Iran Sanctions
Complete and Timely Licensing Data Needed to Strengthen Enforcement of Export Restrictions Gao ID: GAO-10-375 March 4, 2010In 1995, the United States banned exports to Iran of most U.S. goods without a Treasury Department license. In 2008, the U.S. media, citing U.S. government statistics, reported that U.S. firms were exporting numerous goods to Iran. The statistics are maintained by the Census Bureau and are based on data filed by exporters or their agents. The United States has also generally banned unlicensed transshipments of U.S. goods to Iran via other nations. In this report, GAO assesses the extent to which (1) U.S. trade statistics accurately depict exports to Iran, (2) Treasury licenses exports to Iran in accordance with the trade restrictions and provides licensing data to enforcement agencies and Congress, and (3) Iran obtains U.S. military and dual-use goods through transshipment. GAO analyzed Census export data, a randomly selected sample of Treasury export licenses, Treasury licensing information systems, and U.S. government transshipment data. It also interviewed relevant U.S. government officials.
U.S. trade statistics for exports to Iran erroneously include goods that were not exported to Iran. While the statistics indicate that U.S. firms exported 278 types of goods to Iran from 2004 to 2008, 97 of these types of goods were instead exported to Ireland, Iraq, and other countries. The misidentification of Iran as the recipient resulted from errors in export data filings that Census did not detect or correct. As a result of our review, Census officials stated, Census has begun manually checking all new filings of exports to Iran and posting corrections to a Census Web page. While Treasury is licensing exports to Iran in accordance with export restrictions, it cannot provide complete and timely information about the licenses it has issued. Its paper-based licensing information systems cannot be searched to quickly identify licenses for exports of goods to Iran. For example, Treasury was unable to address a 2009 request from U.S. Customs and Border Protection (CBP) officials for complete and timely licensing data to support CBP inspectors at U.S. ports. Treasury's information systems weaken the ability of the government to assess compliance with Iran sanctions. Treasury plans to upgrade its licensing information system for agricultural and medical exports to Iran. However, the upgrade would not address its inability to readily identify licenses for other goods, including civilian items with potential military uses. A wide range of U.S. military and dual-use goods are illegally transshipped to Iran through the United Arab Emirates (UAE), Malaysia, Singapore, and other countries, according to U.S. officials. The Justice Department has prosecuted several individuals for efforts to transship military aircraft parts to Iran.
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-10-375, Iran Sanctions: Complete and Timely Licensing Data Needed to Strengthen Enforcement of Export Restrictions
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
March 2010:
Iran Sanctions:
Complete and Timely Licensing Data Needed to Strengthen Enforcement of
Export Restrictions:
GAO-10-375:
GAO Highlights:
Highlights of GAO-10-375, a report to congressional requesters.
Why GAO Did This Study:
In 1995, the United States banned exports to Iran of most U.S. goods
without a Treasury Department license. In 2008, the U.S. media, citing
U.S. government statistics, reported that U.S. firms were exporting
numerous goods to Iran. The statistics are maintained by the Census
Bureau and are based on data filed by exporters or their agents. The
United States has also generally banned unlicensed transshipments of
U.S. goods to Iran via other nations. In this report, GAO assesses the
extent to which (1) U.S. trade statistics accurately depict exports to
Iran, (2) Treasury licenses exports to Iran in accordance with the
trade restrictions and provides licensing data to enforcement agencies
and Congress, and (3) Iran obtains U.S. military and dual-use goods
through transshipment. GAO analyzed Census export data, a randomly
selected sample of Treasury export licenses, Treasury licensing
information systems, and U.S. government transshipment data. It also
interviewed relevant U.S. government officials.
What GAO Found:
U.S. trade statistics for exports to Iran erroneously include goods
that were not exported to Iran. While the statistics indicate that
U.S. firms exported 278 types of goods to Iran from 2004 to 2008, 97
of these types of goods were instead exported to Ireland, Iraq, and
other countries. The misidentification of Iran as the recipient
resulted from errors in export data filings that Census did not detect
or correct. As a result of our review, Census officials stated, Census
has begun manually checking all new filings of exports to Iran and
posting corrections to a Census Web page.
While Treasury is licensing exports to Iran in accordance with export
restrictions, it cannot provide complete and timely information about
the licenses it has issued. Its paper-based licensing information
systems cannot be searched to quickly identify licenses for exports of
goods to Iran. For example, Treasury was unable to address a 2009
request from U.S. Customs and Border Protection (CBP) officials for
complete and timely licensing data to support CBP inspectors at U.S.
ports. Treasury‘s information systems weaken the ability of the
government to assess compliance with Iran sanctions. Treasury plans to
upgrade its licensing information system for agricultural and medical
exports to Iran. However, the upgrade would not address its inability
to readily identify licenses for other goods, including civilian items
with potential military uses.
A wide range of U.S. military and dual-use goods are illegally
transshipped to Iran through the United Arab Emirates (UAE), Malaysia,
Singapore, and other countries, according to U.S. officials. The
Justice Department has prosecuted several individuals for efforts to
transship military aircraft parts to Iran.
Figure: Illegal Transshipment Routes to Iran:
[Refer to PDF for image: illustration]
The illustration is a map of the world depicting the following data:
U.S. exports to intermediary countries: Location of transshipment
intermediaries:
Australia;
Brazil;
Canada;
Colombia;
France;
Germany;
Luxembourg;
Malaysia;
Netherlands;
Singapore;
UAE.
From intermediary countries: Transshipments to Iran.
Sources: GAO analysis of Justice Department data; Map Resources (map).
[End of figure]
What GAO Recommends:
GAO recommends that Treasury develop the capability to provide
complete and timely information on all licenses for the export of
goods to Iran. Treasury commented that it was upgrading its licensing
system for agricultural and medical exports, but it did not specify
when it would upgrade its licensing system for dual-use items with
potential military uses.
View [hyperlink, http://www.gao.gov/products/GAO-10-375] or key
components. For more information, contact Joseph A. Christoff at (202)
512-8979 or christoffj@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
U.S. Export Statistics for Iran Erroneously Include Goods Not Exported
to Iran:
Treasury Is Licensing Exports to Iran in Accordance with Trade Ban but
Cannot Provide Complete and Timely Information on Its Licensing
Decisions:
Iran Is Obtaining Illegal Transshipments of U.S. Military and Dual-Use
Goods through Other Countries:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: U.S. Legal Tools for Sanctioning Foreign Companies That
Transfer Sensitive Technology:
Appendix III: Comments from the Department of the Treasury:
Appendix IV: Comments from the Department of Commerce:
Appendix V: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Selected Goods Erroneously Included in Export Statistics for
Iran:
Table 2: Selected Countries and Country Codes:
Table 3: Non-TSRA Licenses Issued 2008 to August 2009:
Figures:
Figure 1: TSRA Licenses Issued by Treasury for Exports to Iran, 2002-
2009:
Figure 2: F-14 and F-4 Aircraft:
Figure 3: Illegal Transshipment Routes Cited in Cases Prosecuted 2007-
2009:
Abbreviations:
AECA: Arms Export Control Act:
AES: Automated Export System:
CBP: Customs and Border Protection:
Census: U.S. Census Bureau:
CENTCOM: Defense Department Central Command:
IEEPA: International Emergency Economic Powers Act:
MTCR: Missile Technology Control Regime:
OFAC: Office of Foreign Assets Control:
TSRA: Trade Sanctions Reform and Export Enhancement Act of 2000:
WMD: weapons of mass destruction:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
March 4, 2010:
The Honorable Howard Berman:
Chairman:
Committee on Foreign Affairs:
House of Representatives:
The Honorable David M. Scott:
House of Representatives:
Iran's actions to enrich uranium, conceal its nuclear program, and
sponsor international terrorism present significant challenges to U.S.
national interests. In response, the United States has banned the
export of most U.S. goods to Iran without an export license from the
Department of the Treasury. According to Treasury officials,
Treasury's general policy is to deny most license applications for
Iran with the exception of agricultural and medical goods specified in
a 2000 law.[Footnote 1] Treasury is responsible for maintaining
records of its export licensing decisions. In 2008, the U.S. media,
citing U.S. government official trade statistics, reported that U.S.
firms had exported a wide range of restricted goods to Iran, including
military rifles. At that time, Treasury officials questioned the
statistics' accuracy and stated that Treasury had licensed exports to
Iran in compliance with U.S. law and policy. The statistics, which are
maintained by the U.S. Census Bureau (Census), are based on data that
exporters or their agents file.[Footnote 2] In addition to restricting
direct exports, the United States has also generally prohibited U.S.
firms from knowingly shipping goods to Iran through other nations
without a Treasury license.[Footnote 3] This prohibition includes dual-
use goods (civilian goods with potential military applications) that
the Department of Commerce has licensed for export to other countries.
The Departments of Commerce, Defense, Justice, and Homeland Security
are responsible for detecting and prosecuting illegal transshipment of
U.S. goods to Iran.
In this report, we assess the extent to which (1) U.S. trade
statistics accurately depict U.S. exports to Iran, (2) Treasury
licenses U.S. exports to Iran in accordance with the trade
restrictions and provides complete and timely licensing data to
enforcement agencies and Congress, and (3) Iran obtains U.S. military
and dual-use items through illegal transshipments. We also present
information in appendix II regarding U.S. legal tools for sanctioning
foreign firms that export sensitive non-U.S. technologies to Iran.
To assess the extent to which U.S. statistics accurately depict U.S.
exports to Iran, we asked Census to review the export statistics for
Iran and identify the addresses of the recipients of the exports. We
also met with Census officials to determine their methods and policies
for assuring the accuracy of the statistics. To assess Treasury's
licensing activities, we selected a random sample of Treasury export
licenses for agricultural and medical goods and determined if the
goods and recipients cited in the licenses were consistent with U.S.
law. We also reviewed Treasury documents concerning the systems
Treasury uses to record its licensing activities, interviewed Treasury
and other executive branch officials, and requested detailed licensing
data from Treasury. To review the extent to which U.S. goods are
illegally transshipped to Iran, we obtained and analyzed lists of
relevant criminal prosecutions from the Department of Justice. We also
discussed transshipment issues with officials of the Departments of
Commerce, Defense, Homeland Security (including U.S. Customs and
Border Protection and U.S. Immigration and Customs Enforcement),
Justice, and the Treasury; the Federal Bureau of Investigation; and
other government agencies. The Department of Commerce (Commerce)
provided us with transshipment-related information that it controls as
being "for official use only." We have not included that information
in this report but have instead incorporated it into a "For Official
Use Only" report that is not publicly available.
We conducted this performance audit from May 2009 to March 2010 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives. Our scope and
methodology are described in greater detail in appendix I.
Results in Brief:
The U.S. government's official statistics for U.S. exports to Iran
erroneously include goods that were exported to countries other than
Iran. These statistics indicate that U.S. exporters shipped a total of
278 different types of goods to Iran from 2004 to 2008. However, we
found that 97 of these types of goods, including military rifles, were
shipped not to Iran but to a variety of other nations, including
Ireland, Israel, and Iraq. The remaining 181 types of goods consisted
primarily of agricultural, medical, humanitarian, and informational
items. The misidentification of Iran as the recipient country in the
statistics resulted from export data filing errors that Census did not
detect or correct because of the low dollar value of the export
transactions. Although their dollar value is small relative to the
value of all U.S. exports, the accuracy of the Iran export statistics
is important because the United States has severely restricted trade
with Iran as a state sponsor of terrorism. Census officials stated
that, as a result of our review, they have initiated a manual check of
new filings of exports to Iran, required filers of export data to
select recipient countries from a list instead of allowing them to
enter a two-letter international standard country code, and begun
posting newly-detected corrections to Iran export data on a Census Web
page. According to Census officials, it is too soon to determine
whether these actions will improve the accuracy of future U.S. trade
statistics for Iran.
Treasury is issuing export licenses for Iran in accordance with export
regulations but cannot routinely provide complete and timely
information about those licenses. We reviewed a random sample of 58
licenses drawn from 1,833 agricultural and medical export licenses
issued from late 2006 to mid-2009 and found that the sampled licenses
were consistent with U.S. export regulations related to agricultural
and medical items. We also determined that Treasury had complied with
legal restrictions applicable to licensing the export of dual-use
technology to insure the safety of civil aviation and safe operation
of U.S.-origin commercial aircraft. However, we identified weaknesses
in Treasury's ability to retrieve and provide complete information
about its licensing decisions. Treasury uses two paper-based
information systems to record data on all Iran-related licensing
decisions. The systems are not integrated with one another, and
neither can be searched to specifically identify licenses for the
export of goods to Iran. As a result, Treasury has been unable to
consistently provide timely responses to requests for complete
information on such licenses. For example, Treasury was unable to
respond to a 2009 request from U.S. Customs and Border Protection
(CBP) officials for complete and timely Iran licensing data. CBP
officials stated that they sought the information to help CBP
inspectors verify that goods at U.S. ports had been properly licensed
for export to Iran. Because Treasury administers the U.S. sanctions
program on Iran, its inability to provide complete and timely
information on export licenses undermines the U.S. government's
ability to assess compliance with the sanctions. Treasury is planning
to upgrade its system for tracking licenses for agricultural and
medical exports to Iran, which are permitted by U.S. law. However, the
upgrade would not include the small number of export licenses for
other types of goods, such as civilian aircraft safety equipment with
potential military uses.
Iran is obtaining U.S. military and dual-use goods that are illegally
transshipped through intermediaries in third-party nations, according
to U.S. officials. Goods involved in cases of actual or attempted
transshipment include parts for Iran's U.S.-built fighter aircraft,
military helicopters, and air defense systems; night vision equipment;
submachine guns; computers; laboratory equipment; specialized steel;
pumps with nuclear applications; and electronic components for
missiles. Criminal cases handled by the Justice Department indicate
that U.S. goods are often transshipped to Iran through the United Arab
Emirates, Malaysia, or Singapore. To address the problem, U.S.
agencies have conducted investigations to uncover Iranian procurement
networks and prosecuted at least 30 firms and individuals during 2007
through September 2009.
To help ensure that U.S. agencies have timely access to reliable data
concerning licensed U.S. exports to Iran, we are recommending that the
Secretary of the Treasury ensure that Treasury develop the capability
to provide other agencies and Congress with complete and timely
information concerning all licenses issued for the export of goods to
Iran.
In commenting on a draft of this report, Treasury stated that it was
upgrading the licensing system that tracks agricultural and medical
exports to Iran. However, it did not specify when similar upgrades
would occur for a licensing system that tracks other exports,
including dual-use items that have potential military applications. We
therefore have not changed our recommendation. Treasury also stated
that the title of our draft report implied that its information
systems weakened implementation of sanctions on Iran. We therefore
modified the title to clarify our message and reinforce our
recommendation. Treasury's comments are reproduced in appendix III.
The Department of Commerce provided technical comments in writing,
which we have incorporated as appropriate and reproduced in appendix
IV. The other agencies cited in this report did not provide formal
comments. CBP, U.S. Immigration and Customs Enforcement, and Treasury
provided technical comments, which we incorporated as appropriate.
Background:
The U.S. government's official trade statistics are maintained by the
U.S. Census Bureau for use as economic indicators and measures of the
U.S. balance of trade with other countries. The statistics are based
primarily on data filed by exporters and their agents[Footnote 4] into
the electronic Automated Export System (AES) database.[Footnote 5]
Census maintains the AES data on a mainframe computer operated by the
Department of Homeland Security's U.S. Customs and Border Protection.
While most filers enter data through the Census Bureau's AESDirect or
a related Census system, others have developed their own software for
this purpose. The data filed into AES includes the recipient country.
Until recently, filers of export data designated the recipient country
by choosing a two-letter international standard country code. Data
filers also designate the type of good being exported from a list of
more than 8,000 internationally harmonized commodity codes. According
to these statistics, the United States exported worldwide nearly $1.3
trillion during 2008.
U.S. exports to Iran are severely restricted by U.S. laws and
regulations. Before 1979, the United States enjoyed good relations
with the Iranian government and exported military equipment to Iran.
However, U.S.-Iranian relations deteriorated sharply following the
1979 Iranian revolution and the consequent seizure of U.S. embassy
personnel. Iran's subsequent efforts to enrich uranium and support
international terrorism prompted the United States to impose numerous
sanctions on Iran, including a 1995 ban on almost all U.S. exports to
that country.[Footnote 6] The current ban is administered by the
Office of Foreign Assets Control of the U.S. Department of the
Treasury, which is also responsible for licensing financial
transactions with Iran and imports from Iran.[Footnote 7] Under the
ban, in general, a U.S. person must obtain a Treasury license before
exporting or selling goods to Iran.[Footnote 8] Congress had already
restricted exports to Iran by prohibiting the export of dual-use goods
(civilian goods with potential military applications) to Iran.
[Footnote 9] This prohibition can be waived by the President if the
President determines that doing so is essential to the national
interests of the United States.[Footnote 10]
According to Treasury officials, Treasury policy is to generally deny
license applications for the export of U.S. goods to Iran, with the
exception of goods covered by the Trade Sanctions Reform and Export
Enhancement Act of 2000 (TSRA). TSRA requires the President to
terminate any unilateral agricultural or medical sanctions against a
foreign country or foreign entity.[Footnote 11] TSRA also states that
the export of agricultural commodities, medicine, or medical devices
to a designated state sponsor of terrorism, such as Iran,[Footnote 12]
shall only be made pursuant to 1-year licenses.[Footnote 13] As a
result, Treasury licenses the export of agricultural goods, medicines,
and medical goods to Iran and other sanctioned countries.[Footnote 14]
Treasury has issued a growing number of licenses for agricultural and
medical exports to Iran following passage of TSRA, as shown in figure
1. TSRA licenses may not be granted for exports to entities linked to
international terrorism, the proliferation of weapons of mass
destruction, or narcotics trafficking.
Figure 1: TSRA Licenses Issued by Treasury for Exports to Iran, 2002-
2009:
[Refer to PDF for image: vertical bar graph]
Year: 2002;
Licenses: 150.
Year: 2003;
Licenses: 370.
Year: 2004;
Licenses: 455.
Year: 2005;
Licenses: 605.
Year: 2006;
Licenses: 375.
Year: 2007;
Licenses: 607.
Year: 2008;
Licenses: 540.
Year: 2009;
Licenses: 777.
Source: GAO analysis of Treasury data.
[End of figure]
The trade ban also generally prohibits exports of U.S. goods
(including dual-use items) to countries other than Iran without a
Treasury license if the exporter has reason to know the goods are
specifically intended for transshipment to Iran.[Footnote 15] Foreign
firms are generally prohibited from knowingly reexporting goods on
Commerce's list of controlled dual use goods to Iran even if those
goods were originally legally exported from the United States to a
third country under a Commerce license.[Footnote 16] For example, dual-
use U.S. goods exported to countries other than Iran under a Commerce
license may not be subsequently transshipped to Iran without a
Treasury license if the exporter knew or had reason to know that such
goods were intended for Iran. The Departments of Commerce, Defense,
Homeland Security, Justice, and the Treasury investigate allegations
of illegal transshipment of U.S. goods to Iran. Exporters who
knowingly ship U.S. goods to Iran via other countries without a
Treasury license are subject to prosecution by the Department of
Justice. Congress is considering new sanctions that would restrict
Iran's ability to import goods from other countries.[Footnote 17]
U.S. Export Statistics for Iran Erroneously Include Goods Not Exported
to Iran:
The U.S. government's official statistics for U.S. exports to Iran
erroneously include many types of goods that U.S. firms did not export
to Iran. The misidentification of Iran as the recipient country in the
statistics is the result of export data filing errors that Census did
not detect or correct. Census officials stated that, as a result of
our review, Census has begun manually checking new export filings
reporting exports to Iran. While Census policy is not to correct
errors in the statistics that are older than 1 year, it has begun
posting Iran-related corrections on a separate Web page.
U.S. Export Statistics Contain Numerous Erroneous Entries for Iran:
U.S. export statistics erroneously indicate that U.S. exporters
shipped 278 types of goods to Iran from 2004 to 2008. At our request,
Census reviewed its records and determined that more than a third (97)
of these types of goods had not been exported to Iran. As shown in
table 1, the types of goods erroneously included in the Iran export
statistics include military rifles exported to Iraq and aircraft parts
exported to Ireland, Israel, and Iraq.[Footnote 18] The remaining
types of goods in the export statistics for Iran are primarily
agricultural, medical, humanitarian, or informational.
Table 1: Selected Goods Erroneously Included in Export Statistics for
Iran:
Type of Good: Civilian aircraft, engines, and parts;
Total value shipped (2004-2008): $640,235;
Actual countries of destination: Ireland, Israel, Iraq.
Type of Good: Military rifles;
Total value shipped (2004-2008): $106,635;
Actual countries of destination: Iraq.
Type of Good: Military rifle parts;
Total value shipped (2004-2008): 8,760;
Actual countries of destination: $Iraq.
Type of Good: Military equipment;
Total value shipped (2004-2008): 33,197;
Actual countries of destination: $Iraq, Kyrgyzstan.
Type of Good: Specially designed vehicles;
Total value shipped (2004-2008): 21,000;
Actual countries of destination: $Iraq.
Type of Good: Work trucks;
Total value shipped (2004-2008): 60,713;
Actual countries of destination: $Israel.
Type of Good: Cinema cameras;
Total value shipped (2004-2008): $3,000;
Actual countries of destination: Iraq.
Type of Good: Perfumes and toilet waters;
Total value shipped (2004-2008): $8,938;
Actual countries of destination: Israel.
Type of Good: String musical instruments;
Total value shipped (2004-2008): $8,123;
Actual countries of destination: Ireland.
Source: GAO analysis of Census data.
[End of table]
The misidentification of Iran as the recipient country for these and
other exports was the result of errors made by filers of export data
into the Automated Export System. In checking its records at our
request, Census determined the addresses of the recipients to which
the shipment were to be delivered. It found many cases of "improbable"
addresses, such as "Dublin, Iran." In these cases, exporters
apparently mistook the two-letter country code for Iran ("IR") for the
code for the actual recipient country. For example, exporters shipping
goods to Ireland might enter "IR" instead of the correct code for
Ireland ("IE"). Table 2 depicts the code for Iran and the codes for
several other recipient countries.
Table 2: Selected Countries and Country Codes:
Country: Iran;
Standardized country code: IR.
Country: Ireland;
Standardized country code: IE.
Country: Israel;
Standardized country code: IL.
Country: Iraq;
Standardized country code: IQ.
Country: Italy;
Standardized country code: IT.
Source: U.S. Census Bureau.
[End of table]
Census Did Not Detect or Correct Errors in Export Data for Iran:
Census officials stated that they did not detect or correct all of the
Iran-related errors in new exporter filings or in the export
statistics for previous years. The officials focused on detecting
errors involving high-dollar value transactions because of the
statistics' use in determining the U.S. balance of trade rather than
the sensitivity of the reported recipient country. The officials
stated that they did not focus on detecting errors in the data for
exports to Iran because the value of such exports was relatively
small. In 2008, the reported value of U.S. exports to Iran was $683
million, while the total value of all U.S. exports worldwide was
nearly $1.3 trillion.[Footnote 19] Moreover, the officials stated, the
policy of the Census Bureau is not to make changes in trade statistics
that are more than a year old. For example, Census officials have not
corrected an erroneous entry in the statistics concerning the alleged
export of rifles to Iran in 2004, although they learned of the error
in 2008. Census officials also stated that Census is not involved in
enforcing U.S. export controls on Iran.
Although the dollar value of U.S. exports to Iran is small relative to
the value of all U.S. exports, the accuracy of the Census Bureau's
Iran export statistics is important. The nature and composition of the
U.S. exports to Iran is sensitive because the United States has
severely restricted trade with Iran as a state sponsor of terrorism.
Also, other U.S. government agencies use these statistics in
connection with the trade with Iran. For example, Commerce and
Homeland Security enforcement officials use the statistics as part of
their enforcement targeting efforts. In addition, officials from the
Department of State stated that they employ these statistics in
defending U.S. trade policy with Iran in discussion with other
governments.
Census Has Taken Action in Response to Our Review:
In response to our review, Census officials have taken action to
improve the accuracy of statistics concerning current U.S. exports to
Iran.
* Beginning in August 2009, Census officials began routine accuracy
checks of new filings of exports to Iran and other heavily sanctioned
countries (Cuba, North Korea, and Sudan), regardless of the dollar
value of the exports. Census officials stated that they are now
checking recipient addresses to verify that they match the reported
country of destination and are calling filers of export data to verify
questionable entries. Although they have not formalized the process,
Census officials have stated that they intend to continue these
accuracy checks.
* Census also clarified the country selection process in AESDirect,
the filing system used by most exporters to enter information into the
Automated Export System. Because exporters often apparently assumed
that "IR" was the code for other countries, Census has changed the
data entry process to include a pull-down menu that lists all the
countries of the world by their complete names.
* In June 2009, Census began posting an online list of corrections to
Iran export data.[Footnote 20] However, Census officials stated that
they will continue their policy of not correcting errors in the trade
statistics older than 1 year.[Footnote 21]
Census officials stated that it is too early to determine the extent
to which these recent efforts may improve the accuracy of U.S.
statistics concerning exports to Iran.
Treasury Is Licensing Exports to Iran in Accordance with Trade Ban but
Cannot Provide Complete and Timely Information on Its Licensing
Decisions:
Treasury is licensing exports to Iran in accordance with the trade ban
but cannot provide other agencies or Congress with complete and timely
licensing information. It is hindered by paper-based information
systems that cannot be searched to identify licenses for the export of
goods to Iran. As a result, Treasury has been unable to quickly
respond to requests for complete information on such licenses.
Treasury is planning to upgrade its system for tracking licenses for
agricultural and medical exports to Iran, which are permitted by TSRA.
However, the upgrade would not include the small number of export
licenses for other types of goods, such as dual-use civilian aviation
equipment with potential military uses.
Treasury Licenses for Exports to Iran Are in Accordance with the Trade
Ban:
Our review of a sample of TSRA licenses found no evidence that
Treasury has issued TSRA licenses for the export of goods other than
those covered by TSRA. We also found no evidence that TSRA licenses
involved recipients engaged in forbidden activities. We selected a
random sample of 58 licenses from 1,833 TSRA export licenses issued by
Treasury between October 2006 and August 2009. The licenses selected
authorized the export of more than 275 types of goods. None of the
licenses in our sample authorized the export of nonagricultural or
nonmedical items. Also, none of the end users listed on the licenses
in our sample appeared on Treasury's Specially Designated Nationals
and Blocked Persons List, which contains individuals known to be
linked to international terrorism, the proliferation of weapons of
mass destruction, and narcotics trafficking.
We also reviewed 34 non-TSRA licenses that Treasury issued between
January 2008 and July 2009. As shown in table 3, we found that all but
one of the licenses involved the return of human remains to Iran;
official U.S. government and law enforcement matters; educational,
research, and exchange programs; and media-related enterprises for
broadcasting or Internet connectivity. The remaining license involved
the export of dual-use equipment to help ensure the safety of Iran's
U.S.-built civilian airliners. U.S. law prohibits the export of any
dual-use item to Iran and states that the President may waive the
prohibition if doing so is essential to the interests of the United
States.[Footnote 22] The President has delegated the authority to
issue such waivers to the Secretary of State.[Footnote 23] We obtained
a list of waivers from the Department of State and confirmed that a
waiver had been issued for this dual-use export.
Table 3: Non-TSRA Licenses Issued 2008 to August 2009:
Purpose of licenses: Transport of human remains to Iran;
Number of licenses: 13.
Purpose of licenses: U.S. Government/Law Enforcement;
Number of licenses: 9.
Purpose of licenses: Educational/Research/Exchange Programs;
Number of licenses: 8.
Purpose of licenses: Media/Broadcasting/Internet Connectivity;
Number of licenses: 3.
Purpose of licenses: Aircraft Safety (dual-use);
Number of licenses: 1.
Purpose of licenses: Total;
Number of licenses: 34.
Source: GAO analysis of Treasury data.
[End of table]
Treasury Information Systems Cannot Provide Complete and Timely
Licensing Data to Other Agencies and Congress:
Treasury cannot provide other agencies or Congress with complete and
timely information concerning the licenses it has issued. It cannot do
so because it relies on paper-based information systems that cannot be
searched to identify licenses for the export of goods to Iran.
Treasury's primary licensing information system for export licenses is
based on correspondence tracking software. According to a Treasury
official familiar with the system, it contains nonstandardized data
for license applications entered before 2007, relies on manual data
entry, and requires time-consuming case-by-case review by licensing
officials to ensure its reliability and suitability for release.
Treasury's secondary information system was created by TSRA licensing
personnel to support the licensing of exports of TSRA goods. In
January 2009, an internal Treasury budget request characterized the
TSRA information system as a "largely paper-based" system that hinders
"the speed, efficacy, reliability, and security of [Treasury's]
licensing, enforcement and compliance activities." Treasury officials
must manually review all TSRA licensing data for Iran to identify
licenses that authorize the export of goods. Because the TSRA system
is not integrated with Treasury's primary licensing information
system, TSRA licensing officials must manually enter the same data
into both systems.
Treasury has been unable to consistently provide timely and complete
licensing information for Iran to other agencies and Congress. For
example, a Treasury official informed U.S. Customs and Border
Protection (CBP) officials in 2009 that Treasury's information systems
could not provide CBP with complete and timely information on licenses
issued for the export of goods to Iran. CBP officials stated that they
had sought the information to help CBP officers at U.S. ports quickly
determine whether goods slated for export to Iran had been properly
licensed by Treasury. CBP officers currently use a more time-consuming
process to access limited Treasury data through a third agency.
Treasury officials stated in January 2010 that their licensing
information systems focus on the exceptions that Treasury grants to
the Iran trade embargo, rather than on controls over the export of
specific goods.
Similarly, as of March 1, 2010, Treasury had yet to provide Congress
with a required biennial report on TSRA licenses issued to Iran from
October 1, 2006 to September 30, 2008.[Footnote 24] Treasury officials
noted that Treasury has published quarterly reports that contain the
number of TSRA licenses issued during this period. However, the data
in the quarterly reports were not consistent with data that Treasury
provided us during our review. A TSRA official stated that Treasury
could not resolve the inconsistencies in a timely manner because of
information system limitations. In addition, Treasury required more
than 2 months to provide GAO with adequate data concerning its TSRA
licenses.
Treasury has begun work to upgrade its system for managing TSRA
licensing information. During our review, Treasury hired a contractor
in September 2009 to begin designing a system to better manage TSRA
licensing information. The stated goal of the project is to provide
Treasury with an integrated, largely paperless TSRA database that
would allow it to better collect and manage information, conduct
analysis, improve efficiency, provide U.S. law enforcement agencies
with better information, and improve the timeliness of reports to
Congress. Treasury intends to complete the upgrade by September 2010.
Treasury officials informed us that they gave priority to upgrading
the TSRA database because of the volume of licensing requests.
However, the new TSRA system would not include licenses that Treasury
has issued for the export of goods that are not agricultural or
medical in nature, including dual-use civilian goods with potential
military applications. Congress has prohibited the export of any dual-
use item to Iran and has stated that the President may waive the
prohibition if doing so is essential to the interests of the United
States.[Footnote 25] Treasury has had difficulty in identifying
licenses for dual-use items. For example, Treasury officials informed
a Defense Department Central Command (CENTCOM) official in 2009 that
they could not provide CENTCOM with a list of Treasury licenses for
the export of U.S. dual-use civilian aircraft parts to Iran. According
to the CENTCOM official's report, Treasury officials stated they could
not do so because of information system limitations. [Footnote 26]
Similarly, Treasury took more than 4 months to provide GAO with
adequate data concerning a dual-use export license and 33 other non-
TSRA licenses issued during the preceding 18 months (January 1, 2008-
July 2009). Treasury officials stated in December 2009 that Treasury
had yet to determine when it might upgrade its licensing information
system for non-TSRA export licenses.
In 2007, we identified the lack of data concerning U.S. trade
sanctions as a governmentwide problem affecting the U.S. government's
ability to assess the impact of the sanctions on Iran.[Footnote 27]
Given Treasury's central role in licensing exports to Iran, its
inability to provide complete and timely licensing information weakens
government efforts to determine whether dual-use and other goods
exported to Iran have been properly licensed and to assess compliance
with the trade ban.
Iran Is Obtaining Illegal Transshipments of U.S. Military and Dual-Use
Goods through Other Countries:
According to U.S. officials, Iran is obtaining U.S. military and dual-
use goods that are being illegally transshipped by firms and
individuals through locations in numerous countries, including the
United Arab Emirates, Malaysia, and Singapore. The goods include
components for U.S.-built fighter aircraft, electronics, and
specialized metals. To address the problem, U.S. agencies have
conducted undercover investigations to detect Iranian procurement
networks, prosecuted criminal cases against at least 30 firms and
individuals for transshipping or attempting to transship goods to
Iran, and provided export control training and support to the United
Arab Emirates and other countries.
Wide Range of Military and Dual-Use Goods Involved in Iran
Transshipment Cases:
Firms and individuals have transshipped or attempted to transship a
wide range of U.S. military and dual-use goods to Iran, according to
U.S. officials. The Department of Justice reported in September 2009
that individuals and firms were seeking to transship military
components to Iran. For example, the department listed nine major
criminal prosecutions between 2007 and September 2009 that involved
transshipment of components for Iran's U.S.-built fighter aircraft.
These aircraft include the F-14 fighter, a highly capable aircraft
used by the U.S. Navy until 2006 (see figure 2); the F-4 fighter-
bomber; and the F-5 fighter. The department also reported efforts to
transship parts for Iran's U.S.-built military helicopters, military-
grade night vision equipment, submachine guns, computers, and
specialized laboratory equipment. Immigration and Customs Enforcement
officials expressed concern regarding Iranian efforts to acquire
through transshipment electronic components for missiles, parts for
Iran's U.S.-built Hawk anti-aircraft missiles, specialized steel, and
pumps with nuclear applications.
Figure 2: F-14 and F-4 Aircraft:
[Refer to PDF for image: 2 photographs]
Sources: U.S. Navy (F-14) and U.S. Air Force (F-4).
[End of figure]
Goods Are Transshipped through Several Nations:
Firms and individuals have transshipped or attempted to transship
goods though intermediaries in several countries. A 2009 report by the
Justice Department cited 30 cases that involved the use of
intermediaries in the United Arab Emirates (UAE), Malaysia, Singapore,
Thailand, Australia, Canada, Colombia, Brazil, Austria, France,
Germany, Luxembourg, The Netherlands, and the United Kingdom. As shown
in figure 3, the cases involved efforts to ship the goods to Iran
through the use of intermediaries in these countries. More than 50
percent of the cases listed involved use of intermediaries in the UAE
for transshipment. About 20 percent involved the use of Malaysia and
Singapore.[Footnote 28] U.S. goods involved in these cases included
U.S. military aircraft components, laboratory equipment, specialty
alloy pipes, night vision goggles, and sensitive technologies sent to
Iranian missile and nuclear entities.
Figure 3: Illegal Transshipment Routes Cited in Cases Prosecuted 2007-
2009:
[Refer to PDF for image: illustration]
The illustration is a map of the world depicting the following data:
U.S. exports to intermediary countries: Location of transshipment
intermediaries:
Australia;
Brazil;
Canada;
Colombia;
France;
Germany;
Luxembourg;
Malaysia;
Netherlands;
Singapore;
UAE.
From intermediary countries: Transshipments to Iran.
Sources: GAO analysis of Justice Department data; Map Resources (map).
[End of figure]
U.S. officials stated that the UAE has taken steps to address the use
of its territory for transshipment. They noted that the UAE has
increased cooperation with U.S. enforcement entities and enacted new
export control legislation in 2007. According to the UAE government,
the new law addresses goods subject to import and export control
procedures, bans the export or re-export of strategic goods (including
arms and military hardware, chemical and biological materials, and
dual-use items) without a special license, and specifies penalties of
imprisonment of up to a year and fines totaling over $270,000. U.S.
officials met with UAE officials in June 2009 to discuss the
implementation of the new law. Commerce officials stated that the law
contains the basic elements of an export control regime to combat
transshipment. However, some U.S. officials also stated that
individuals involved in illegal transshipment may shift their
operations to other nations, such as Malaysia and Singapore.
Actions Are Being Taken by U.S. Agencies to Combat Transshipment:
U.S. enforcement officials stated that they pursue allegations of
transshipment. For example, Defense Criminal Investigative Services
and U.S. Immigration and Customs Enforcement officials stated they
conduct undercover investigations to detect efforts by Iranian
procurement agents to obtain U.S. goods in response to requests from
Iran's military-industrial establishment. To do so, procurement agents
may seek to build long-term relationships with suppliers by initially
buying small quantities of relatively-innocuous items before seeking
more sensitive items. Defense Criminal Investigative Services and U.S.
Immigration and Customs Enforcement officials stated that, in one
case, a procurement agent with ties to the Iranian military attempted
to procure about 700 goods, including aircraft parts and radar
components. Most of the goods would have required U.S. government
licenses to be exported to their alleged destination in the United
Arab Emirates. The individual seeking the parts typically identified
himself as a United Arab Emirates businessman in approaching U.S.
firms, according to U.S. enforcement officials. The individual
provided false documents and attempted to convince the U.S. firms that
they did not need to obtain export licenses.
U.S. law provides criminal penalties for the illegal transshipment of
goods to Iran.[Footnote 29] For example, violators of Treasury's
Iranian Transactions Regulations may receive sentences of up to 20
years imprisonment and fines of up to $1 million. The Justice
Department has reported that from January 2007 to September 2009 it
handled at least 30 criminal prosecutions involving actual or
attempted transshipments to Iran. Five individuals convicted in
connection with these cases received sentences of imprisonment that
ranged from 6 months to more than 5 years.
The Commerce Department is responsible for licensing U.S. exports of
dual-use items to the UAE, as well as countries other than Iran. To
help detect illegal transshipments of U.S. dual-use goods, Commerce
enforcement personnel select a sample of previously shipped goods and
attempt to verify they are located and being used in accordance with
licensing conditions.[Footnote 30]
U.S. agencies have provided export control assistance to countries
that have been used by intermediaries to transshipment goods to Iran.
For example, the UAE has received assistance provided by U.S.
agencies, including the Department of Homeland Security and the
Department of Energy. The Departments of Commerce and Justice have
also worked with the UAE in improving its controls over exports.
Conclusions:
While the United States government has severely restricted U.S.
exports to Iran, it cannot readily determine the extent to which it
has issued licenses for such exports or the extent to which goods
marked for Iran are leaving U.S. ports. U.S. agencies should have
complete, reliable, and timely information concerning these matters to
ensure the U.S. government is implementing the ban on exports to Iran.
While covert transshipments of U.S. goods through third-party
countries are inherently difficult to detect, erroneous reports of
overt shipments of U.S. goods to Iran have prompted concerns that the
United States is not abiding by its own export ban. The Census Bureau
has taken some steps to detect and correct errors in its latest
statistics, but the Treasury Department has yet to take action to
ensure that it can retrieve complete and timely data on which exports
to Iran it has licensed and which it has not.
Recommendation for Executive Action:
To help ensure that U.S. agencies have timely access to reliable data
concerning licensed U.S. exports to Iran, we recommend that the
Secretary of the Treasury ensure that the Department of the Treasury
develop the capability to provide other agencies and Congress with
complete and timely information concerning all licenses issued for the
export of goods to Iran.
Agency Comments and Our Evaluation:
Treasury provided written comments regarding a draft of our report,
which are reprinted in appendix III. With regard to our
recommendation, Treasury stated that it is already able to access,
review, and share information relating to TSRA licenses and that it
"hopes" to enhance its abilities to process non-TSRA licensing
information. It also indicated that it plans to share licensing data
with CBP in the future through the Automated Commercial Environment
(ACE) system. Treasury acknowledged that its ability to search some
parts of its current licensing databases is limited and that its data
systems could be improved. Treasury also acknowledged that it "has
work to do" before it can provide CBP with the specific data CBP needs
to validate licensed exports. While Treasury is able to access and
share licensing information, it cannot do so in a complete and timely
manner. As noted in our draft report, Treasury required more than 2
months to provide us with complete licensing data for agricultural and
medical exports and more than 4 months to access and share 34 recent
export licenses for other types of goods, including a dual-use good
with potential military applications. The ACE system is still in
development and is not ready to receive Treasury's export data. We
therefore have not changed our recommendation that Treasury develop
the ability to provide complete and timely information regarding all
export licenses for Iran.
Treasury also stated that, contrary to the notion that the
administration of the sanctions program had been weakened, nothing in
our draft report indicated that enforcement actions regarding exports
to Iran, or the implementation of the sanctions, had been impaired by
incomplete and untimely licensing data. Treasury's assertion is in
contrast with a 2009 internal Treasury budget request, in which
Treasury officials stated that (1) Treasury's information processes
were hampering "the speed, efficacy, reliability and security" of its
enforcement and compliance activities and (2) Treasury would be able
to provide better information to law enforcement agencies if it
upgraded its TSRA information system. Also, as noted in our report,
limitations in Treasury's information systems prevented it from
responding to a request from U.S. Customs and Border Protection
officials for more complete and timely licensing information to aid
CBP agents at U.S. ports.
Treasury also stated that it appreciated the report's finding that
Treasury is licensing the export of goods to Iran in accordance with
the laws and regulations imposing sanctions on Iran. However, it
expressed concern that our draft report title conveyed an impression
that Treasury's information systems were weakening the implementation
of economic sanctions against Iran. We therefore modified the title of
our report to clarify our message and reinforce our recommendation.
The Department of Commerce provided formal written comments concerning
the Census Bureau's maintenance of U.S. export statistics. Commerce's
comments were technical in nature and did not address our findings or
recommendation. We have incorporated Commerce's comments in our text
as appropriate and reproduced them in appendix IV. The other agencies
cited in this report did not provide formal comments. CBP, U.S.
Immigration and Customs Enforcement, and Treasury provided technical
comments, which we incorporated as appropriate.
We are sending copies of this report to the Departments of Commerce,
Defense, Energy, Homeland Security, Justice, State, and the Treasury,
as well as interested congressional committees. In addition, the
report will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-8979 or christoffj@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. Key contributors are listed in
appendix V.
Signed by:
Joseph A. Christoff:
Director, International Affairs and Trade:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
To assess the extent to which U.S. statistics accurately depict U.S.
exports to Iran, we analyzed the results of a Census Bureau review of
records regarding all types of goods reportedly shipped to Iran from
2004 through 2008 to determine the specific destinations of those
goods. In reviewing its records, Census checked the shipping address
of the ultimate recipient for each good. Based on the results of its
review, Census provided us with the actual country of destination and
the total dollar value of each type of good that was sent to a country
other than Iran. We used that information to adjust the data found in
the U.S. export statistics. We also reviewed a Census Web page listing
corrections to U.S. export data concerning Iran to corroborate the
posted corrections with those that Census had provided to us. We also
met with Census officials to determine their methods and policies for
assuring the accuracy of the statistics.
To assess the Treasury Department's licensing activities, we first
reviewed U.S. laws and regulations that established sanctions on U.S.
exports to Iran, including Treasury's Iranian Transaction Regulations.
We then reviewed a random sample of 58 licenses that were issued by
Treasury to exporters from October 2006 to August 2009. With this
probability sample, each member of the study population had a nonzero
probability of being included, and that probability could be computed
for any member. The random sample was taken from a list of 1,833
licenses provided to us by Treasury. On the basis of the sample, we
estimate no more than 5 percent of the population contained errors, at
a 95 percent confidence level,[Footnote 31] which we judged to be
sufficiently reliable for our review. In the digital PDF copies of
licenses we obtained, we verified that all licenses were for
agricultural goods, medicines, and medical devices allowed under TSRA
and the Iranian Transactions Regulations. We also looked at the
intended end users in the license to verify that none were sponsors of
international terrorism. The names of end users in the licenses were
compared with a search of Treasury's Specially Designated Nationals
and Blocked Persons list, which is maintained and updated daily on
Treasury's Web site.[Footnote 32] For non-TSRA goods, we reviewed all
non-TSRA licenses provided by Treasury for January 2008 to June 2009.
For dual-use items, we verified that a waiver had been obtained for
the export of goods to Iran before a license was granted. We also
interviewed officials from the Departments of the Treasury and State
on their collaboration and joint decision-making for licenses granted
for export to Iran that required a presidential waiver. To assess
Treasury's ability to provide complete and timely licensing data to
other agencies and Congress, we obtained documents concerning Treasury
information systems, including contracting and budget documents for a
planned upgrade. We obtained a Treasury presentation on the TSRA
Database and Foreign Assets Control Database systems used to store
records of its licensing activities. We also obtained and reviewed all
of the mandated biennial and quarterly reports for TSRA on Treasury's
Web site.[Footnote 33] We compiled these reports into a comprehensive
total of licenses issued by Treasury and then compared it with the
list Treasury provided to us for the overlapping time periods. We also
interviewed relevant Treasury licensing, information technology, and
enforcement officials. We interviewed officials from the Departments
of Commerce and Homeland Security and other entities who use Treasury
licensing information. In addition, we requested detailed licensing
data from Treasury and monitored its ability to comply with our
request.
To review the extent to which U.S. goods are being illegally
transshipped to Iran, we obtained and analyzed lists of relevant
criminal prosecutions from the Department of Justice. We also
discussed transshipment issues with officials of the Departments of
Commerce, Defense, Homeland Security, Justice, and the Treasury; the
Federal Bureau of Investigation; and other government agencies. We
relied on secondary sources for descriptions of foreign laws.
[End of section]
Appendix II: U.S. Legal Tools for Sanctioning Foreign Companies That
Transfer Sensitive Technology:
The U.S. government has a number of legal tools to exert pressure on
foreign entities that transfer foreign sensitive technologies to Iran.
[Footnote 34] These tools allow the United States to penalize foreign
entities by freezing their U.S. properties, limiting their ability to
trade with the United States, prohibiting them from obtaining U.S.
government procurement contracts, or otherwise impairing their ability
to work with U.S. entities. Some of these tools are specifically
focused on the transfer of technologies to Iran, while others can be
applied to a wider range of actions. The laws presented below are
discussed only in the context of non-U.S. entities transferring
sensitive non-U.S. technologies to Iran from outside the United
States. Please refer to the original text of the laws for the full
content.
Executive Orders 13382, 12938, and 13094:
These executive orders establish criteria for the application of
sanctions on foreign firms that provide sensitive technologies to
Iran. The orders draw their authority from the International Emergency
Economic Powers Act (IEEPA) and several other acts of Congress.
* Executive Order 13382 allows the Secretary of State or the Secretary
of the Treasury, in consultation with each other and other relevant
agencies, to freeze the assets of persons designated as being engaged
in the proliferation of weapons of mass destruction (WMD), as well as
members of their support networks.[Footnote 35] The order also states
that frozen assets may not be transferred, paid, exported, withdrawn
or otherwise dealt in and prohibits any transactions by a U.S. person
or within the United States taken to evade or avoid such
prohibitions.[Footnote 36] Foreign persons can be designated under the
order if they have engaged, or attempted to engage, in activities or
transactions that have materially contributed to the proliferation of
(or pose a risk of doing so) WMD or WMD delivery systems (such as
missiles capable of delivering WMD). Such activities include efforts
by any person or country of proliferation concern to manufacture,
acquire, possess, develop, transport, transfer, or use WMD or WMD
delivery systems.
* Executive Order 12938 allows the Secretary of State to impose
sanctions against foreign persons if the Secretary has made a
determination that such persons have, on or after November 16, 1990,
knowingly and materially contributed to the efforts of any foreign
country, project, or entity to use, develop, produce, stockpile, or
otherwise acquire chemical or biological weapons.[Footnote 37] The
United States government is prohibited from procuring goods or
services from a designated person or importing products produced by a
designated person, unless exempted from these sanctions by the
Secretaries of State and the Treasury for certain reasons, such as
U.S. military requirements or defense production needs.
* Executive Order 13094 expanded Executive Order 12938 to impose
sanctions when the Secretary of State determines that a foreign person
on or after November 16, 1990, has materially contributed or attempted
to contribute materially to the efforts of any foreign country,
project, or entity of proliferation concern to use, acquire, design,
develop, produce, or stockpile weapons of mass destruction or missiles
capable of delivering such weapons.[Footnote 38] The penalties that
could be imposed under Executive Order 12938 remained the same.
Iran, North Korea, and Syria Nonproliferation Act:
This act allows the President to sanction foreign persons with respect
to whom there is credible evidence indicating that such persons
transferred sensitive goods, services, or technology to Iran after a
certain date.[Footnote 39] Under the act, the President is required to
report to the Senate Foreign Relations Committee and the House Foreign
Affairs Committee every 6 months identifying foreign persons with
respect to whom there is credible evidence that such persons have, on
or after January 1, 1999, transferred goods, services, or technology
listed in specified multilateral export control lists to Iran.
[Footnote 40] The act allows the President to impose a number of
measures to a foreign person appearing in the report, such as a ban of
U.S. government procurement from the designated person, a ban of U.S.
government arms sales to the foreign person,[Footnote 41] or the
denial or suspension of licenses to export dual-use items to the
foreign person.[Footnote 42]
Iran-Iraq Arms Nonproliferation Act of 1992:
This act requires the President[Footnote 43] to sanction persons who,
by transferring or retransferring goods or technology, "knowingly and
materially" contribute to Iran's efforts to acquire chemical,
biological, or nuclear weapons, or destabilizing numbers and types of
advanced conventional weapons.[Footnote 44] Mandatory sanctions under
the act include (1) a ban on U.S. government procurement from
sanctioned persons and (2) a ban on licenses for export to or by the
foreign person.[Footnote 45] The sanctions are to be imposed and last
for 2 years, unless the President issues a waiver on the basis that it
is essential to U.S. national interests.[Footnote 46] The President is
required to report to the Senate Armed Services, Senate Foreign
Relations, House Armed Services, and House Foreign Affairs committees
if the President determines that a person has made a transfer subject
to sanction under the act.[Footnote 47] In the report, the President
must identify the person, provide details of the transfer, and
describe the actions taken or to be taken under the act.[Footnote 48]
Iran Sanctions Act:
This act allows the President to sanction persons who provide Iran
with goods, technology, or services if they know that doing so would
contribute materially to Iran's ability to acquire or develop (1)
chemical, biological, or nuclear weapons or related technologies or
(2) destabilizing numbers and types of advanced conventional weapons.
[Footnote 49] The act requires the President to impose at least two of
the following sanctions:
* denying Export-Import Bank assistance for exporting to the foreign
person;
* banning licenses to export sensitive technologies to the sanctioned
person;
* banning U.S. financial institutions from loaning the sanctioned
person more than $10 million in a 1-year period;
* if the sanctioned person is a financial institution, banning that
institution from dealing in U.S. debt instruments or serving as
repositories for U.S. government funds; and:
* banning U.S. Government procurement, as well as other sanctions that
fall under the powers of the International Emergency Economic Powers
Act, including IEEPA-derived executive orders.[Footnote 50]
The President may waive these sanctions if the President determines
that doing so is important to the national interest of the United
States.[Footnote 51]
Nuclear Proliferation Prevention Act of 1994:
This act directs the President, with exceptions, to sanction persons
if the President determines in writing that such persons have
"materially and with requisite knowledge" contributed, through the
transfer of certain specified goods or technology,[Footnote 52] to the
efforts of any individual, group, or non-nuclear-weapon state to (1)
acquire unsafeguarded special nuclear material or (2) to use, develop,
produce, stockpile, or otherwise acquire any nuclear explosive
device.[Footnote 53] The penalty is a ban on United States government
procurement from the sanctioned person lasting at least 1 year. The
President may waive the penalty after the sanction has been imposed
for a year if the President determines, and certifies in writing to
Congress, that continuation would have a serious adverse effect on
vital United States interests. The act further requires the President
to sanction persons if the President determines in writing that a
United States person or a foreign person has (by providing financing)
knowingly, materially, and directly contributed or attempted to
contribute to an individual, group, or non-nuclear weapon state's (1)
acquisition of unsafeguarded special nuclear material or (2) the use,
development, production, stockpiling, or other acquisition of any
nuclear explosive device.[Footnote 54] For at least 1 year, sanctioned
persons may not be primary dealers in U.S. government debt
instruments, serve as depositories of U.S. government funds, directly
or indirectly commence any line of business in the United States, or
directly or indirectly conduct new business from a new location in the
United States. The President may waive these sanctions after a year if
the President determines in writing, and certifies to Congress, that
their continuation would have a serious adverse effect on the on the
safety and soundness of the domestic or international financial system
or on domestic or international payments systems.
Arms Export Control Act:
Portions of the Arms Export Control Act (AECA) require the President
to sanction foreign persons that the President has determined to have
(1) provided to certain countries missile equipment or technology or
(2) contributed to certain countries' acquisition of chemical or
biological weapons.
* Section 73 (22 U.S.C. § 2797b): Under this section, subject to
exceptions, the President shall impose sanctions when the president
determines that a foreign persons have knowingly exported,
transferred, or otherwise engaged in the trade of missile equipment or
technology controlled under the Missile Technology Control Regime
(MTCR)[Footnote 55] that contributes to the acquisition, design,
development, or production of missiles in a country that is not an
MTCR adherent. The President shall also apply sanctions when he has
made a determination with respect to a foreign person under section
2410b(b)(1) of Title 50, Appendix (discussed later). Depending on the
nature of the equipment and technology involved, sanctions could
include (1) denying the foreign persons U.S. government contracts
related to missile equipment or technology, (2) denying the foreign
persons any U.S. government contracts, (3) denying licenses for
transfers of missile equipment or technology controlled under the Arms
Export Control Act to the sanctioned persons, (4) denying licenses for
the transfer of all items on the United States Munitions List to the
sanctioned persons, or (5) prohibiting the importation of products
produced by the sanctioned persons into the United States. The
President may waive these sanctions in certain cases specified in the
act. The President may also decide to apply a waiver with respect to a
product or service if the President certifies to Congress that (1) the
product or service is essential to the national security of the United
States and (2) such person is a sole source supplier of the product or
service, and an alternative is not available and cannot be made
available in a timely manner.
* Section 81 (22 U.S.C. § 2798): Under this section, the President is
required to sanction, subject to certain exceptions, foreign persons
the President determines to have knowingly and materially contributed,
through the export of certain goods or technology or any other
transaction not already subject to sanctions under the Export
Administration Act, to the efforts of certain foreign countries to
use, develop, produce, stockpile, or otherwise acquire chemical or
biological weapons. The sanctions are a ban on U.S. government
procurement from the foreign person and a ban on imports into the
United States from the foreign person for at least 12 months. After a
year of imposing the sanctions, the President may waive the sanctions
by certifying to Congress that doing so is important to the national
security interests of the United States.
Export Administration Act:
Portions of this act require the President to sanction foreign persons
that are determined to have (1) provided to certain countries missile
equipment or technology or (2) contributed to certain countries'
acquisition of chemical or biological weapons.
* Section 11B (50 app. U.S.C. § 2410b): Subject to certain exceptions,
the President shall impose sanctions when the President determines
that a foreign person has knowingly exported, transferred, or
otherwise engaged in the trade of any MTCR equipment or technology
that contributes to the design, development, or production of missiles
in a non-MTCR country.[Footnote 56] The section also calls for
sanctions on persons who have conspired or attempted to engage in or
facilitated such export, transfer, or trade. The President shall also
impose sanctions under this act if the President makes a determination
with respect to a foreign person under section 73(a) of the Arms
Export Control Act (22 U.S.C. § 2797b(a)) (discussed above). Depending
on circumstances specified in this section, sanctions could include a
2-year denial of specified licenses for the transfer to the sanctioned
person of AECA-controlled missile equipment or technology and a 2-year
ban on imports into the United States of products produced by the
foreign person. The President may waive these sanctions in certain
specified cases.
* Section 11C (50 app. U.S.C. § 2410c): This section requires the
President to impose sanctions, subject to certain exceptions, on
foreign persons determined to have "knowingly and materially"
contributed to the efforts of state sponsors of terrorism[Footnote 57]
and certain other countries[Footnote 58] to use, develop, or acquire
chemical or biological weapons through certain exports from a foreign
country. The exported goods or technology must be items that the
United States would control under the Export Administration Act if the
items were of U.S. origin. Foreign persons are subject to bans of at
least 1 year on U.S. government procurement and on imports into the
United States from the foreign person. The President may issue a
waiver after 12 months by certifying to Congress that doing so is
important to the national security interests of the United States.
[End of section]
Appendix III: Comments from the Department of the Treasury:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
Department Of The Treasury:
Washington, D.C. 20220:
Joseph Christoff:
Director:
International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Christoff:
This responds to your electronic transmission of January 19, 2010, to
the U.S. Department of the Treasury (Treasury) attaching a copy of the
draft entitled "Incomplete and Untimely Licensing Data Weaken Ability
of the United States to Assess and Enforce its Export Restrictions"
(GAO-10-375) and its "For Official Use Only" version (GAO-10-339SU).
We have reviewed the portions of the report pertaining to matters
administered by the Office of Foreign Assets Control ("OFAC"). We are
providing the following comments regarding the recommendations and
assertions contained in the report produced by the Government
Accountability Office.
We appreciate the report's findings that OFAC is licensing the export
of goods to Iran in accordance with the laws and regulations imposing
sanctions on Iran. We also acknowledge and welcome the observation
that Treasury can improve its data systems, which has been a
longstanding OFAC objective. However, it is troubling that the title
of this report does not accurately reflect its contents. Despite an
explicit, positive finding that Treasury has issued licenses for
exports to Iran in accordance with laws and regulations imposing
sanctions on Iran, the title of your report would lead the reader into
believing that certain limitations in Treasury's ability to process
licensing data have actually resulted in problems with the enforcement
of export restrictions on Iran. However, contrary to the notion that
the administration of the sanctions program has been weakened, nothing
in the report indicates that any enforcement action regarding exports
to Iran, or the implementation of sanctions with respect to Iran, have
been impaired by "incomplete and untimely" licensing data. We thus
urge you to change the title to one that fairly represents your
report. [See comment 1]
While Treasury acknowledges certain limitations with respect to its
ability to search some parts of OFAC's current licensing databases, a
complete understanding of OFAC's work in administering the more than
20 sanctions programs mandated by the President and Congress,
including those related to terrorism, nonproliferation of weapons of
mass destruction, narcotics trafficking, and sanctions relating to
Iran, Sudan, Cuba and Burma, would lead to refinement of the
recommendations. The dedicated professionals of OFAC work tirelessly
to enforce these many programs, particularly our sanctions with
respect to Iran. It should be emphasized that OFAC licenses for export
to Iran only a tiny spectrum of goods, mostly agricultural and medical
products under the Trade Sanctions Reform and Export Enhancement Act
of 2000 ("TSRA"). Military and dual-use items are ineligible for
licenses other than in exceptional circumstances such as for the
safety of civil aviation. We wish to reiterate that the completeness
or timeliness of licensing data has no bearing on the illegal
diversion of military and dual-use items to Iran, and no effect on
enforcement efforts to combat illegal diversion.
As for the report's recommendation that Treasury "develop the
capability to provide other agencies and Congress with complete and
timely information concerning all licenses issued for the export of
goods to Iran," it is important to understand that OFAC is actually
already able to access, review, and share information relating to TSRA
licenses for the export of agricultural commodities, medicine, and
medical devices to Iran. Moreover, as noted in the report, OFAC is
currently upgrading and improving its TSRA licensing systems to be
able to more efficiently capture information on these licenses. These
upgrades were in progress before GAO conducted its review. OFAC hopes
to build on this technology to enhance processing capabilities for non-
TSRA licensing information. In assessing OFAC's programs, it is
critical to recognize that OFAC receives many license requests well
beyond requests for the export of goods to Iran. Because the Iranian
Transactions Regulations reflect a comprehensive set of trade and
financial regulations, these requests are often complex and may
involve imports and exports of services, investment transactions,
funds transfers, or third country transactions involving the Iranian
government or Iranian entities. [See comment 2]
In response to the report's specific criticisms about the sharing of
licensing data, the report states that systemic limitations have
prevented Treasury from sharing licensing data with other agencies,
primarily U.S. Customs and Border Protection ("CBP"). Treasury began
to address this issue in the 1990s, when it established the
International Trade Data System initiative, the purpose of which was
to consolidate in one system all import and export data, including
export licenses, in part to better support CBP's enforcement at the
border. This initiative has become part of CBP's information
modernization under the Automated Commercial Environment ("ACE").
Partially in response to the terrorist attacks of September 11, 2001,
the project has prioritized the security of our ports and homeland and
has thus placed the processing of imports ahead of exports in its
development schedule. OFAC fully participates in ACE development, and
it plans to include licensing information in the data shared with CBP.
The ACE system is not currently ready to incorporate licenses
involving exported goods, although OFAC acknowledges that it also has
work to do in order to provide the specific data needed by CBP for
validating licensed exports. [See comment 3]
We welcome and agree with the report's finding that OFAC is licensing
the export of goods to Iran in accordance with laws and regulations
imposing sanctions. We also have been working, and will continue to
work, towards improving our data systems. It is disappointing and
distracting, however, that the title of this report gives the
erroneous impression that the ability to search OFAC's data systems
somehow weakens the implementation of economic sanctions against Iran.
[See comment 4]
Thank you for the opportunity to comment on this report.
Sincerely,
Signed by:
Adam J. Szubin:
The following are GAO's comments on the Department of the Treasury's
letter.
GAO Comments:
1. Treasury's statement is in contrast with statements contained in a
2009 Treasury internal budget request. As cited in our draft report,
the request stated that OFAC's information processes were hampering
"the speed, efficacy, reliability and security" of OFAC's "enforcement
and compliance activities." Our draft report also noted that a
Treasury official had informed U.S. Customs and Border Protection
officials that Treasury's licensing information systems could not
provide CBP with more complete and timely Treasury licensing
information. CBP officials stated that they had asked for the
information to help CBP agents at U.S. ports validate licenses for
exports to Iran. However, for the sake of clarity, we have modified
the title of our report.
2. While Treasury is able to access and share information on licenses
for medical and agricultural exports to Iran to some degree, it cannot
do so in a timely and complete manner. For example, Treasury required
more than 2 months to provide us with requested data on medical and
agricultural export licenses. It required more than 4 months to
provide us with 34 licenses for the export of other types of goods
issued over the preceding 18 months. These licenses included a license
for the export of aircraft equipment with potential military
applications.
3. ACE is a trade processing system that has been in development by
CPB since 2001. Intended to automate border processing, ACE is being
deployed in phases. As Treasury notes in its comments, ACE is not
ready to accept export data that would be of use to enforcement
agencies.
4. As noted above, we have modified the title of our report for the
sake of clarity.
[End of section]
Appendix IV: Comments from the Department of Commerce:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
The Secretary Of Commerce:
Washington, D.C. 20230:
February 24, 2010:
Mr. Joseph Christoff:
Director, International Affairs and Trade:
Government Accountability Office:
Washington, DC 20548:
Dear Mr. Christoff:
The Department of Commerce (Department) appreciates the opportunity to
comment on the Government Accountability Office's draft report,
"Incomplete and Untimely Licensing Data Weaken Ability of the United
States to Assess and Enforce its Export Restrictions" (GAO-10-10-375).
The Department's comments on this report are enclosed.
Sincerely,
Signed by:
Gary Locke:
Enclosure:
[End of letter]
U.S. Department of Commerce:
Comments on the United States Government Accountability Office Draft
Report Entitled Incomplete and Untimely Licensing Data Weaken Ability
of the United States to Assess and Enforce its Export Restrictions
(GAO-10-10-375):
Highlights page:
First paragraph:
* sixth line: Reads: "did not detect or correct." Should read: "did
not detect."
* seventh line: Reads: "begun checking all new filings of exports to
Iran and posting.
corrections to a". Should read: "begun manually checking all new
filings of exports to Iran, regardless of the dollar value, and have
posted corrections to a Census Bureau Web page."
Page 3:
First paragraph:
* seventh line: Reads: "or correct because of the low dollar value of
the exports" Should read: "because of the low dollar value of the
export transactions."
* beginning on the tenth line:
Reads: "terrorism. As a result of our review, Census officials
initiated a routine check of new filings of exports to Iran, allowed
filers of export data to select recipient countries from a list
instead of requiring them to enter a two-letter country code, and
began posting corrections to Iran export data on a Census Web page.
According to Census officials, it is to soon to determine whether
these actions will improve the accuracy of future U.S. trade
statistics for Iran."
Should read: "terrorism. As a result of our review, Census Bureau
officials initiated a in-depth manual review of all new filings
identifying Iran as the country of destination, implemented a new
country selection routine for export filings requiring export filers
to select the recipient country from a list containing the full
country name instead of al4iwing them to enter a two-letter
International Standards Organization (ISO) country code, and posting
corrections to Iran export data, not previously detected, on a Census
Web page According to Census Bureau officials, it is too soon to
determine whether these actions will improve the accuracy of future
U.S. trade statistics for Iran."
Page 5:
First paragraph:
* fourth line: Reads: "Customs and Border Protection" Should read:
Customs and Border Protection (CBP);
* sixth line: Reads: "Census-approved" Should read: CBP-approved.
* eighth line: Reads: "by choosing a two-lettered standardized code."
Should read: by choosing a two-lettered ISO code.
Footnote 4:
Reads: "While most data is submitted electronically by exporters and
their age, (63 percent), statistics are also compiled using Shipper's
Export Declaration documents filed with Customs and Border Protection
and sent to the U.S. Census Bureau (3 percent), as well a special
computer tapes from Canada for U.S. exports to Canada (34 percent)."
Should read: In general, beginning in July 2008 all export
transactions, with the country of destination other than Canada, are
submitted electronically by exporters or their agents using the
Automated Export System. This accounts for approximately 67 percent of
export transactions. The remaining export data are compiled using
transactions obtai4d electronically through the United States/Canada
data exchange, accounting for approximately 33 percent of all export
transactions."
Pace 8:
First paragraph:
* second sentence:
Reads: "The misidentification of Iran as the recipient country, in the
statistics is the result from export data filing errors that Census
did not detect or correct. As a result of our review, Census officials
have begun routinely checking new export filings reporting exports to
Iran. While Census policy is not to correct errors in the statistics
that are older than 1 year, it has begun posting Iran related
corrections on a separate Web page."
Should read: "The misidentification of 97 records with Iran as the
recipient country is the result from export filing errors that the
Census Bureau did not detect. As a result of our review, Census Bureau
officials have initiated an in-depth manual review of all new export
filings reporting Iran as the 'country of destination. While the
Census Bureau's revision policy for international trade data is not to
correct errors in the data products that are older than 1 year, it
does issue special announcements as warranted with the discovery of
large value revisions and has posted corrections older than 1 year on
a separate Special Notices and Corrections Web page since 2004.
Page 9:
* second line: Reads: "results of errors made by filers of export data
into the Automated Export System. Should read: "results of errors made
by filers of export transactions submitted into the AES.
* sixth line: Reads: "letter country code" Should read: "letter ISO
country code.
Page 10:
* first paragraph:
Reads: "Census officials stated that they did not detect or correct
Iran-related errors in new exporter filings or in the export
statistics for previous years. The officials focu4d on detecting
errors involving high-dollar values because of the statistics' use in
determining the U.S. balance of trade rather than the sensitivity of
the reported recipient country. The officials stated that they did not
focus on detecting errors in the data for exports to Iran because the
value of such exports was relatively small. In 2008, the reported
value of U.S. exports to Iran was $683 million, or about one-half of 1
percent of the total value of all U.S. exports. Moreover, the
officials stated, the policy of the Census Bur4au is not to make
changes in trade statistics that are more than a year old. For
example, Census officials have not corrected an erroneous entry in the
statistics concerning the alleged export of rifles to Iran in 2004,
although they learned of the error in 2008. Census officials also
stated that Census is not involved in enforcing U.S. export controls
on Iran.
Should read: "Census Bureau officials stated that they did not detect
all of the Iran-related errors in exporter filings or in the export
data products for previous time periods. The officials stated the
primary focus is placed on detecting errors involving high-dollar
value transactions because of the statistics' use in determining the
U.S. balance of trade, one of the principal economic indicators.
Census Bureau officials identified all of the Iran related errors and
discovered more than 85% of the transactions were valued less than $50
thousand and the highest valued transaction was $1.0 million. In 2008,
the reported value of U.S. exports to Iran was $683 million, or about
five-hundredths of the total value of all U.S. exportS of goods ($1.3
trillion). Moreover, the officials stated that while the Census
Bureau's revision policy for international trade data is not to
correct errors in the data products that are older than 1 year, it
does issue special announcements as warranted with the discovery of
large vale revisions. The 2004 statistics concerning the alleged
export of rifles to Iran will not be collected in the trade data
products since the error was identified in 2008, well past the one-
ye4r data product revision period. Beginning in 2004, corrections
older than 1 year are posted on a separate "Special Notices and
Corrections" Web page to supplement the data products. All the
corrections for Iran have been posted to this Web site.
* second paragraph: the following should be included:
It should be noted that the Census Bureau is not responsible for
enforcing export control and enforcement of U.S. regulations and laws
regarding U.S. exports to Iran. Tho4 responsibilities fall under the
Office of Foreign Asset Control (OFAC) in the Department of Treasury
and CBP in the Department of Homeland Security. Additionally, CBP has
been delegated the responsibility of enforcing the Census Bureau's
Foreign Trade Regulations. Shipment's stating the final destination as
Iran are available, in real time through the AES, to CBP for
monitoring and targeting purposes. The Census Bureau is not
responsible for validating the accuracy or need for licensing
requirements and has approached OFAC to include licensing requirements
in the AES as editing and shipment acceptance criteria. At this point
no action has been taken.
Page 11:
* last bullet:
Reads: "In June 2009, Census began posting an online list of
corrections to Iran export data. However, Census officials stated that
they will continue their policy of not correcting errors in the trade
statistics older than 1 year."
Should read: The Census Bureau began posting an on-line list of
corrections to Iran under the "Statistical Notices and Corrections"
section of their Web site in June 2009. Census officials stated that
they will continue their policy of not correcting errors in the trade
data products older than 1 year, however they are developing new
processing systems that will allow corrections to be applied over
several years.
Bureau of Industry and Security Comments:
Page 6, last paragraph of the Census Comments: [See comment]
Currently reads "It should be noted that the Census Bureau is not
responsible for enforcing U.S. regulations and laws regarding U.S.
exports to Iran. Those responsibilities fall under the Office of
foreign Asset Control (OFAC) in the Department of Treasury and CBP in
the Department of Homeland Security."
Should read "It should be noted that the Census Bureau is not
responsible for enforcing export control and enforcement of U.S.
regulations and laws regarding U.S. exports to lien. Those
responsibilities fall under the Office of foreign Asset Control (OFAC)
in the Department of Treasury, the Bureau of Industry and Security's
Office of Export Enforcement, and CBP and ICE in the Department of
Homeland Security."
Page 10, first paragraph:
Census states that Iran trade is "five-hundredths of the total value
of all U.S. exports of goods"; it appears that such trade is actually
five-hundredths of one percent, rather than five-hundredths (which
would technically be 5%).
Page 19, last paragraph of the GAO report:
Currently reads "The Commerce Department is responsible for licensing
U.S. exports of dual-use items to the UAE, as well as countries other
than Iran."
Should read "The Commerce Department is responsible for licensing and
enforcing U.S. exports of dual-use items to the UAE, as well as
countries other than Iran."
Other assorted, minor issues in these comments:
(a) it appears that Census may consider "export transactions" to be
data on export transactions, such that Census frequently makes
statements such as "export transactions...are submitted electronically
.....when they seemingly should be saying that "information [or data]
on export transactions...is [are] submitted electronically...(see,
e.g., comment on footnote 4, Page 5; this issue also appears
elsewhere).
(b) Page three, tenth line comment: "and posting corrections to Iran
export data" Should likely be and posted corrections to Iran export
data" or "and began posting corrections to Iran export data."
(c) Page 8, second sentence correction: "records with Iran as the
recipient country' is the result from export filing errors" should be
"records with Iran as the recipient country is pe result of export
filing errors"
(d) Page 9, second line: "results" should be "result".
(e) Page 10, replacement first paragraph: "Beginning in 2004,
corrections older than 1 year are posted .....seemingly should be
"Beginning in 2004, corrections older than one year have been posted."
The following is GAO's comment on the Department of Commerce's letter
dated February 24, 2010.
GAO Comment:
The Bureau of Industry and Security's comments on pages 39 and 40 are
not directed at our draft report, but are instead directed at the
preceding comments, which were submitted by the Bureau of the Census.
The Bureau of Industry and Security and the Bureau of the Census are
separate bureaus within the Department of Commerce.
[End of section]
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
Joseph A. Christoff, (202) 512-8979 or christoffj@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Tet Miyabara (Assistant
Director), Patrick Breiding, Joseph Clifton, Lynn Cothern, Etana
Finkler, Grace Lui, Lauren Membreno, and Pierre Toureille made key
contributions to this report. Martin De Alteriis and Justin Fisher
provided technical assistance.
[End of section]
Footnotes:
[1] Trade Sanctions Reform and Export Enhancement Act of 2000, Pub. L.
No. 106-387, Title IX, 114 Stat. 1549, 1549A-67 - 1549A-72 (codified
as amended at 22 U.S.C. §§ 7201-7211).
[2] The official U.S. trade statistics can be accessed at [hyperlink,
http://www.usatradeonline.gov/].
[3] 31 C.F.R. § 560.204.
[4] Most data (67 percent) are submitted electronically by exporters
and their agents using the Automated Export System, according to
Census. The remainder is compiled using data obtained electronically
through a U.S. data exchange with Canada.
[5] Section 1404(b) of the Foreign Relations Authorization Act, Fiscal
Year 2003 requires the issuance of regulations to require all persons
required to file export data to do so through AES. Pub. L. No. 107-
228, § 1404(b), 116 Stat. 1350, 1454 (2002).
[6] Exec. Order No. 12,959, 60 Fed. Reg. 24,757 (May 6, 1995). Items
exempted from the ban include donations of clothing, food, and
medicine to relieve human suffering; and informational materials such
as films, posters, and publications.
[7] Iranian Transaction Regulations, 31 C.F.R. part 560.
[8] In this context, a U.S. person is "any United States citizen,
permanent resident alien, entity organized under the laws of the
United States (including foreign branches), or any person in the
United States." 31 C.F.R. § 560.314.
[9] The Iran-Iraq Arms Nonproliferation Act applies to Iran specific
sanctions established in section 586G of the Iraq Sanctions Act of
1990, as contained in the Foreign Operations, Export Financing, and
Related Programs Appropriations Act, 1991(Pub. L. No. 101-513, §§ 586-
586J, 104 Stat. 1979, 2047-55 (1990)). Pub. L. No. 102-484, § 1603,
106 Stat. 2315, 2571 (codified as amended at 50 U.S.C. § 1701 note).
These sanctions prohibit exports of dual-use items. See 50 App. U.S.C.
§§ 2401-2420; 15 C.F.R. Pt. 774, Supp. 1.
[10] Pub. L. No. 102-484, § 1606. Commerce is generally responsible
for licensing dual-use exports but has deferred to Treasury on
licensing the export of such items to Iran. 15 C.F.R. § 746.7.
[11] 22 U.S.C. § 7204.
[12] In 1984, the Secretary of State designated Iran as a state
sponsor of terrorism. Determination Pursuant to Section 6(i) of the
Export Administration Act of 1979 - Iran, 49 Fed. Reg. 2,836 (Jan. 23,
1984).
[13] 22 U.S.C. § 7205.
[14] 31 C.F.R. §§ 560.530, 560.532, 560.533.
[15] 31 C.F.R. §§ 560.204
[16] 31 C.F.R. §§ 560.205
[17] The U.S. export ban (31 C.F.R. part 560) does not apply to
foreign firms that export non-U.S. goods to Iran from abroad. U.S.
legal tools for sanctioning foreign firms that export sensitive goods
to Iran are described in Appendix II. Some of the bills currently
under consideration in Congress include the Comprehensive Iran
Sanctions, Accountability and Divestment Act of 2009, S. 2799, 111th
Cong. (2009); Iran Sanctions Enabling Act of 2009, S. 1065, 111th
Cong. (2009); Iran Refined Petroleum Sanctions Act, S. 908, 111th
Cong. (2009); Iran Refined Petroleum Sanctions Act of 2009, H.R. 2194,
111th Cong. (2009); and Iran Sanctions Enabling Act of 2009, H.R.
1327, 111th Cong. (2009).
[18] Similarly, U.S. export statistics for 2002 include aircraft
launching gear among the items exported to Iran. At our request,
Census reviewed its records and determined that this item had been
exported to Italy and not to Iran.
[19] According to Census officials, more than 85 percent of the
transactions involved in the Iran-related errors were valued at less
than $50,000 and the highest-valued transaction was valued at $1
million.
[20] The Census corrections are at [hyperlink,
http://www.census.gov/foreign-trade/statistics/corrections/iran/]. As
of December 2009, Census had listed 270 corrections to the Iran export
data.
[21] In commenting on a draft of this report in late February 2010,
Census officials stated they are "developing new processing systems
that will allow corrections to be applied over several years."
[22] Iran-Iraq Arms Non-Proliferation Act of 1992, §§ 1603 and 1606.
[23] Memorandum of the President of the United States, 59 Fed. Reg.
50,685 (Sept. 27, 1994).
[24] 22 U.S.C. § 7205.
[25] Iran-Iraq Arms Non-Proliferation Act of 1992, §§ 1603 and 1606.
[26] Treasury officials stated in January 2010 that they had been
unable to develop the list within four hours as requested and that
Treasury could have provided the data within a "reasonable" period of
time if it had received a written request.
[27] GAO, Iran Sanctions: Impact in Furthering U.S. Objectives Is
Unclear and Should Be Reviewed, [hyperlink,
http://www.gao.gov/products/GAO-08-58] (Washington, D.C.: Dec. 18,
2007).
[28] The information made public by Justice does not necessarily
include all recent prosecutions of efforts to illegally transship U.S.
goods to Iran.
[29] 31 C.F.R. § 560.701.
[30] Additional information regarding Commerce's verification efforts
concerning Iran is included in a For Official Use Only version of this
report.
[31] Because we followed a probability procedure based on random
selections, our sample is only one of a large number of samples that
we might have drawn. Since each sample could have provided different
estimates, we express our confidence in the precision of our
particular sample's results as a 95 percent confidence interval (e.g.,
from zero to 5 percent). This is the interval that would contain the
actual population value for 95 percent of the samples we could have
drawn.
[32] [hyperlink,
http://www.ustreas.gov/offices/enforcement/ofac/sdn/t11sdn.pdf].
[33] [hyperlink,
http://www.ustreas.gov/offices/enforcement/ofac/licensing/agmed/index.sh
tml].
[34] For the purposes of this appendix, sensitive technology includes
technology relevant to nuclear and other weapons of mass destruction
and advanced conventional weapons (including missiles), as well as any
dual-use technologies (civilian technologies that have security
applications). Three United Nations Security Council resolutions call
on all United Nations member states to prevent transfer of sensitive
technology to Iran. UNSCR 1737 declares that member states should
prevent dealings that further Iran's nuclear and missile development
and includes a list of entities involved in this development. UNSCR
1747 and UNSCR 1803 add to this list. See S.C. Res. 1737, U.N.Doc.
S/RES/1737 (Dec. 27, 2006), S.C. Res. 1747, U.N. Doc. S/RES/1747 (Mar.
24, 2007), and S.C. Res. 1803, U.N. Doc. S/RES/1803 (Mar. 3, 2008).
[35] Exec. Order No. 13,382, 70 Fed. Reg. 38,567 (June 28, 2005).
[36] Id.
[37] Exec. Order No. 12,938, 59 Fed. Reg. 58,099 (Nov. 14, 1994).
[38] Exec. Order No. 13,094, 63 Fed. Reg. 40,803 (July 28, 1998).
[39] This law was enacted as the Iran Nonproliferation Act of 2000;
Restriction on Extraordinary Payments in Connection with the
International Space Station, Pub. L. No. 106-178, 114 Stat. 38 (Mar.
14, 2000); Syria was added to the act by the Iran Nonproliferation
Amendments Act of 2005, Pub. L. No. 109-112, §4, 119 Stat. 2366, 2369
(Nov. 22, 2005); and North Korea was added by the North Korea
Nonproliferation Act of 2006, Pub. L. No. 109-2353, 120 Stat. 2015
(Oct. 13, 2006).
[40] An example of such a list would be the Missile Technology Control
Regime Equipment and Technology Annex of June 11, 1996, as revised.
Pub. L. No. 106-178, as amended.
[41] This is a prohibition on United States Government sales of any
item on the United States Munitions List as in effect on August 8,
1995, and a termination of sales of any defense articles, defense
services, or design and construction services under the Arms Export
Control Act, Pub. L. No. 90-269, as amended.
[42] Pub. L. No. 106-178, as amended.
[43] All functions vested in the President under the act were
delegated to the Secretary of State, in consultation with heads of
other departments and agencies. See Memorandum of the President of the
United States, 59 Fed. Reg. 50,685 (Sept. 27, 1994).
[44] Enacted by the National Defense Authorization Act for fiscal year
1993, Pub. L. No. 102-484, Title XVI, 106 Stat. 2315, 2571-75 (1992).
[45] Pub. L. No. 102-484, § 1604, as amended.
[46] Pub. L. No. 102-484, §§ 1604 and 1606, as amended.
[47] Pub. L. No. 102-484, § 1607, as amended.
[48] Id.
[49] This act was originally enacted as the Iran-Libya Sanctions Act
of 1996, Pub. L. No. 104-172, 110 Stat. 1541; Libya was removed from
the law in 2006 by the Iran Freedom Support Act, Pub. L. No. 109-293,
120 Stat. 1344. Proliferation-related sanctionable activities were
added to the law in 2006.
[50] Pub. L. No. 104-172, § 5, as amended.
[51] Pub. L. No. 104-172, § 9, as amended.
[52] The act defines "goods or technology" as (1) nuclear materials
and equipment and sensitive nuclear technology as such terms are
defined in 22 U.S.C. § 3203, all export items that could be of
significance for nuclear explosive purposes and designated by the
President as under the control of the Department of Commerce pursuant
to section 2139a(c) of Title 42, and all technical assistance
requiring authorization under section 2077(b) of Title 42, and (2) in
the case of exports from a country other than the United States, any
goods or technology that, if exported from the United States, would be
goods or technology described in (1).
[53] Nuclear Proliferation Prevention Act, Pub. L. No. 103-236, Title
VIII, §§ 801-851, 108 Stat. 382, 507-525 (1994), codified as amended
at 22 U.S.C. §§ 6301-6305.
[54] 22 U.S.C. § 6303.
[55] The equipment and technology must be types that would be subject
to U.S. jurisdiction under the Arms Export Control Act if it were U.S.-
origin equipment or technology.
[56] The equipment and technology must be types that would be subject
to U.S. jurisdiction under the Arms Export Control Act if it were U.S.-
origin equipment or technology.
[57] As designated under section 6(j) of the Export Administration Act.
[58] The designated countries are any that (1) the President
determines has, after January 1, 1980, used chemical or biological
weapons in violation of international law, used lethal chemical or
biological weapons against its own nationals, or made substantial
preparations to engage in such activities, (2) has been designated a
state sponsor of terrorism under section 6(j) of the Export
Administration Act; or (3) any other foreign country, project, or
entity designated by the President for purposes of the act.
[End of section]
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