Export Controls
Vulnerabilities and Inefficiencies Undermine System's Ability to Protect U.S. Interests Gao ID: GAO-07-1135T July 26, 2007In controlling the transfer of weapons and related technologies overseas, the U.S. government must limit the possibility of sensitive items falling into the wrong hands while allowing legitimate trade to occur. Achieving this balance, however, has become increasingly difficult due to redefined security threats and an increasingly globalized economy. The export control system is a key government program intended to balance U.S. interests. GAO has identified and reported on many weaknesses and challenges in the export control system. The export control system is a complex system involving multiple departments, laws, and regulations. It is governed primarily by the State Department, which regulates arms exports, and the Commerce Department, which regulates dual-use exports that have both military and civilian applications. GAO has made a number of recommendations aimed at improving the export control system, but many have yet to be implemented. This statement focuses on three key areas: (1) weaknesses and challenges that have created vulnerabilities in the U.S. export control system, (2) inefficiencies in the export licensing process, and (3) State's and Commerce's lack of assessments on the effectiveness of their controls.
For over a decade, GAO has documented vulnerabilities in the export control system's ability to protect U.S. security, foreign policy, and economic interests. Two key weaknesses relate to the most basic aspects of the system's effectiveness. First, State and Commerce have yet to clearly determine which department controls the export of certain sensitive items. Unclear jurisdiction lets exporters--not the government--determine which export restrictions apply and the type of government review that will occur. Not only does this create an unlevel playing field among U.S. companies, it also increases the risk that items will fall into the wrong hands. Second, a lack of clarity on exemption use has limited the government's ability to ensure that unlicensed exports comply with export laws and regulations. These weaknesses compound an already challenged enforcement community, which has had difficulty coordinating investigations, balancing multiple priorities, and leveraging finite resources. State's initiatives to facilitate defense trade by reducing the time it takes to process export license applications have generally not been successful. For example, D-Trade, State's new automated application processing system, has not yet achieved anticipated efficiencies. Overall, processing times have increased--from a median of 13 days in 2002 to 26 days in 2006. Also, at the end of 2006, State's backlog of applications reached its highest level--more than 10,000 open cases. While Commerce's license processing times have been relatively stable, the overall efficiency of its processing is unknown. Despite the existence of known vulnerabilities, neither department has conducted systematic assessments of its export control system. Federal programs need to reexamine their priorities and approaches and determine what corrective actions may be needed to ensure they are fulfilling their missions in the 21st century. Given their export control responsibilities, State and Commerce should not be excused from this basic management tenet. Ultimately, GAO's work demonstrates both the ineffectiveness and inefficiency of the export control system--a key concern that compelled GAO to designate the effective protection of technologies critical to U.S. national security interests as a new high risk area. In its 21st century challenges report, GAO has identified the need for basic reexamination of programs established decades ago. Given the importance of the system in protecting U.S. national security, foreign policy, and economic interests, it is necessary to assess and rethink what type of system is needed to best protect these interests in a changing environment.
GAO-07-1135T, Export Controls: Vulnerabilities and Inefficiencies Undermine System's Ability to Protect U.S. Interests
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Testimony:
Before the Subcommittee on Terrorism, Nonproliferation, and Trade,
Committee on Foreign Affairs, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 2:00 p.m. EDT:
Thursday, July 26, 2007:
Export Controls:
Vulnerabilities and Inefficiencies Undermine System's Ability to
Protect U.S. Interests:
Statement of Ann Calvaresi-Barr, Director:
Acquisition and Sourcing Management:
GAO-07-1135T:
GAO Highlights:
Highlights of GAO-07-1135T, a testimony before the Subcommittee on
Terrorism, Nonproliferation, and Trade, Committee on Foreign Affairs,
House of Representatives
Why GAO Did This Study:
In controlling the transfer of weapons and related technologies
overseas, the U.S. government must limit the possibility of sensitive
items falling into the wrong hands while allowing legitimate trade to
occur. Achieving this balance, however, has become increasingly
difficult due to redefined security threats and an increasingly
globalized economy. The export control system is a key government
program intended to balance U.S. interests. GAO has identified and
reported on many weaknesses and challenges in the export control
system.
The export control system is a complex system involving multiple
departments, laws, and regulations. It is governed primarily by the
State Department, which regulates arms exports, and the Commerce
Department, which regulates dual-use exports that have both military
and civilian applications.
GAO has made a number of recommendations aimed at improving the export
control system, but many have yet to be implemented. This statement
focuses on three key areas: (1) weaknesses and challenges that have
created vulnerabilities in the U.S. export control system, (2)
inefficiencies in the export licensing process, and (3) State‘s and
Commerce‘s lack of assessments on the effectiveness of their controls.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-1135T.]
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 calvaresibarra@gao.gov.
[End of Section]
Mr. Chairman and Members of the Subcommittee:
Thank you for inviting me here today to discuss the U.S. export control
system, a key component of the U.S. government's efforts to protect
critical technologies while allowing legitimate defense trade. As you
know, the U.S. government controls the transfer of weapons and related
technologies to other countries and foreign companies. In doing so, the
government must consider U.S. national security, foreign policy, and
economic interests and strike a balance among these interests.
Achieving such a balance, however, has become increasingly difficult
due to a redefinition of security threats after the September 2001
terrorist attacks and an increasingly globalized and high-tech economy.
This changing environment raises concerns about the ability of
government programs, which were established decades ago, to protect
critical technologies. These concerns, along with a body of GAO work on
weaknesses in the export control system and related federal programs,
prompted GAO early this year to designate the effective protection of
technologies critical to U.S. national security interests as a high-
risk area warranting strategic examination.[Footnote 1]
Within the safety net of government programs to protect critical,
defense-related technologies, the export control system is particularly
complex as it involves multiple agencies, laws, and regulations. This
system is governed primarily by the Departments of State and Commerce.
State is responsible for regulating arms exports[Footnote 2] while
Commerce is responsible for regulating exports of dual-use items, which
have both military and civilian applications. Exports subject to
State's regulations generally require a license, unless an exemption
applies. Many Commerce-controlled items do not require a license for
export to most destinations. Both departments, however, are responsible
for limiting the possibility of exported items falling into the wrong
hands while allowing legitimate trade to occur.
We have made a number of recommendations to address the weaknesses and
challenges we have identified in the U.S. export control system, but
many have yet to be implemented. My statement today focuses on three
key areas: (1) weaknesses and challenges that have created
vulnerabilities in the U.S. export control system, (2) inefficiencies
in the export licensing process, and (3) State's and Commerce's lack of
assessments on the effectiveness of their controls. In addition, the
appendix contains summaries of our export control-related reports
issued from fiscal year 2000 to date, along with information on the
status of the implementation of our recommendations by the various
departments involved in the system. A list of related products that we
have issued since the mid-1990s is also included.
My statement is based on GAO's extensive body of work on the export
control system, including information from our on-going review of the
arms export control system. We conducted our work in accordance with
generally accepted government auditing standards.
Summary:
For over a decade, we have reported on weaknesses and challenges that
have created vulnerabilities in the U.S. export control system. Two key
weaknesses relate to the most basic aspects of the system. First, State
and Commerce have yet to clearly determine which department controls
the export of certain sensitive items. Jurisdictional disputes are
often rooted in the departments' differing interpretations of
regulations and inadequate coordination. Second, a lack of clarity on
exemption use has limited the government's ability to ensure that
unlicensed exports comply with export laws and regulations. These
weaknesses compound an already challenged enforcement community, which
has difficulty in coordinating investigations, balancing multiple
priorities, and leveraging finite resources.
To help facilitate defense trade, State has sought to reduce the amount
of time it takes to process export license applications. However,
streamlining initiatives have generally not been successful and
processing times have increased in recent years--from a median of 13
days in 2002 to 26 days in 2006. Also, at the end of 2006, State's
backlog of applications reached its highest level of more than 10,000
open cases. While Commerce's license application processing times have
been relatively stable, the overall efficiency of Commerce's process is
unknown, in part due to its limited assessments. Commerce's assessments
are limited to only the first steps in its application review process
and not the review process as a whole.
State and Commerce can provide little assurance about the overall
effectiveness of their respective export control systems. In managing
their systems, neither department has conducted systematic assessments
that would provide a basis for determining what corrective actions may
be needed to ensure they are fulfilling their missions. Without such
assessments, the departments are ill-equipped to adapt to the changing
demands of the 21st century.
Background:
The U.S. export control system for defense-related items involves
multiple federal agencies and is divided between two regulatory bodies-
-one for arms and another for dual-use items, which have both military
and commercial applications (see table 1).
Table 1: Roles and Responsibilities in the Arms and Dual-Use Export
Control Systems:
Principal regulatory body: State Department's Directorate of Defense
Trade Controls;
Mission: Regulates export of arms by giving primacy to national
security and foreign policy concerns;
Statutory authority: Arms Export Control Act[A];
Implementing regulations: International Traffic in Arms Regulations.
Principal regulatory body: Commerce Department's Bureau of Industry and
Security;
Mission: Regulates export of dual-use items by weighing economic,
national security, and foreign policy interests;
Statutory authority: Export Administration Act of 1979[B];
Implementing regulations: Export Administration Regulations.
Other federal agencies: Department of Defense;
Mission: Provides
input on which items should be controlled by either State or Commerce
and conducts technical and national security reviews of export license
applications submitted by exporters to either State or Commerce.
Other federal agencies: Department of Homeland Security; Mission:
Enforces arms and dual-use export control laws and regulations through
border inspections and investigations[C].
Other federal agencies: Department of Justice; Mission: Investigates
any criminal violations in certain counterintelligence areas, including
potential export control violations, and prosecutes suspected violators
of arms and dual-use export control laws[C].
Source: GAO analysis of cited laws and regulations.
[A] 22 U.S.C. §2751 et. seq.
[B] 50 U.S.C. App. §2401 et. seq. Authority granted by the Act lapsed
on August 20, 2001. However, Executive Order 13222, Continuation of
Export Control Regulations, issued August 2001, continues the export
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.
[C] Homeland Security, Justice, and Commerce investigate potential dual-
use export control violations. Homeland Security and Justice
investigate potential arms export control violations.
[End of table]
Implementing regulations for both State and Commerce contain lists that
identify which items each department controls and establish
requirements for exporting those items. Exporters are responsible for
determining which department controls the items they are seeking to
export and what the requirements for export are. The two departments'
controls differ in several key areas. In most cases, Commerce's
controls over dual-use items are less restrictive than State's controls
over arms and provide less up-front government visibility into what is
being exported. For example, many items controlled by Commerce do not
require licenses for export to most destinations, while State-
controlled items generally require licenses to most destinations. Also,
Commerce-controlled items may be exported to China while arms exports
to China are generally prohibited.
In carrying out their respective export control functions, Commerce and
State have different levels of workload and personnel (see table 2).
Table 2: Case Workload and Staffing for the Dual-Use and Arms Export
Control Systems for Fiscal Year 2006:
Commerce Department's Bureau of Industry and Security; Number of cases
closed[A]: 23,673;
Number of positions filled[B]: 351.
State Department's Directorate of Defense Trade Controls; Number of
cases closed[A]: 65,274;
Number of positions filled[B]: 64.
Source: GAO analysis of Commerce and State budget documents and State
licensing data (data).
[A] For Commerce, cases include both export license applications and
commodity classification requests. For State, cases include
applications for permanent exports, temporary exports and imports,
agreements, license amendments, and jurisdiction determinations.
[B] Commerce's positions include licensing officers, enforcement
agents, analysts, and other staff. State's positions include licensing
officers, compliance officials, and other staff. Numbers provided do
not include contractors or staff on loan from other organizations.
[End of Table]
Jurisdiction Disputes, Lack of Clarity on Exemption Use, and
Enforcement Challenges Have Weakened the Export Control System:
Our reports have clearly documented weaknesses and challenges in the
export control system that point to vulnerabilities in the system and
its ability to protect U.S. security, foreign policy, and economic
interests. Two key weaknesses relate to the most basic aspects of the
export control system: (1) whether items are controlled by State or
Commerce and (2) whether items should be subject to government review
prior to export.
Because State and Commerce have different restrictions on the items
they control, determining which exported items are controlled by State
and which are controlled by Commerce is fundamental to the U.S. export
control system's effectiveness. However, as we have previously
reported, State and Commerce have disagreed on which department
controls certain items. In some cases, both departments have claimed
jurisdiction over the same items, such as certain missile-related
technologies. In another case, for example, Commerce improperly
determined that explosive detection devices were subject to Commerce's
less restrictive export control requirements when they were, in fact,
State-controlled. Such jurisdictional disagreements and problems are
often rooted in the departments' differing interpretations of the
regulations and minimal or ineffective coordination between the
departments. Until these disagreements and problems are resolved,
however, exporters--not the government--determine which restrictions
apply and the type of governmental review that will occur. Not only
does this create an unlevel playing field and competitive disadvantage-
-because some companies will have access to markets that others will
not, depending on which system they use--but it also increases the risk
that critical items will be exported without the appropriate review and
resulting protections. Despite these risks, no one has held the
departments accountable for making clear and transparent decisions
about export control jurisdiction.
Even when jurisdiction is clearly established, limitations exist in the
government's ability to ensure that exports exempt from licensing
requirements comply with laws and regulations. While State generally
requires a license for exports, some exports are exempt from licensing,
such as certain arms exports to Canada. In such cases, it becomes the
exporter's responsibility--not the government's--to ensure the
legitimacy of the export. Therefore, exporters need sufficient guidance
to minimize the possibility of incorrect interpretations of the
regulations and improper use of an exemption to export an item. At
times, State has provided conflicting information to exporters on the
proper use of the Canadian exemption, which has resulted in some
exporters using the exemption while others applied for licenses to
export the same item.
Together, these weaknesses create considerable challenges for
enforcement agencies in carrying out their respective inspection,
investigation, and prosecution responsibilities. For example, obtaining
timely and complete information to confirm whether items are controlled
and need a license is a challenge. In one case, investigative agents
executed search warrants based on Commerce's license determination that
missile technology-related equipment was controlled. Subsequently,
Commerce determined that no license was required for this equipment,
and the case was closed. The use of license exemptions has also raised
serious concerns for enforcement officials. Homeland Security officials
explained that they generally oppose licensing exemptions because items
can be more easily diverted without detection, which complicates
potential investigations. Justice officials similarly noted that
prosecuting export violations under an exemption is difficult because
of the challenges in acquiring evidence of criminal intent, given the
limited "paper trail" generated under an exemption. Other enforcement
challenges include difficulty in coordinating investigations among
several departments, balancing multiple priorities, and leveraging
finite resources.
Export Control System is Further Hindered by Licensing Inefficiencies:
While exporters and foreign governments have complained about
processing times, reviews of arms export license applications require
time to deliberate and ensure that license decisions are appropriate.
However, such reviews should not be unnecessarily delayed due to
inefficiencies nor should they be eliminated for efficiency's sake--
both of which could have unintended consequences for U.S. security,
foreign policy, and economic interests. Over the last several years,
State has initiated various efforts to reduce license application
processing times. Yet, these initiatives have generally not been
successful:
* The establishment in 2004 of D-Trade, a new automated system for
processing licensing applications, has been cited as State's most
significant effort to improve efficiency. However, the anticipated
efficiencies have not been realized. Our current analysis of processing
times for permanent export licenses does not show a significant
difference between D-Trade and paper processing for fiscal years 2004
through 2006.
* State also implemented initiatives to expedite applications in
support of on-going military operations. In 2005, however, we reported
that only 19 percent of the applications submitted under the
initiatives for Operations Enduring Freedom and Iraqi Freedom were
processed within the time frames set by State. Our current work shows
that even fewer cases are being processed within the department's
current 2-day goal for applications in support of these operations.
* Other initiatives have not been widely used by exporters. For
example, we reported that between 2000 and 2005, State had only
received three applications for comprehensive export authorizations for
a range of exports associated with multinational defense efforts, such
as the Joint Strike Fighter.
The initiatives' lack of success is not surprising. When many of these
initiatives were announced in 2000, we determined that there was no
analysis of the problems that the initiatives were intended to remedy
or demonstration of how they would achieve identified goals. As a
result, there was little assurance that the initiatives would result in
improvements to the arms export control system. State also has not
implemented procedures to expedite license applications for exports to
Australia or the United Kingdom, as required by a 2004 law.[Footnote 3]
Our current work shows that processing times for Australia and the
United Kingdom do not significantly differ from other major trading
partners, taking a median of 21 days to process in fiscal year 2006.
Despite efforts to improve efficiency, State's median processing times
of license applications for arms exports have been increasing since
2003, reversing a downward trend since 1999 (see fig. 1). Furthermore,
State has not kept pace with a growing number of applications, which
has increased almost 23 percent over the last 3 years. At the end of
fiscal year 2006, the backlog reached its highest level of over 10,000
cases.
Figure 1: Median Processing Times for Arms Export Cases, Fiscal Year
1999 through April 2007 (in days):
[See PDF for image]
Source: GAO analysis of State data.
[End of figure]
Concerns about licensing efficiency have largely focused on State, in
part, because most Commerce-controlled exports can occur without a
license. In 2005, for example, only 1.5 percent of dual-use exports, by
dollar value, were licensed.[Footnote 4] However, the overall
efficiency of Commerce's licensing process is unknown. For example, in
assessing its license processing times, which have remained relatively
stable, Commerce only measures the first steps of its application
review process--how long it takes to review an application internally
and refer it to another agency for review. Commerce does not have
efficiency-related measures for other steps in the license application
review process, such as how quickly a license should be issued once
other agencies provide their input, or for the review process as a
whole.
Lack of Systematic Assessments Invites Risk:
To be able to adapt to 21st century challenges, federal programs need
to systematically reassess priorities and approaches and determine what
corrective actions may be needed to fulfill their missions.[Footnote 5]
Given their export control responsibilities, State and Commerce should
not be exceptions to this basic management tenet. However, neither
department has conducted such assessments to determine overall
effectiveness, despite the existence of known vulnerabilities.
While GAO has made numerous recommendations to improve the
effectiveness and efficiency of the arms export control system, State
has not made significant changes to its system. State does not know how
well it is fulfilling its mission and what additional corrective
actions may be needed since it has not systematically assessed its
controls, even in light of the September 2001 terror attacks.
Commerce officials acknowledged that they had not comprehensively
assessed the effectiveness of dual-use export controls in protecting
U.S. national security and economic interests. Instead, they stated
they conducted an ad hoc review of the dual-use system after the events
of September 2001 and determined that no fundamental changes were
needed. We were unable to assess the sufficiency of this review because
Commerce did not document how it conducted the review or reached its
conclusions.
Conclusions:
At a time of evolving threats, changing allied relationships, and
increasing globalization, it is appropriate to ask how Congress can be
assured that the export control system is achieving its intended
purposes--protecting national security and promoting foreign policy
interests while allowing legitimate trade. To accomplish such purposes,
an export control system needs to clearly define what should be
controlled and how, so that it is understandable by exporters and
enforceable by the government. The system should also be efficient and
well managed. Our work in this area demonstrates both the
ineffectiveness and inefficiency of the system--a key concern that
compelled GAO to designate the effective protection of technologies
critical to U.S. national security interests as a new high risk area.
It is, therefore, time to step back, assess, and rethink what type of
system is needed to best protect U.S. national security, foreign
policy, and economic interests in a changing environment.
GAO Contacts and Acknowledgments:
For questions regarding this testimony, please contact me at (202) 512-
4841 or calvaresibarra@gao.gov. Anne-Marie Lasowski and Johana R.
Ayers, Assistant Directors; Ian Jefferies, Karen Sloan, and Bradley
Terry made key contributions to this statement. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this statement.
[End of section]
Appendix: Summary of Prior GAO Reports on the U.S. Export Control
System;
Over the last several years, GAO has issued numerous reports regarding
the export control system. In those reports, we have identified
weaknesses primarily in two areas: (1) the U.S. government's controls
on exports to ensure that U.S. interests are protected and (2) the
mechanisms to ensure that these exports comply with U.S. laws and
regulations. We have also identified inefficiencies in the
administration and management of the system. To correct these
weaknesses and inefficiencies, we have made multiple recommendations.
The recommendations have generally focused on clarifying regulations
and guidance, improving interagency coordination, and obtaining
sufficient information for decision making. As we followed up with the
various departments over the last year, we determined that a number of
these recommendations have not been implemented. Table 3 summarizes
what we found, what we recommended, and what actions, if any, the
departments have taken to implement the recommendations.
The State Department regulates overseas arms sales by U.S. companies
under the authority of the Arms Export Control Act. State maintains a
list of the items subject to its export controls. Prior to exporting
State-controlled items to foreign companies and governments, companies
generally need to obtain State-issued licenses. The Defense Department
assists State by providing input on which items should be State-
controlled and by conducting technical and national security reviews of
export license applications. State's controls on arms exports are
separate from those maintained by the Commerce Department. Commerce
regulates the export of dual-use items, which have both military and
commercial applications. Under the authority of the Export
Administration Act of 1979, Commerce maintains its own list of items
subject to its controls. Many items controlled by Commerce do not
require licenses for export to most destinations. State and Commerce's
controls differ in several key areas. For example, many items
controlled by Commerce do not require licenses for export to most
destinations, and Commerce-controlled items may be exported to China
while arms exports to China are generally prohibited.
Table 3: Summary of 2000-2007 GAO Reports on the U.S. Export Control
System:
Defense Trade: Analysis of Support for Recent Initiatives (Aug. 31,
2000, GAO/NSIAD-00-191:)
Background: In 1999, Defense compiled a list of; 81 defense cooperation
initiatives intended to enhance cross-border defense trade and
investment. Several initiatives were part of an ongoing effort to
reinvent the Foreign Military Sales program, while other initiatives
were to help streamline processes and/or change policies considered
important for defense cooperation, such as export controls. Building on
the 81 initiatives, State and Defense announced 17 measures,
collectively known as the Defense Trade Security Initiative (DTSI), to
adjust the export control system;
Main issues: Defense developed its initiatives on the basis of
incomplete data and inadequate analysis to determine underlying causes
for problems it identified. It is unclear whether the department's
initiatives will achieve the desired outcomes of improving U.S. and
foreign forces' ability to operate together in coalition warfare
scenarios, reducing a gap in military capabilities between the United
State and its allies, and ensuring that U.S. companies successfully
compete in overseas markets. Further, there was no demonstration of how
DTSI measures would achieve identified goals and no analysis of
existing problems. As a result, there is little assurance that any
underlying problems with the U.S. export control system have been
sufficiently analyzed to determine whether DTSI will remedy any
existing problems.
GAO recommendations; No recommendations;
Action taken: Not applicable.
Export Controls: Systems for Controlling Exports of High Performance
Computing is Ineffective (Dec. 18, 2000 GAO-01-10);
Background: Exports of high performance computers exceeding a defined
performance threshold require an export license from Commerce. As
technological advances in high performance computing occur, it may
become necessary to explore other options to maintain the U.S. lead in
defense-related technology. As a step in this direction, the National
Defense Authorization Act for Fiscal Year 1998 required the Secretary
of Defense to assess the cumulative effect of U.S.-granted licenses for
exports of computing technologies to countries and entities of concern.
It also required information on measures that may be necessary to
counter the use of such technologies by entities of concern;
Main issues: The current system for controlling exports of high
performance computers is ineffective because it focuses on the
performance level of individual computers and does not address the
linking or "clustering" of many lower performance computers that can
collectively perform at higher levels than current export controls
allow. However, the act does not require an assessment of the
cumulative effect of exports of unlicensed computers, such as those
that can be clustered. The current control system is also ineffective
because it uses millions of theoretical operations per second as the
measure to classify and control high performance computers meant for
export. This measure is not a valid means for controlling computing
capabilities;
GAO recommendations;
Commerce;
* in consultation with other relevant agencies, convene a panel of
experts to comprehensively assess and report to Congress on ways of
addressing the shortcomings of computer export controls;
Defense;
* determine what countermeasures are necessary, if any, to respond to
enhancements of the military or proliferation capabilities of countries
of concern derived from both licensed and unlicensed high performance
computing;
Action taken: Commerce has implemented our recommendation. Defense has
not implemented our
recommendation.
Export Controls: Regulatory Change Needed to Comply with Missile
Technology Licensing Requirements (May 31, 2001, GAO-01-530);
Background: Concerned about missile proliferation, the United States
and several major trading partners in 1987 created an international
voluntary agreement, the Missile Technology Control Regime (MTCR), to
control the spread of missiles and their related technologies. Congress
passed the National Defense Authorization Act for Fiscal Year 1991 to
fulfill the U.S. government's MTCR commitments. This act amended the
Export Administration Act of 1979, which regulates the export of dual-
use items, by requiring a license for all exports of controlled dual-
use missile technologies to all countries. The National Defense
Authorization Act also amended the Arms Export Control Act, which
regulates the export of military items, by providing the State
Department the discretion to require licenses or provide licensing
exemptions for missile technology exports;
Main issues: State's regulations require licenses for the exports of
missile technology items to all countries--including Canada, which is
consistent with the National Defense Authorization Act. However,
Commerce's export regulations are not consistent with the act as they
do not require licenses for the export of controlled missile equipment
and technology to Canada;
GAO recommendations;
Commerce;
* revise the Export Administration Regulations to comply with the MTCR
export licensing requirements contained in the National Defense
Authorization Act for Fiscal Year 1991, or;
* seek a statutory change
from Congress to specifically permit MTCR items to be exempted from
licensing requirements;
* if Commerce seeks a statutory change, revise the Export
Administration Regulations to comply with the current statute until
such time as a statutory change occurs;
Action taken: Our recommendations have not been implemented. However,
Commerce has a regulatory change pending that, once implemented, will
require licenses for the export of dual-use missile technologies to
Canada.
Export Controls: State and Commerce Department License Review Times Are
Similar (June 1, 2001, GAO-01-528);
Background: The U.S. defense industry and some U.S. and allied
government officials have expressed concerns about the amount of time
required to process export license applications;
Main issues: In fiscal year 2000, State's average review time for
license applications was 46 days while Commerce's average was 50 days.
Variables identified as affecting application processing times include
the commodity to be exported and the extent of interagency
coordination. Both departments approved more than 80 percent of license
applications during fiscal year 2000;
GAO recommendations; No recommendations;
Action taken: Not applicable.
Export Controls: Clarification of Jurisdiction for Missile Technology
Items Needed (Oct. 9, 2001, GAO-02-120);
Background: The United States has committed to work with other
countries through the Missile Technology Control Regime (MTCR) to
control the export of missile-related items. The regime is a voluntary
agreement among member countries to limit missile proliferation and
consists of common export policy guidelines and a list of items to be
controlled. In 1990, Congress amended existing export control statutes
to strengthen missile-related export controls consistent with U.S.
commitments to the regime. Under the amended statutes, Commerce is
required to place regime items that are dual-use on its list of
controlled items. All other regime items are to appear on State's list
of controlled items;
Main issues: Commerce and State have not clearly determined which
department has jurisdiction over almost 25 percent of the items that
the U.S. government agreed to control as part of its regime
commitments. The lack of clarity as to which department has
jurisdiction over some regime items may lead an exporter to seek a
Commerce license for a militarily sensitive item controlled by State.
Conversely, an exporter could seek a State license for a Commerce-
controlled item. Either way, exporters are left to decide which
department should review their exports of missile items and, by
default, which policy interests are to be considered in the license
review process;
GAO recommendations;
Commerce and State;
* jointly review the listing of items included on the MTCR list,
determine the appropriate jurisdiction for those items, and revise
their respective export control lists to ensure that proposed exports
of regime items are subject to the appropriate review process;
Action taken: Commerce and State have not implemented our
recommendations despite initially agreeing to do so.
Export Controls: Reengineering Business Processes Can Improve
Efficiency of State Department License Reviews (Dec. 31, 2001, GAO-02-
203);
Background: The U.S. defense industry and some foreign government
purchasers have expressed concern that the arms export control process
is unnecessarily lengthy. While the export licensing process can be
lengthy because of foreign policy and national security considerations,
other factors may also affect processing times;
Main issues: State lacks formal guidelines for determining which
agencies and offices should review arms export license applications and
does not have procedures to monitor the flow of applications through
the process. As a result, thousands of applications have been delayed
while no substantive review occurred and hundreds more have been lost;
GAO recommendations;
State;
* develop criteria for determining which applications should be
referred to which agencies and offices for further review, develop
formal guidelines and training for reviewing organizations so they
clearly understand their duties;
* establish timeliness goals for each phase of the licensing process
and mechanisms to ensure that applications are not lost or delayed;
* implement these recommendations before proceeding with a planned
upgrade to the department's electronic business processing system;
Action taken: Our recommendations have been implemented;
* State's electronic system does not yet accept all types of export
applications.
Defense Trade: Lessons to Be Learned from the Country Export Exemption
(March 29, 2002, GAO-02-63);
Background: State's export regulations do not require licenses for the
export of many defense items to Canada; In 2000, the U.S. government
announced plans to extend similar licensing exemptions for exports to
other countries;
Main issues:
Because of unclear guidance, some exporters have implemented the
Canadian exemption inconsistently and have misinterpreted requirements
to report their export activities to State. State has provided
inconsistent answers to exporters and U.S. Customs Service[A] officials
when questions were raised about the exemption's use in specific
situations; State encourages exporters to voluntarily disclose
violations but relies primarily on U.S. Customs to enforce export
control laws and regulations, including use of the Canadian exemption.
U.S. Customs' ability to enforce the proper use of exemptions is
weakened by a lack of information and resources, difficulties in
investigating suspected violations, and competing demands, such as
terrorism prevention and drug interdiction;
GAO recommendations;
State;
* review guidance and licensing officer training to improve clarity and
ensure consistent application of the exemption and provide the guidance
to U.S. Customs to ensure consistent application of the exemption and
provide the guidance to U.S. Customs to ensure that consistent
information is disseminated to exporters;
*work with the Justice Department and U.S. Customs to assess lessons
learned from the Canadian exemption and ensure the lessons are
incorporated in future agreements;
U.S. Customs;
* assess the threat of illegal defense exports along the Canadian
border and evaluate whether reallocation of inspectors or other actions
are warranted to better enforce export regulations;
* update, finalize, and provide guidance on inspection requirements to
all inspectors;
Action taken: State has not implemented our recommendations. In its
response to our report, State said it would provide training and
guidance but did not indicate how it would ensure that the guidance and
training are clear and understood by those who need to use them. The
department also said it would work with law enforcement agencies to
assess lessons learned but did not identify how it would do so.
Subsequently, State signed the treaty with the United Kingdom to allow
for license-free export before the department conducted a lessons
learned assessment;
U.S. Customs has implemented our recommendations.
Export Controls: Issues to Consider in Authorizing a New Export
Administration Act (Feb. 28, 2002, GAO-02- 468T;)
Background: The U.S. government's policy regarding exports of sensitive
dual-use technologies seeks to balance economic, national security, and
foreign policy interests. The Export Administration Act (EAA) of 1979,
as amended, has been extended through executive orders and law. Under
the act, the President has the authority to control and require
licenses for the export of dual-use items, such as nuclear, chemical,
biological, missile, or other technologies that may pose a national
security or foreign policy concern. In 2002, there were two different
bills before the 107th Congress--H.R. 2581 and S. 149--that would enact
a new EAA;
Main issues: A new EAA should take into consideration the increased
globalization of markets and an increasing number of foreign
competitors, rapid advances in technologies and products, a growing
dependence by the U.S. military on commercially available dual-use
items, and heightened threats from terrorism and the proliferation of
weapons of mass destruction;
GAO recommendations; No recommendations;
Action taken: Not applicable.
Export Controls: Rapid Advances in China's Semiconductor Industry
Underscore Need for Fundamental U.S. Policy Review (April 19, 2002, GAO-
02-620);
Background: Semiconductor equipment and materials are critical
components in everything from automobiles to weapons systems. The U.S.
government controls the export of these dual-use items to sensitive
destinations, such as China. Exports of semiconductor equipment and
materials require a license from Commerce. Other departments, such as
Defense and State, assist Commerce in reviewing license applications.
The United States is a member of the multilateral Wassenaar Arrangement
on Export Controls for Conventional Arms and Dual-Use Goods and
Technologies;
Main issues: Since 1986, China has narrowed the gap between the U.S.
and Chinese semiconductor manufacturing technology from approximately 7
years to 2 years or less. China's success in acquiring manufacturing
technology from abroad has improved its semiconductor manufacturing
facilities for more capable weapons systems and advanced consumer
electronics. The multilateral Wassenaar Arrangement has not affected
China's ability to obtain semiconductor manufacturing equipment because
the U.S. is the only member of this voluntary arrangement that
considers China's acquisition of semiconductor manufacturing equipment
a cause for concern. Additionally, U.S. government policies and
practices to control the export of semiconductor technology to China
are unclear and inconsistent, leading to uncertainty among U.S.
industry officials about the rationale for some licensing decisions.
Furthermore, U.S. agencies have not done the analyses, such as
assessing foreign availability of this technology or the cumulative
effects of such exports on U.S. national security interests, necessary
to justify U.S. policies and practices;
GAO recommendations;
Commerce;
* in consultation with Defense and State, reassess and document U.S.
export policy on semiconductor manufacturing equipment and materials to
China:
* complete the analyses needed to serve as a sound basis for an updated
policy;
* develop new export controls, if appropriate, or alternative means for
protecting U.S. security interests; and;
* communicate the results of these efforts to Congress and U.S.
industry;
Action taken: Commerce has not implemented our recommendations.
Export Controls: More Thorough Analysis Needed to Justify Changes in
High Performance Computer Controls (Aug. 2, 2002, GAO-02-892;)
Background: High performance computers that operate at or above a
defined performance threshold, measured in millions of theoretical
operations per second, require a Commerce license for export to
particular destinations. The President has periodically changed, on the
basis of technological advances, the threshold above which licenses are
required. The National Defense Authorization Act of 1998 requires that
the President report to Congress the justification for changing the
control threshold. The report must, at a minimum, (1) address the
extent to which high performance computers with capabilities between
the established level and the newly proposed level of performance are
available from foreign countries,; (2) address all potential uses of
military significance to which high performance computers between the
established level and the newly proposed level could be applied, and
(3) assess the impact of such uses on U.S. national security interests;
Main issues: In January 2002, the President announced that the control
threshold--above which computers exported to such countries as China,
India, and Russia--would increase from 85,000 to 190,000 millions of
theoretical operations per second. The report to Congress justifying
the changes in control thresholds for high performance computers was
issued in December 2001 and focused on the availability of such
computers. However, the justification did not fully address the
requirements of the National Defense Authorization Act of 1998. The
December 2001 report did not address several key issues related to the
decision to raise the threshold: (1) the unrestricted export of
computers with performance capabilities between the old and new
thresholds will allow countries of concern to obtain computers they
have had difficulty constructing on their own, (2) the U.S. government
is unable to monitor the end uses of many of the computers it exports,
and (3) the multilateral process used to make earlier changes in high
performance computer thresholds;
GAO recommendations; No recommendations;
Action taken: Not applicable.
Export Controls: Department of Commerce Controls over Transfers of
Technology to Foreign Nationals Need Improvement (Sept. 6, 2002, GAO-02-
972);
Background: To work with controlled dual-use technologies in the United
States, foreign nationals and the firms that employ them must comply
with U.S. export control and visa regulations. U.S. firms may be
required to obtain what is known as a deemed export license from
Commerce before transferring controlled technologies to foreign
nationals in the United States. Commerce issues deemed export licenses
after consulting with the Defense, Energy, and State Departments. In
addition, foreign nationals who are employed by U.S. firms should have
an appropriate visa classification, such as an H-1B specialized
employment classification. H-1B visas to foreign nationals residing
outside of the United States are issued by State, while the Immigration
and Naturalization Service approves requests from foreign nationals in
the United States to change their immigration status to H- 1B;
Main issues: In fiscal year 2001, Commerce approved 822 deemed export
license applications and rejected 3. Most of the approved deemed export
licenses allowed foreign nationals from countries of concern to work
with advanced computer, electronic, or telecommunication and
information security technologies in the United States. To better
direct its efforts to detect possible unlicensed deemed exports, in
fiscal year 2001 Commerce screened thousands of applications for H-1B
and other types of visas submitted by foreign nationals overseas. From
these applications, it developed 160 potential cases for follow-up by
enforcement staff in the field. However, Commerce did not screen
thousands of H-1B change-of-status applications submitted domestically
to the Immigration and Naturalization Service for foreign nationals
already in the United States. In addition, Commerce could not readily
track the disposition of the 160 cases referred to field offices for
follow-up because it lacks a system for doing so. Commerce attaches
security conditions to almost all licenses to mitigate the risk of
providing foreign nationals with controlled dual-use technologies.
However, according to senior Commerce officials, their staff do not
regularly visit firms to determine whether these conditions are being
implemented because of competing priorities, resource constraints, and
inherent difficulties in enforcing several conditions;
GAO recommendations;
Commerce;
* use available Immigration and
Naturalization Service data to identify foreign nationals potentially
subject to deemed export licensing requirements;
* establish, with Defense, Energy, and State, a risk-based program to
monitor compliance with deemed export license conditions; if the
departments conclude that certain security conditions are impractical
to enforce, they should jointly develop conditions or alternatives to
ensure that deemed exports do not place U.S. national security
interests at risk;
Action taken: Our recommendations have been implemented.
Export Controls: Processes for Determining Proper Control of Defense-
Related Items Need Improvement (Sept. 20, 2002, GAO-02-996);
Background: Companies seeking to export defense-related items are
responsible for determining whether those items are regulated by
Commerce or State and what the applicable export requirements are. If
in doubt about whether an item is Commerce-or State-controlled or when
requesting a change in jurisdiction, an exporter may request a
commodity jurisdiction determination from State. State, which consults
with Commerce and Defense, is the only department authorized to change
export control jurisdiction. If an exporter knows an item is Commerce-
controlled but is uncertain of the export requirements, the exporter
can request a commodity classification from Commerce. Commerce may
refer classification requests to State and Defense to confirm that an
item is Commerce-controlled;
Main issues: Commerce has improperly classified some State-controlled
items as Commerce-controlled because it rarely obtains input from
Defense and State before making commodity classification
determinations. As a result, the U.S. government faces an increased
risk that defense items will be exported without the proper level of
government review and control to protect national interests. Also,
Commerce has not adhered to regulatory time frames for processing
classification requests; In its implementation of the commodity
jurisdiction process, State has not adhered to established time frames,
which may discourage companies from requesting jurisdiction
determinations. State has also been unable to issue determinations for
some items because of interagency disputes occurring outside the
process;
GAO recommendations;
Commerce;
* promptly review existing guidance and develop criteria with
concurrence from State and Defense for referring commodity
classification requests to those departments;
* work with State to develop procedures for referring requests that are
returned to companies because the items are controlled by State or
because they require a commodity jurisdiction review;
Commerce, Defense and State;
* revise interagency guidance to incorporate any changes to the
referral process and time frames for making decisions; * assess the
resources needed to make jurisdiction recommendations and
determinations within established time frames and reallocate them as
appropriate;
Action taken: With a limited exception, our recommendations have not
been implemented. In responding to our report, State indicated it
partially agreed with our recommendations, while Commerce and Defense
agreed to implement our recommendations;
Commerce and Defense have added staff to assist with their respective
processes. State indicated that it intends to seek additional staff to
assist with its processes.
Nonproliferation: Strategy Needed to Strengthen Multilateral Export
Control Regimes (Oct. 25, 2002, GAO 03-43);
Background: Multilateral export control regimes are a key policy
instrument in the overall U.S. strategy to combat the proliferation of
weapons of mass destruction. They are consensus-based, voluntary
arrangements of supplier countries that produce technologies useful in
developing weapons of mass destruction or conventional weapons; The
regimes aim to restrict trade in these technologies to prevent
proliferation. The four principal regimes are the Australia Group,
which controls chemical and biological weapons proliferation; the
Missile Technology Control Regime (MTCR); the Nuclear Suppliers Group;
and the Wassenaar Arrangement, which controls conventional weapons and
dual-use items and technologies. All four regimes expect members to
report denials of export licenses for controlled dual-use items, which
provide members with more complete information for reviewing
questionable export license applications. The United States is a member
of all four regimes;
Main issues: Weaknesses impede the ability of the multilateral export
control regimes to achieve their nonproliferation goals. Regimes often
lack even basic information that would allow them to assess whether
their actions are having their intended results. The regimes cannot
effectively limit or monitor efforts by countries of concern to acquire
sensitive technology without more complete and timely reporting of
licensing information and without information on when and how members
adopt and implement agreed- upon export controls. For example, GAO
confirmed that the U.S. government had not reported its denial of 27
export licenses between 1996 and 2002 for items controlled by the
Australia Group. Several obstacles limit the options available to the
U.S. government in strengthening the effectiveness of multilateral
export control regimes. The requirement to achieve consensus in each
regime allows even one member to block action in adopting needed
reforms. Because the regimes are voluntary in nature, they cannot
enforce members' compliance with regime commitments. For example,
Russia exported nuclear fuel to India in a clear violation of its
commitments under the Nuclear Suppliers Group, threatening the
viability of this regime. The regimes have adapted to changing threats
in the past. Their continued ability to do so will determine whether
they remain viable in curbing proliferation in the future.;
GAO recommendations;
State;
* as the U.S. government's representative to the multilateral regimes,
establish a strategy to strengthen these regimes. This strategy should
include ways for regime members to;
- improve information-sharing;
- implement regime changes to their export controls more consistently,
and;
* identify organizational changes that could help reform regime
activities;
* ensure that the United States reports all license application denials
to regimes;
* establish criteria to assess the effectiveness of the regimes;
Action taken: State has not implemented our recommendations.
Non-proliferation: Improvements Needed to Better Control Technology
Exports for Cruise Missiles and Unmanned Aerial Vehicles (Jan. 23,
2004, GAO-04-175);
Background: Cruise missiles and unmanned aerial vehicles (UAV) pose a
growing threat to U.S. national security interests as accurate,
inexpensive delivery systems for conventional, chemical, and biological
weapons. Exports of cruise missiles and military UAVs by U.S. companies
are licensed by State while government-to-government sales are
administered by Defense. Exports of dual-use technologies related to
cruise missiles and UAVs are licensed by Commerce;
Main issues: U.S. export control officials find it increasingly
difficult to limit or track dual-use items with cruise missile or UAV-
related capabilities that can be exported without a license. A gap in
dual-use export control authority enables U.S. companies to export
certain dual-use items to recipients that are not associated with
missile projects or countries listed in the regulations, even if the
exporter knows the items might be used to develop cruise missiles or
UAVs. The gap results from current "catch- all" regulations that
restrict the sale of unlisted dual-use items to certain national
missile proliferation projects or countries of concern, but not to
nonstate actors such as certain terrorist organizations or individuals.
Catch-all controls authorize the government to require an export
license for items that are not on control lists but are known or
suspected of being intended for use in a missile or weapons of mass
destruction program.
Commerce, Defense, and State have seldom used their end use monitoring
programs to verify compliance with conditions placed on the use of
cruise missile, UAV, or related technology exports. For example,
Commerce conducted visits to assess the end use of items for about 1
percent of the 2,490 missile-related licenses issued between fiscal
years 1998 and 2002. Thus, the U.S. government cannot be confident that
recipients are effectively safeguarding equipment in ways that protect
U.S. national security and nonproliferation interests;
GAO recommendations;
Commerce;
*assess and report to the Committee on Government Reform on the
adequacy of the Export Administration Regulations' catch-all provision
to address missile proliferation by nonstate actors; this assessment
should indicate ways the provision should be modified;
Commerce, Defense and State;
* as a first step, each department complete a comprehensive assessment
of cruise missile, UAV, and related dual-use technology transfers to
determine whether U.S. exporters and foreign end users are complying
with the conditions on the transfers;
* as part of the assessment, each department conduct additional
postshipment verification visits on a sample of cruise missile and UAV
licenses;
Action taken: Commerce has addressed our recommendation by revising its
licensing requirement for missile technology exports.
While Commerce has taken some actions to address our recommendations,
the other departments have not done so.
Export Controls: Post-Shipment Verification Provides Limited Assurance
that Dual-Use Items Are Being Properly Used (Jan.12, 2004, GAO-04-357);
Background: Commerce conducts post-shipment verification (PSV) checks
to ensure that dual-use items arrive at their intended destination and
are used for the purposes stated in the export license. To conduct PSV
checks, Commerce personnel visit foreign companies to verify the use
and location of exported items. PSVs serve as one of the primary means
of checking whether end users are complying with conditions imposed by
the license. Commerce placed conditions on nearly all approved licenses
for exports to countries of concern for fiscal years 2000 to 2002;
Main issues: In fiscal years 2000 to 2002, Commerce approved 7,680
licenses for dual-use exports to countries of concern, such as China,
India, and Russia. However, we found that during this time Commerce
completed PSV checks on only 428 of the dual-use licenses it approved
for countries of concern; We identified three key weaknesses in the PSV
process that reduce its effectiveness. First, PSVs do not confirm
compliance with license conditions because U.S. officials often lack
the technical training needed to assess compliance and end users may
not be aware of the license conditions by which they are to abide.
Second, some countries of concern, most notably China, limit the U.S.
government's access to facilities where dual-use items are shipped,
making it difficult to conduct a PSV. Third, PSV results have only a
limited impact on future licensing decisions. Companies receiving an
unfavorable PSV may receive greater scrutiny in future license
applications, but licenses for dual-use exports to these companies can
still be approved. In addition, according to Commerce officials, past
PSV results play only a minor role in future enforcement actions.
GAO recommendations;
Commerce;
* improve technical training for personnel conducting PSV checks to
ensure they are able to verify compliance with license conditions;
* ensure that personnel conducting PSV checks assess compliance with
license conditions;
* require that the exporter inform the end user in writing of the
license conditions;
Action taken: Our recommendations have been implemented.
Defense Trade: Arms Export Control System in the Post-9/11 Environment
(Feb.16, 2005, GAO 05-234).
Background: Over the years, there have been various efforts to change
the arms export control system overseen by State. One effort was the
Defense Trade Security Initiative (DTSI) in 2000, which was intended to
facilitate defense trade with allies in the post-Cold War environment.
Given the September 2001 terror attacks, the U.S. government has had to
reevaluate whether existing policies support national security and
foreign policy goals;
Main issues: Since the September 2001 terror attacks, the arms export
control system has not undergone fundamental changes because, according
to State officials, the system is already protecting U.S. interests.
While the system essentially remains unchanged, new trends have emerged
in the processing of arms export cases. In particular, median
processing times for all arms export cases began increasing in fiscal
year 2003;
State and Defense have continued to implement DTSI and related
initiatives primarily designed to streamline the processing of arms
export licenses. According to State officials, they have not evaluated
the effects of these initiatives on the export control system or
revised the initiatives but maintain that the initiatives remain
relevant after September 2001. Yet, applications processed under these
initiatives have generally not been processed within the time frames
established by State and Defense and exporters have not widely used
several initiatives;
State has sought limited coordination with the agencies responsible for
enforcing U.S. arms export laws--the Departments of Homeland Security
and Justice--regarding initiatives designed to streamline arms export
licensing. The only exceptions have been regarding proposed export
licensing exemptions. Enforcement officials have raised concerns
regarding licensing exemptions, including the increased risk of
diversion;
GAO recommendations;
No recommendations; Action taken: Not applicable.
Export Controls: Improvements to Commerce's Dual-Use System Needed to
Ensure Protection of U.S. Interests in the Post- 9/11 Environment (June
26, 2006, GAO 06-638);
Background: In regulating dual-use exports, Commerce seeks to allow
U.S. companies to compete globally while minimizing the risk of items
falling into the wrong hands. In so doing, Commerce faces the challenge
of weighing U.S. national security and economic interests, which at
times can be divergent or even competing-
-a challenge heightened by shifts in the security and economic
environment;
Main issues: Commerce has not systematically evaluated whether the dual-
use export control system is meeting its stated goal of protecting U.S.
national security and economic interests. Specifically, Commerce has
not comprehensively analyzed available data to determine what dual-use
items have actually been exported. Commerce has also not established
performance measures that would provide an objective basis for
assessing how well the system is protecting U.S. interests. Instead,
Commerce relies on limited measures of efficiency, as well as
intelligence reports and meetings with industry to gauge how the system
is operating. After conducting an ad hoc review of the system, Commerce
officials determined that no fundamental changes were needed after
September 2001, but did make some adjustments primarily related to
controls on chemical and biological agents; Omissions exist in the
watchlist Commerce uses to screen export license applications. This
screening is intended to identify ineligible parties or parties
warranting more scrutiny. The omissions undermine the list's utility,
which increases the risk of dual-use exports falling into the wrong
hands. GAO identified 147 parties that had violated U.S. export control
requirements, had been determined by Commerce to be suspicious end
users, or had been reported by State as committing acts of terror, but
these parties were not on the watchlist of approximately 50,000 names.
Reasons for the omissions include a lack of specific criteria as to who
should be on the watchlist and Commerce's failure to regularly review
the list. In addition, a technical limitation in Commerce's
computerized screening system results in some parties on license
applications not being automatically screened against the watchlist;
Commerce has implemented several but not all of GAO's recommendations
for ensuring that export controls on sensitive items protect U.S.
interests. Among weaknesses identified by GAO is the lack of clarity on
whether certain items are under Commerce's control, which increases the
risk of defense-related items being improperly exported. Commerce has
yet to take corrective action on this matter;
GAO recommendations;
Commerce;
* use available data and develop performance measures in consultation
with other agencies to systematically evaluate the effectiveness and
efficiency of the dual-use export control system in achieving the goal
of protecting U.S. interests;
* correct omissions in the watchlist and weaknesses in the screening
process;
* report to Congress on the status of GAO recommendations, the reasons
why recommendations have not been implemented, and what other actions,
if any, are being taken to address the identified weaknesses;
Action taken: While Commerce indicated it has plans to evaluate the
effectiveness of the dual-use export control system, it has not
implemented them or taken action regarding the report to Congress;
Commerce has implemented the recommendations concerning the watchlist.
Analysis of Data for Exports Regulated by the Department of Commerce
(Nov.13, 2006, (GAO-07-197R)
Background: GAO previously reported that Commerce has not
systematically evaluated the overall effectiveness and efficiency of
the dual-use export system. Commerce has not conducted comprehensive
analyses of available data about items that have actually been exported
from the United States. GAO made several recommendations in that
report, including that Commerce should use the available data to
evaluate the system's effectiveness;
Main issues: The data we obtained provide an overall picture of the
dollar value of commodities subject to Commerce regulations and of the
countries receiving these exports. Most items subject to Commerce's
regulations do not require government review and approval in the form
of a license prior to export. We found that less than 1 percent of
exports subject to Commerce regulations were licensed in 2005.[B] The
dollar value of unlicensed exports from the United States in 2005 was
about $624 billion, while the value of licensed exports was about $1.2
billion;
The insight we gained from analyzing shipment data further supports the
prior recommendation to Commerce that is use available data to evaluate
the effectiveness of its export control system. The data could aid in
determining the economic impact of current regulations and in
evaluating whether exporters are complying with regulations. Commerce
officials told us they periodically use portions of the data for
enforcement activities but currently do not use the data to evaluate
the system's effectiveness;
GAO recommendations; No recommendations;
Action taken: Not applicable.
Export Controls: Agencies Should Assess Vulnerabilities and Improve
Guidance for Protecting Export-Controlled Information at Companies
(Dec. 5, 2006, GAO-07-69);
Background: The U.S. government controls exports of defense-related
goods and services by companies and the export of information
associated with their design, production, and use. Globalization and
communication technologies facilitate exports of controlled
information, which provides benefits to U.S. companies and increases
interactions between U.S. and foreign companies--making it challenging
to protect such exports;
Main issues: Commerce and State have less oversight on exports of
controlled information than they do on exports of controlled goods.
Commerce's and State's export control requirements and processes
provide physical checkpoints on the means and methods companies use to
export controlled goods to help the agencies ensure such exports are
made under their license terms, but the agencies cannot easily apply
these same requirements and processes to exports of controlled
information. Commerce and State expect individual companies to be
responsible for implementing practices to protect export-controlled
information. However, one-third of the companies GAO interviewed did
not have internal control plans to protect export-controlled
information; Commerce and State have not fully assessed the risks of
companies using a variety of means to protect export-controlled
information. They have not used existing resources, such as license
data, to help identify the minimal protections for such exports. As
companies use a variety of measures for protecting export-controlled
information, increased knowledge of the risks associated with
protecting such information could improve agency outreach and training
efforts;
GAO recommendations;
Commerce and State; * strategically assess potential vulnerabilities in
the protection of export-controlled information using available
resources, such as licensing data, and evaluate company practices for
protecting such information; * improve interagency coordination in the
following areas (1) provide specific guidance, outreach, and training
on how to protect export-controlled information and (2) better target
compliance activities on company protection of export-controlled
information;
Action taken: Commerce and State have not implemented the
recommendations, but Commerce indicated it is taking steps to address
them.
Export Controls: Agencies Should Assess Vulnerabilities and Improve
Guidance for Protecting Export-Controlled Information at Universities
(Dec. 5, 2006, GAO-07-70);
Background: U.S. export control regulations allow foreign students and
researchers without export licenses to partake in fundamental research,
defined to mean basic research and applied research in science and
engineering, the results of which are ordinarily published and shared
broadly within the scientific community. U.S. policymakers recognize
that foreign students and researchers have made substantial
contributions to U.S. research efforts, but the potential transfer of
knowledge of controlled defense- related technologies to their home
countries could have significant consequences for U.S. national
interests;
Main issues: According to university officials we interviewed, their
institutions focus almost exclusively on fundamental research, which is
generally not subject to export controls. By conducting fundamental
research, universities can openly share and publish their research
findings within a broad community that includes international students
and scholars. To ensure their research remains in the public domain,
most university officials said they extensively screen and review
potential contracts and grants for fundamental research to ensure there
are no publication or other dissemination restrictions. If export
controls apply, university officials stated they sometimes reject the
research contract, involve only students and scholars who can conduct
the research under license exclusions, or refer such work to associated
facilities that can better regulate and control foreign national access
to such research. However, the universities we visited indicated that
government-provided training and guidance on export regulations is
limited in informing their efforts to manage and protect export-
controlled information, and it does not clarify when fundamental
research exclusions should apply;
While State and Commerce officials expressed concerns that universities
may not correctly interpret and apply export regulations, they have not
conducted an overall assessment of available trend data on technology
development research and foreign participation in such research at U.S.
universities to identify potential vulnerabilities. Although State and
Commerce provide guidance through training seminars, agency Web sites,
and telephone help desks to assist exporters in understanding and
complying with regulations, officials stated that their focus is on
processing export license applications--primarily from industry.
Recently, Commerce established an advisory committee composed of
industry and university representatives who are expected to discuss
issues such as the nature of university research and its relation to
export controls;
GAO recommendations;
Commerce and State
*strategically assess potential vulnerabilities in the conduct and
publication of academic research through analyzing available
information on technology development and foreign student populations
at universities;
*on the basis of this assessment, coordinate efforts and improve
guidance and outreach to ensure that universities understand when to
apply export controls;
Action taken:
Commerce and State have not yet implemented the recommendations, but
Commerce indicated it is taking steps to address them.
Export Controls: Challenges Exist in Enforcement of an Inherently
Complex System (Dec. 20, 2006, GAO-07-265);
Background: A key function of 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. Enforcement
activities are largely carried out by Commerce, Homeland Security,
Justice, and State;
Main issues: The enforcement of export control laws and regulations
involves multiple agencies with varying roles, responsibilities, and
authorities. The agencies 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;
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. 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;
GAO recommendations;
Commerce, Homeland Security, and Justice;
* establish a task force to evaluate options to improve coordination
and cooperation among export enforcement investigative agencies;
* report the status of task force actions to Congress;
Commerce and Homeland Security;
* establish goals for license determinations;
Commerce, Homeland Security, and State;
* determine what additional training or guidance is needed on license
determinations;
Commerce and Homeland Security;
* determine the feasibility of establishing a requirement for Customs
and Border Protection to decrement Commerce licenses and an action plan
for doing so;
Justice;
* establish formal procedures for conveying criminal export enforcement
results to State and Commerce;
Action taken:
Justice and Homeland Security indicated that they are taking steps to
address this recommendation;
Commerce and State have not yet implemented these recommendations.
Homeland Security has implemented the recommendation concerning
guidance on license determinations. Commerce and Homeland Security have
not implemented this recommendation;
Justice has implemented this recommendation.
Source: GAO analysis of prior work.
[A] The U.S. Customs Service is now part of the Homeland Security
Department's Customs and Border Protection and Immigration and Customs
Enforcement.
[B] Amounts do not include data for exports to Canada.
[End of table]
[End of section]
Related GAO Products:
Export Controls: Challenges Exist in Enforcement of an Inherently
Complex System. GAO-07-265. Washington, D.C.: December 20, 2006.
Analysis of Data for Exports Regulated by the Department of Commerce.
GAO-07-197R. Washington, D.C.: November 13, 2006.
Export Controls: Agencies Should Assess Vulnerabilities and Improve
Guidance for Protecting Export-Controlled Information at Universities.
GAO-07-70. Washington, D.C.: December 5, 2006.
Export Controls: Agencies Should Assess Vulnerabilities and Improve
Guidance for Protecting Export-Controlled information at Companies. GAO-
07-69. Washington, D.C.: December 5, 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 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.
Nonproliferation: Further Improvements Needed in U.S. Efforts to
Counter Threats from Man-Portable Air Defense Systems. GAO-04-519.
Washington, D.C.: May 13, 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.
Joint Strike Fighter Acquisition: Cooperative Program Needs Greater
Oversight to Ensure Goals Are Met. GAO-03-775. Washington, D.C.:
July 21, 2003.
Defense Trade: Better Information Needed to Support Decisions Affecting
Proposed Weapons Transfers. GAO-03-694. Washington, D.C.: July 11,
2003.
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: Reengineering Business Processes Can Improve
Efficiency of State Department License Reviews. GAO-02-203. Washington,
D.C.: December 31, 2001.
Export Controls: Clarification of Jurisdiction for Missile Technology
Items Needed. GAO-02-120. Washington, D.C.: October 9, 2001.
Export Controls: State and Commerce Department License Review Times are
Similar. GAO-01-528. Washington, D.C.: June 1, 2001.
Export Controls: Regulatory Change Needed to Comply with Missile
Technology Licensing Requirements. GAO-01-530. Washington, D.C.:
May 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: National Security Issues and Foreign Availability for
High Performance Computer Exports. GAO/NSIAD-98-200. Washington, D.C.:
September 16, 1998.
China: Military Imports From the United States and the European Union
Since the 1989 Embargoes. GAO/NSIAD-98-176. Washington, D.C.: June 16,
1998.
Export Controls: Change in Export Licensing Jurisdiction for Two
Sensitive Dual-Use Items. GAO/NSIAD-97-24. Washington, D.C.:
January 14, 1997.
Export Controls: Sensitive Machine Tool Exports to China. GAO/NSIAD-97-
4. Washington, D.C.: November 19, 1996.
Export Controls: Sale of Telecommunications Equipment to China. GAO/
NSIAD-97-5. Washington, D.C.: November 13, 1996.
Export Controls: Concerns over Stealth-Related Exports. GAO/NSIAD-95-
140. Washington, D.C.: May 10, 1995.
Export Controls: Some Controls Over Missile-Related Technology Exports
To China Are Weak. GAO/NSIAD-95-82. Washington, D.C.: April 17, 1995.
Export Controls: License Screening and Compliance Procedures Need
Strengthening. GAO/NSIAD-94-178. Washington, D.C.: June 14, 1994.
FOOTNOTES
[1] GAO, High-Risk Series: An Update, GAO-07-310 (Washington, D.C.:
January 2007).
[2] "Arms" refers to defense articles and services as specified in 22
U.S.C. §2778.
[3] Ronald W. Reagan National Defense Authorization Act for Fiscal Year
2005, Pub. L. No. 108-375 §1225(b) (2004).
[4] This amount reflects only the export of items specifically
identified on Commerce's control list. If an item is not listed on the
control list but is subject to Commerce's regulations, it falls into
the category known as EAR99. In 2005, 99.98 percent of EAR99 items were
exported without licenses. Amounts do not include data for exports to
Canada.
[5] GAO, 21st Century Challenges: Reexamining the Base of the Federal
Government, GAO-05-325SP (Washington, D.C.: February 2005) and 21st
Century Challenges: Transforming Government to Meet Current and
Emerging Challenges, GAO-05-830T (Washington, D.C.: July 13, 2005).
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