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Testimony: 

Before the Subcommittee on Terrorism, Nonproliferation, and Trade, 
Committee on Foreign Affairs, House of Representatives: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 2:00 p.m. EDT: 

Thursday, July 26, 2007: 

Export Controls: 

Vulnerabilities and Inefficiencies Undermine System's Ability to 
Protect U.S. Interests: 

Statement of Ann Calvaresi-Barr, Director: 
Acquisition and Sourcing Management: 

GAO-07-1135T: 

GAO Highlights: 

Highlights of GAO-07-1135T, a testimony before the Subcommittee on 
Terrorism, Nonproliferation, and Trade, Committee on Foreign Affairs, 
House of Representatives 

Why GAO Did This Study: 

In controlling the transfer of weapons and related technologies 
overseas, the U.S. government must limit the possibility of sensitive 
items falling into the wrong hands while allowing legitimate trade to 
occur. Achieving this balance, however, has become increasingly 
difficult due to redefined security threats and an increasingly 
globalized economy. The export control system is a key government 
program intended to balance U.S. interests. GAO has identified and 
reported on many weaknesses and challenges in the export control 
system. 

The export control system is a complex system involving multiple 
departments, laws, and regulations. It is governed primarily by the 
State Department, which regulates arms exports, and the Commerce 
Department, which regulates dual-use exports that have both military 
and civilian applications.  

GAO has made a number of recommendations aimed at improving the export 
control system, but many have yet to be implemented. This statement 
focuses on three key areas: (1) weaknesses and challenges that have 
created vulnerabilities in the U.S. export control system, (2) 
inefficiencies in the export licensing process, and (3) State’s and 
Commerce’s lack of assessments on the effectiveness of their controls. 

[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-1135T.] 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Ann Calvaresi-Barr at 
(202) 512-4841 or calvaresibarra@gao.gov. 

[End of Section] 

Mr. Chairman and Members of the Subcommittee: 

Thank you for inviting me here today to discuss the U.S. export control 
system, a key component of the U.S. government's efforts to protect 
critical technologies while allowing legitimate defense trade. As you 
know, the U.S. government controls the transfer of weapons and related 
technologies to other countries and foreign companies. In doing so, the 
government must consider U.S. national security, foreign policy, and 
economic interests and strike a balance among these interests. 
Achieving such a balance, however, has become increasingly difficult 
due to a redefinition of security threats after the September 2001 
terrorist attacks and an increasingly globalized and high-tech economy. 
This changing environment raises concerns about the ability of 
government programs, which were established decades ago, to protect 
critical technologies. These concerns, along with a body of GAO work on 
weaknesses in the export control system and related federal programs, 
prompted GAO early this year to designate the effective protection of 
technologies critical to U.S. national security interests as a high- 
risk area warranting strategic examination.[Footnote 1] 

Within the safety net of government programs to protect critical, 
defense-related technologies, the export control system is particularly 
complex as it involves multiple agencies, laws, and regulations. This 
system is governed primarily by the Departments of State and Commerce. 
State is responsible for regulating arms exports[Footnote 2] while 
Commerce is responsible for regulating exports of dual-use items, which 
have both military and civilian applications. Exports subject to 
State's regulations generally require a license, unless an exemption 
applies. Many Commerce-controlled items do not require a license for 
export to most destinations. Both departments, however, are responsible 
for limiting the possibility of exported items falling into the wrong 
hands while allowing legitimate trade to occur. 

We have made a number of recommendations to address the weaknesses and 
challenges we have identified in the U.S. export control system, but 
many have yet to be implemented. My statement today focuses on three 
key areas: (1) weaknesses and challenges that have created 
vulnerabilities in the U.S. export control system, (2) inefficiencies 
in the export licensing process, and (3) State's and Commerce's lack of 
assessments on the effectiveness of their controls. In addition, the 
appendix contains summaries of our export control-related reports 
issued from fiscal year 2000 to date, along with information on the 
status of the implementation of our recommendations by the various 
departments involved in the system. A list of related products that we 
have issued since the mid-1990s is also included. 

My statement is based on GAO's extensive body of work on the export 
control system, including information from our on-going review of the 
arms export control system. We conducted our work in accordance with 
generally accepted government auditing standards. 

Summary: 

For over a decade, we have reported on weaknesses and challenges that 
have created vulnerabilities in the U.S. export control system. Two key 
weaknesses relate to the most basic aspects of the system. First, State 
and Commerce have yet to clearly determine which department controls 
the export of certain sensitive items. Jurisdictional disputes are 
often rooted in the departments' differing interpretations of 
regulations and inadequate coordination. Second, a lack of clarity on 
exemption use has limited the government's ability to ensure that 
unlicensed exports comply with export laws and regulations. These 
weaknesses compound an already challenged enforcement community, which 
has difficulty in coordinating investigations, balancing multiple 
priorities, and leveraging finite resources. 

To help facilitate defense trade, State has sought to reduce the amount 
of time it takes to process export license applications. However, 
streamlining initiatives have generally not been successful and 
processing times have increased in recent years--from a median of 13 
days in 2002 to 26 days in 2006. Also, at the end of 2006, State's 
backlog of applications reached its highest level of more than 10,000 
open cases. While Commerce's license application processing times have 
been relatively stable, the overall efficiency of Commerce's process is 
unknown, in part due to its limited assessments. Commerce's assessments 
are limited to only the first steps in its application review process 
and not the review process as a whole. 

State and Commerce can provide little assurance about the overall 
effectiveness of their respective export control systems. In managing 
their systems, neither department has conducted systematic assessments 
that would provide a basis for determining what corrective actions may 
be needed to ensure they are fulfilling their missions. Without such 
assessments, the departments are ill-equipped to adapt to the changing 
demands of the 21st century. 

Background: 

The U.S. export control system for defense-related items involves 
multiple federal agencies and is divided between two regulatory bodies-
-one for arms and another for dual-use items, which have both military 
and commercial applications (see table 1). 

Table 1: Roles and Responsibilities in the Arms and Dual-Use Export 
Control Systems: 

Principal regulatory body: State Department's Directorate of Defense 
Trade Controls; 
Mission: Regulates export of arms by giving primacy to national 
security and foreign policy concerns; 
Statutory authority: Arms Export Control Act[A]; 
Implementing regulations: International Traffic in Arms Regulations. 

Principal regulatory body: Commerce Department's Bureau of Industry and 
Security; 
Mission: Regulates export of dual-use items by weighing economic, 
national security, and foreign policy interests; 
Statutory authority: Export Administration Act of 1979[B]; 
Implementing regulations: Export Administration Regulations. 

Other federal agencies: Department of Defense; 
Mission: Provides 
input on which items should be controlled by either State or Commerce 
and conducts technical and national security reviews of export license 
applications submitted by exporters to either State or Commerce. 

Other federal agencies: Department of Homeland Security; Mission: 
Enforces arms and dual-use export control laws and regulations through 
border inspections and investigations[C]. 

Other federal agencies: Department of Justice; Mission: Investigates 
any criminal violations in certain counterintelligence areas, including 
potential export control violations, and prosecutes suspected violators 
of arms and dual-use export control laws[C]. 
 
Source: GAO analysis of cited laws and regulations. 

[A] 22 U.S.C. §2751 et. seq. 

[B] 50 U.S.C. App. §2401 et. seq. Authority granted by the Act lapsed 
on August 20, 2001. However, Executive Order 13222, Continuation of 
Export Control Regulations, issued August 2001, continues the export 
controls established under the Act and the implementing Export 
Administration Regulations. Executive Order 13222 requires an annual 
extension and was recently renewed by Presidential Notice on August 3, 
2006. 

[C] Homeland Security, Justice, and Commerce investigate potential dual-
use export control violations. Homeland Security and Justice 
investigate potential arms export control violations. 

[End of table]

Implementing regulations for both State and Commerce contain lists that 
identify which items each department controls and establish 
requirements for exporting those items. Exporters are responsible for 
determining which department controls the items they are seeking to 
export and what the requirements for export are. The two departments' 
controls differ in several key areas. In most cases, Commerce's 
controls over dual-use items are less restrictive than State's controls 
over arms and provide less up-front government visibility into what is 
being exported. For example, many items controlled by Commerce do not 
require licenses for export to most destinations, while State- 
controlled items generally require licenses to most destinations. Also, 
Commerce-controlled items may be exported to China while arms exports 
to China are generally prohibited. 

In carrying out their respective export control functions, Commerce and 
State have different levels of workload and personnel (see table 2). 

Table 2: Case Workload and Staffing for the Dual-Use and Arms Export 
Control Systems for Fiscal Year 2006: 

Commerce Department's Bureau of Industry and Security; Number of cases 
closed[A]: 23,673; 
Number of positions filled[B]: 351. 

State Department's Directorate of Defense Trade Controls; Number of 
cases closed[A]: 65,274; 
Number of positions filled[B]: 64. 

Source: GAO analysis of Commerce and State budget documents and State 
licensing data (data). 

[A] For Commerce, cases include both export license applications and 
commodity classification requests. For State, cases include 
applications for permanent exports, temporary exports and imports, 
agreements, license amendments, and jurisdiction determinations. 

[B] Commerce's positions include licensing officers, enforcement 
agents, analysts, and other staff. State's positions include licensing 
officers, compliance officials, and other staff. Numbers provided do 
not include contractors or staff on loan from other organizations. 

[End of Table]

Jurisdiction Disputes, Lack of Clarity on Exemption Use, and 
Enforcement Challenges Have Weakened the Export Control System: 

Our reports have clearly documented weaknesses and challenges in the 
export control system that point to vulnerabilities in the system and 
its ability to protect U.S. security, foreign policy, and economic 
interests. Two key weaknesses relate to the most basic aspects of the 
export control system: (1) whether items are controlled by State or 
Commerce and (2) whether items should be subject to government review 
prior to export. 

Because State and Commerce have different restrictions on the items 
they control, determining which exported items are controlled by State 
and which are controlled by Commerce is fundamental to the U.S. export 
control system's effectiveness. However, as we have previously 
reported, State and Commerce have disagreed on which department 
controls certain items. In some cases, both departments have claimed 
jurisdiction over the same items, such as certain missile-related 
technologies. In another case, for example, Commerce improperly 
determined that explosive detection devices were subject to Commerce's 
less restrictive export control requirements when they were, in fact, 
State-controlled. Such jurisdictional disagreements and problems are 
often rooted in the departments' differing interpretations of the 
regulations and minimal or ineffective coordination between the 
departments. Until these disagreements and problems are resolved, 
however, exporters--not the government--determine which restrictions 
apply and the type of governmental review that will occur. Not only 
does this create an unlevel playing field and competitive disadvantage-
-because some companies will have access to markets that others will 
not, depending on which system they use--but it also increases the risk 
that critical items will be exported without the appropriate review and 
resulting protections. Despite these risks, no one has held the 
departments accountable for making clear and transparent decisions 
about export control jurisdiction. 

Even when jurisdiction is clearly established, limitations exist in the 
government's ability to ensure that exports exempt from licensing 
requirements comply with laws and regulations. While State generally 
requires a license for exports, some exports are exempt from licensing, 
such as certain arms exports to Canada. In such cases, it becomes the 
exporter's responsibility--not the government's--to ensure the 
legitimacy of the export. Therefore, exporters need sufficient guidance 
to minimize the possibility of incorrect interpretations of the 
regulations and improper use of an exemption to export an item. At 
times, State has provided conflicting information to exporters on the 
proper use of the Canadian exemption, which has resulted in some 
exporters using the exemption while others applied for licenses to 
export the same item. 

Together, these weaknesses create considerable challenges for 
enforcement agencies in carrying out their respective inspection, 
investigation, and prosecution responsibilities. For example, obtaining 
timely and complete information to confirm whether items are controlled 
and need a license is a challenge. In one case, investigative agents 
executed search warrants based on Commerce's license determination that 
missile technology-related equipment was controlled. Subsequently, 
Commerce determined that no license was required for this equipment, 
and the case was closed. The use of license exemptions has also raised 
serious concerns for enforcement officials. Homeland Security officials 
explained that they generally oppose licensing exemptions because items 
can be more easily diverted without detection, which complicates 
potential investigations. Justice officials similarly noted that 
prosecuting export violations under an exemption is difficult because 
of the challenges in acquiring evidence of criminal intent, given the 
limited "paper trail" generated under an exemption. Other enforcement 
challenges include difficulty in coordinating investigations among 
several departments, balancing multiple priorities, and leveraging 
finite resources. 

Export Control System is Further Hindered by Licensing Inefficiencies: 

While exporters and foreign governments have complained about 
processing times, reviews of arms export license applications require 
time to deliberate and ensure that license decisions are appropriate. 
However, such reviews should not be unnecessarily delayed due to 
inefficiencies nor should they be eliminated for efficiency's sake-- 
both of which could have unintended consequences for U.S. security, 
foreign policy, and economic interests. Over the last several years, 
State has initiated various efforts to reduce license application 
processing times. Yet, these initiatives have generally not been 
successful: 

* The establishment in 2004 of D-Trade, a new automated system for 
processing licensing applications, has been cited as State's most 
significant effort to improve efficiency. However, the anticipated 
efficiencies have not been realized. Our current analysis of processing 
times for permanent export licenses does not show a significant 
difference between D-Trade and paper processing for fiscal years 2004 
through 2006. 

* State also implemented initiatives to expedite applications in 
support of on-going military operations. In 2005, however, we reported 
that only 19 percent of the applications submitted under the 
initiatives for Operations Enduring Freedom and Iraqi Freedom were 
processed within the time frames set by State. Our current work shows 
that even fewer cases are being processed within the department's 
current 2-day goal for applications in support of these operations. 

* Other initiatives have not been widely used by exporters. For 
example, we reported that between 2000 and 2005, State had only 
received three applications for comprehensive export authorizations for 
a range of exports associated with multinational defense efforts, such 
as the Joint Strike Fighter. 

The initiatives' lack of success is not surprising. When many of these 
initiatives were announced in 2000, we determined that there was no 
analysis of the problems that the initiatives were intended to remedy 
or demonstration of how they would achieve identified goals. As a 
result, there was little assurance that the initiatives would result in 
improvements to the arms export control system. State also has not 
implemented procedures to expedite license applications for exports to 
Australia or the United Kingdom, as required by a 2004 law.[Footnote 3] 
Our current work shows that processing times for Australia and the 
United Kingdom do not significantly differ from other major trading 
partners, taking a median of 21 days to process in fiscal year 2006. 

Despite efforts to improve efficiency, State's median processing times 
of license applications for arms exports have been increasing since 
2003, reversing a downward trend since 1999 (see fig. 1). Furthermore, 
State has not kept pace with a growing number of applications, which 
has increased almost 23 percent over the last 3 years. At the end of 
fiscal year 2006, the backlog reached its highest level of over 10,000 
cases. 

Figure 1: Median Processing Times for Arms Export Cases, Fiscal Year 
1999 through April 2007 (in days): 

[See PDF for image] 

Source:  GAO analysis of State data.

[End of figure] 

Concerns about licensing efficiency have largely focused on State, in 
part, because most Commerce-controlled exports can occur without a 
license. In 2005, for example, only 1.5 percent of dual-use exports, by 
dollar value, were licensed.[Footnote 4] However, the overall 
efficiency of Commerce's licensing process is unknown. For example, in 
assessing its license processing times, which have remained relatively 
stable, Commerce only measures the first steps of its application 
review process--how long it takes to review an application internally 
and refer it to another agency for review. Commerce does not have 
efficiency-related measures for other steps in the license application 
review process, such as how quickly a license should be issued once 
other agencies provide their input, or for the review process as a 
whole. 

Lack of Systematic Assessments Invites Risk: 

To be able to adapt to 21st century challenges, federal programs need 
to systematically reassess priorities and approaches and determine what 
corrective actions may be needed to fulfill their missions.[Footnote 5] 
Given their export control responsibilities, State and Commerce should 
not be exceptions to this basic management tenet. However, neither 
department has conducted such assessments to determine overall 
effectiveness, despite the existence of known vulnerabilities. 

While GAO has made numerous recommendations to improve the 
effectiveness and efficiency of the arms export control system, State 
has not made significant changes to its system. State does not know how 
well it is fulfilling its mission and what additional corrective 
actions may be needed since it has not systematically assessed its 
controls, even in light of the September 2001 terror attacks. 

Commerce officials acknowledged that they had not comprehensively 
assessed the effectiveness of dual-use export controls in protecting 
U.S. national security and economic interests. Instead, they stated 
they conducted an ad hoc review of the dual-use system after the events 
of September 2001 and determined that no fundamental changes were 
needed. We were unable to assess the sufficiency of this review because 
Commerce did not document how it conducted the review or reached its 
conclusions. 

Conclusions: 

At a time of evolving threats, changing allied relationships, and 
increasing globalization, it is appropriate to ask how Congress can be 
assured that the export control system is achieving its intended 
purposes--protecting national security and promoting foreign policy 
interests while allowing legitimate trade. To accomplish such purposes, 
an export control system needs to clearly define what should be 
controlled and how, so that it is understandable by exporters and 
enforceable by the government. The system should also be efficient and 
well managed. Our work in this area demonstrates both the 
ineffectiveness and inefficiency of the system--a key concern that 
compelled GAO to designate the effective protection of technologies 
critical to U.S. national security interests as a new high risk area. 
It is, therefore, time to step back, assess, and rethink what type of 
system is needed to best protect U.S. national security, foreign 
policy, and economic interests in a changing environment. 

GAO Contacts and Acknowledgments: 

For questions regarding this testimony, please contact me at (202) 512- 
4841 or calvaresibarra@gao.gov. Anne-Marie Lasowski and Johana R. 
Ayers, Assistant Directors; Ian Jefferies, Karen Sloan, and Bradley 
Terry made key contributions to this statement. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this statement. 

[End of section] 

Appendix: Summary of Prior GAO Reports on the U.S. Export Control 
System; 

Over the last several years, GAO has issued numerous reports regarding 
the export control system. In those reports, we have identified 
weaknesses primarily in two areas: (1) the U.S. government's controls 
on exports to ensure that U.S. interests are protected and (2) the 
mechanisms to ensure that these exports comply with U.S. laws and 
regulations. We have also identified inefficiencies in the 
administration and management of the system. To correct these 
weaknesses and inefficiencies, we have made multiple recommendations. 
The recommendations have generally focused on clarifying regulations 
and guidance, improving interagency coordination, and obtaining 
sufficient information for decision making. As we followed up with the 
various departments over the last year, we determined that a number of 
these recommendations have not been implemented. Table 3 summarizes 
what we found, what we recommended, and what actions, if any, the 
departments have taken to implement the recommendations. 

The State Department regulates overseas arms sales by U.S. companies 
under the authority of the Arms Export Control Act. State maintains a 
list of the items subject to its export controls. Prior to exporting 
State-controlled items to foreign companies and governments, companies 
generally need to obtain State-issued licenses. The Defense Department 
assists State by providing input on which items should be State- 
controlled and by conducting technical and national security reviews of 
export license applications. State's controls on arms exports are 
separate from those maintained by the Commerce Department. Commerce 
regulates the export of dual-use items, which have both military and 
commercial applications. Under the authority of the Export 
Administration Act of 1979, Commerce maintains its own list of items 
subject to its controls. Many items controlled by Commerce do not 
require licenses for export to most destinations. State and Commerce's 
controls differ in several key areas. For example, many items 
controlled by Commerce do not require licenses for export to most 
destinations, and Commerce-controlled items may be exported to China 
while arms exports to China are generally prohibited. 

Table 3: Summary of 2000-2007 GAO Reports on the U.S. Export Control 
System: 

Defense Trade: Analysis of Support for Recent Initiatives (Aug. 31, 
2000, GAO/NSIAD-00-191:)
Background: In 1999, Defense compiled a list of; 81 defense cooperation 
initiatives intended to enhance cross-border defense trade and 
investment. Several initiatives were part of an ongoing effort to 
reinvent the Foreign Military Sales program, while other initiatives 
were to help streamline processes and/or change policies considered 
important for defense cooperation, such as export controls. Building on 
the 81 initiatives, State and Defense announced 17 measures, 
collectively known as the Defense Trade Security Initiative (DTSI), to 
adjust the export control system; 
Main issues: Defense developed its initiatives on the basis of 
incomplete data and inadequate analysis to determine underlying causes 
for problems it identified. It is unclear whether the department's 
initiatives will achieve the desired outcomes of improving U.S. and 
foreign forces' ability to operate together in coalition warfare 
scenarios, reducing a gap in military capabilities between the United 
State and its allies, and ensuring that U.S. companies successfully 
compete in overseas markets. Further, there was no demonstration of how 
DTSI measures would achieve identified goals and no analysis of 
existing problems. As a result, there is little assurance that any 
underlying problems with the U.S. export control system have been 
sufficiently analyzed to determine whether DTSI will remedy any 
existing problems. 
GAO recommendations; No recommendations; 
Action taken: Not applicable.

Export Controls:  Systems for Controlling Exports of High Performance 
Computing is Ineffective (Dec. 18, 2000 GAO-01-10); 
Background: Exports of high performance computers exceeding a defined 
performance threshold require an export license from Commerce. As 
technological advances in high performance computing occur, it may 
become necessary to explore other options to maintain the U.S. lead in 
defense-related technology. As a step in this direction, the National 
Defense Authorization Act for Fiscal Year 1998 required the Secretary 
of Defense to assess the cumulative effect of U.S.-granted licenses for 
exports of computing technologies to countries and entities of concern. 
It also required information on measures that may be necessary to 
counter the use of such technologies by entities of concern; 
Main issues: The current system for controlling exports of high 
performance computers is ineffective because it focuses on the 
performance level of individual computers and does not address the 
linking or "clustering" of many lower performance computers that can 
collectively perform at higher levels than current export controls 
allow. However, the act does not require an assessment of the 
cumulative effect of exports of unlicensed computers, such as those 
that can be clustered. The current control system is also ineffective 
because it uses millions of theoretical operations per second as the 
measure to classify and control high performance computers meant for 
export. This measure is not a valid means for controlling computing 
capabilities; 
GAO recommendations; 
Commerce; 
* in consultation with other relevant agencies, convene a panel of 
experts to comprehensively assess and report to Congress on ways of 
addressing the shortcomings of computer export controls; 
Defense; 
* determine what countermeasures are necessary, if any, to respond to 
enhancements of the military or proliferation capabilities of countries 
of concern derived from both licensed and unlicensed high performance 
computing; 
Action taken: Commerce has implemented our recommendation. Defense has 
not implemented our 
recommendation. 

Export Controls: Regulatory Change Needed to Comply with Missile 
Technology Licensing Requirements (May 31, 2001, GAO-01-530);
Background: Concerned about missile proliferation, the United States 
and several major trading partners in 1987 created an international 
voluntary agreement, the Missile Technology Control Regime (MTCR), to 
control the spread of missiles and their related technologies. Congress 
passed the National Defense Authorization Act for Fiscal Year 1991 to 
fulfill the U.S. government's MTCR commitments. This act amended the 
Export Administration Act of 1979, which regulates the export of dual-
use items, by requiring a license for all exports of controlled dual-
use missile technologies to all countries. The National Defense 
Authorization Act also amended the Arms Export Control Act, which 
regulates the export of military items, by providing the State 
Department the discretion to require licenses or provide licensing 
exemptions for missile technology exports; 
Main issues: State's regulations require licenses for the exports of 
missile technology items to all countries--including Canada, which is 
consistent with the National Defense Authorization Act. However, 
Commerce's export regulations are not consistent with the act as they 
do not require licenses for the export of controlled missile equipment 
and technology to Canada; 
GAO recommendations; 
Commerce; 
* revise the Export Administration Regulations to comply with the MTCR 
export licensing requirements contained in the National Defense 
Authorization Act for Fiscal Year 1991, or; 
* seek a statutory change 
from Congress to specifically permit MTCR items to be exempted from 
licensing requirements; 
* if Commerce seeks a statutory change, revise the Export 
Administration Regulations to comply with the current statute until 
such time as a statutory change occurs; 
Action taken: Our recommendations have not been implemented. However, 
Commerce has a regulatory change pending that, once implemented, will 
require licenses for the export of dual-use missile technologies to 
Canada. 

Export Controls: State and Commerce Department License Review Times Are 
Similar (June 1, 2001, GAO-01-528);  
Background: The U.S. defense industry and some U.S. and allied 
government officials have expressed concerns about the amount of time 
required to process export license applications; 
Main issues: In fiscal year 2000, State's average review time for 
license applications was 46 days while Commerce's average was 50 days. 
Variables identified as affecting application processing times include 
the commodity to be exported and the extent of interagency 
coordination. Both departments approved more than 80 percent of license 
applications during fiscal year 2000;
GAO recommendations; No recommendations; 
Action taken: Not applicable. 

Export Controls: Clarification of Jurisdiction for Missile Technology 
Items Needed (Oct. 9, 2001, GAO-02-120); 
Background: The United States has committed to work with other 
countries through the Missile Technology Control Regime (MTCR) to 
control the export of missile-related items. The regime is a voluntary 
agreement among member countries to limit missile proliferation and 
consists of common export policy guidelines and a list of items to be 
controlled. In 1990, Congress amended existing export control statutes 
to strengthen missile-related export controls consistent with U.S. 
commitments to the regime. Under the amended statutes, Commerce is 
required to place regime items that are dual-use on its list of 
controlled items. All other regime items are to appear on State's list 
of controlled items; 
Main issues: Commerce and State have not clearly determined which 
department has jurisdiction over almost 25 percent of the items that 
the U.S. government agreed to control as part of its regime 
commitments. The lack of clarity as to which department has 
jurisdiction over some regime items may lead an exporter to seek a 
Commerce license for a militarily sensitive item controlled by State. 
Conversely, an exporter could seek a State license for a Commerce-
controlled item. Either way, exporters are left to decide which 
department should review their exports of missile items and, by 
default, which policy interests are to be considered in the license 
review process; 
GAO recommendations; 
Commerce and State; 
* jointly review the listing of items included on the MTCR list, 
determine the appropriate jurisdiction for those items, and revise 
their respective export control lists to ensure that proposed exports 
of regime items are subject to the appropriate review process; 
Action taken: Commerce and State have not implemented our 
recommendations despite initially agreeing to do so. 

Export Controls: Reengineering Business Processes Can Improve 
Efficiency of State Department License Reviews (Dec. 31, 2001, GAO-02-
203);
Background: The U.S. defense industry and some foreign government 
purchasers have expressed concern that the arms export control process 
is unnecessarily lengthy. While the export licensing process can be 
lengthy because of foreign policy and national security considerations, 
other factors may also affect processing times; 
Main issues: State lacks formal guidelines for determining which 
agencies and offices should review arms export license applications and 
does not have procedures to monitor the flow of applications through 
the process. As a result, thousands of applications have been delayed 
while no substantive review occurred and hundreds more have been lost; 
GAO recommendations; 
State; 
* develop criteria for determining which applications should be 
referred to which agencies and offices for further review, develop 
formal guidelines and training for reviewing organizations so they 
clearly understand their duties; 
* establish timeliness goals for each phase of the licensing process 
and mechanisms to ensure that applications are not lost or delayed; 
* implement these recommendations before proceeding with a planned 
upgrade to the department's electronic business processing system; 
Action taken: Our recommendations have been implemented; 
* State's electronic system does not yet accept all types of export 
applications. 

Defense Trade: Lessons to Be Learned from the Country Export Exemption 
(March 29, 2002, GAO-02-63);
Background: State's export regulations do not require licenses for the 
export of many defense items to Canada; In 2000, the U.S. government 
announced plans to extend similar licensing exemptions for exports to 
other countries; 
Main issues: 
Because of unclear guidance, some exporters have implemented the 
Canadian exemption inconsistently and have misinterpreted requirements 
to report their export activities to State. State has provided 
inconsistent answers to exporters and U.S. Customs Service[A] officials 
when questions were raised about the exemption's use in specific 
situations; State encourages exporters to voluntarily disclose 
violations but relies primarily on U.S. Customs to enforce export 
control laws and regulations, including use of the Canadian exemption. 
U.S. Customs' ability to enforce the proper use of exemptions is 
weakened by a lack of information and resources, difficulties in 
investigating suspected violations, and competing demands, such as 
terrorism prevention and drug interdiction;
GAO recommendations; 
State; 
* review guidance and licensing officer training to improve clarity and 
ensure consistent application of the exemption and provide the guidance 
to U.S. Customs to ensure consistent application of the exemption and 
provide the guidance to U.S. Customs to ensure that consistent 
information is disseminated to exporters; 
*work with the Justice Department and U.S. Customs to assess lessons 
learned from the Canadian exemption and ensure the lessons are 
incorporated in future agreements; 
U.S. Customs; 
* assess the threat of illegal defense exports along the Canadian 
border and evaluate whether reallocation of inspectors or other actions 
are warranted to better enforce export regulations; 
* update, finalize, and provide guidance on inspection requirements to 
all inspectors; 
Action taken: State has not implemented our recommendations. In its 
response to our report, State said it would provide training and 
guidance but did not indicate how it would ensure that the guidance and 
training are clear and understood by those who need to use them. The 
department also said it would work with law enforcement agencies to 
assess lessons learned but did not identify how it would do so. 
Subsequently, State signed the treaty with the United Kingdom to allow 
for license-free export before the department conducted a lessons 
learned assessment; 
U.S. Customs has implemented our recommendations. 

Export Controls: Issues to Consider in Authorizing a New Export 
Administration Act (Feb. 28, 2002, GAO-02- 468T;) 
Background: The U.S. government's policy regarding exports of sensitive 
dual-use technologies seeks to balance economic, national security, and 
foreign policy interests. The Export Administration Act (EAA) of 1979, 
as amended, has been extended through executive orders and law. Under 
the act, the President has the authority to control and require 
licenses for the export of dual-use items, such as nuclear, chemical, 
biological, missile, or other technologies that may pose a national 
security or foreign policy concern. In 2002, there were two different 
bills before the 107th Congress--H.R. 2581 and S. 149--that would enact 
a new EAA; 
Main issues: A new EAA should take into consideration the increased 
globalization of markets and an increasing number of foreign 
competitors, rapid advances in technologies and products, a growing 
dependence by the U.S. military on commercially available dual-use 
items, and heightened threats from terrorism and the proliferation of 
weapons of mass destruction; 
GAO recommendations; No recommendations; 
Action taken: Not applicable. 

Export Controls: Rapid Advances in China's Semiconductor Industry 
Underscore Need for Fundamental U.S. Policy Review (April 19, 2002, GAO-
02-620); 
Background: Semiconductor equipment and materials are critical 
components in everything from automobiles to weapons systems. The U.S. 
government controls the export of these dual-use items to sensitive 
destinations, such as China. Exports of semiconductor equipment and 
materials require a license from Commerce. Other departments, such as 
Defense and State, assist Commerce in reviewing license applications. 
The United States is a member of the multilateral Wassenaar Arrangement 
on Export Controls for Conventional Arms and Dual-Use Goods and 
Technologies; 
Main issues: Since 1986, China has narrowed the gap between the U.S. 
and Chinese semiconductor manufacturing technology from approximately 7 
years to 2 years or less. China's success in acquiring manufacturing 
technology from abroad has improved its semiconductor manufacturing 
facilities for more capable weapons systems and advanced consumer 
electronics. The multilateral Wassenaar Arrangement has not affected 
China's ability to obtain semiconductor manufacturing equipment because 
the U.S. is the only member of this voluntary arrangement that 
considers China's acquisition of semiconductor manufacturing equipment 
a cause for concern. Additionally, U.S. government policies and 
practices to control the export of semiconductor technology to China 
are unclear and inconsistent, leading to uncertainty among U.S. 
industry officials about the rationale for some licensing decisions. 
Furthermore, U.S. agencies have not done the analyses, such as 
assessing foreign availability of this technology or the cumulative 
effects of such exports on U.S. national security interests, necessary 
to justify U.S. policies and practices; 
GAO recommendations; 
Commerce; 
* in consultation with Defense and State, reassess and document U.S. 
export policy on semiconductor manufacturing equipment and materials to 
China: 
* complete the analyses needed to serve as a sound basis for an updated 
policy; 
* develop new export controls, if appropriate, or alternative means for 
protecting U.S. security interests; and; 
* communicate the results of these efforts to Congress and U.S. 
industry; 
Action taken: Commerce has not implemented our recommendations. 

Export Controls: More Thorough Analysis Needed to Justify Changes in 
High Performance Computer Controls (Aug. 2, 2002, GAO-02-892;) 
Background: High performance computers that operate at or above a 
defined performance threshold, measured in millions of theoretical 
operations per second, require a Commerce license for export to 
particular destinations. The President has periodically changed, on the 
basis of technological advances, the threshold above which licenses are 
required. The National Defense Authorization Act of 1998 requires that 
the President report to Congress the justification for changing the 
control threshold. The report must, at a minimum, (1) address the 
extent to which high performance computers with capabilities between 
the established level and the newly proposed level of performance are 
available from foreign countries,; (2) address all potential uses of 
military significance to which high performance computers between the 
established level and the newly proposed level could be applied, and 
(3) assess the impact of such uses on U.S. national security interests; 
Main issues: In January 2002, the President announced that the control 
threshold--above which computers exported to such countries as China, 
India, and Russia--would increase from 85,000 to 190,000 millions of 
theoretical operations per second. The report to Congress justifying 
the changes in control thresholds for high performance computers was 
issued in December 2001 and focused on the availability of such 
computers. However, the justification did not fully address the 
requirements of the National Defense Authorization Act of 1998. The 
December 2001 report did not address several key issues related to the 
decision to raise the threshold: (1) the unrestricted export of 
computers with performance capabilities between the old and new 
thresholds will allow countries of concern to obtain computers they 
have had difficulty constructing on their own, (2) the U.S. government 
is unable to monitor the end uses of many of the computers it exports, 
and (3) the multilateral process used to make earlier changes in high 
performance computer thresholds; 
GAO recommendations; No recommendations; 
Action taken: Not applicable. 

Export Controls:  Department of Commerce Controls over Transfers of 
Technology to Foreign Nationals Need Improvement (Sept. 6, 2002, GAO-02-
972);
Background: To work with controlled dual-use technologies in the United 
States, foreign nationals and the firms that employ them must comply 
with U.S. export control and visa regulations. U.S. firms may be 
required to obtain what is known as a deemed export license from 
Commerce before transferring controlled technologies to foreign 
nationals in the United States. Commerce issues deemed export licenses 
after consulting with the Defense, Energy, and State Departments. In 
addition, foreign nationals who are employed by U.S. firms should have 
an appropriate visa classification, such as an H-1B specialized 
employment classification. H-1B visas to foreign nationals residing 
outside of the United States are issued by State, while the Immigration 
and Naturalization Service approves requests from foreign nationals in 
the United States to change their immigration status to H- 1B; 
Main issues: In fiscal year 2001, Commerce approved 822 deemed export 
license applications and rejected 3. Most of the approved deemed export 
licenses allowed foreign nationals from countries of concern to work 
with advanced computer, electronic, or telecommunication and 
information security technologies in the United States. To better 
direct its efforts to detect possible unlicensed deemed exports, in 
fiscal year 2001 Commerce screened thousands of applications for H-1B 
and other types of visas submitted by foreign nationals overseas. From 
these applications, it developed 160 potential cases for follow-up by 
enforcement staff in the field. However, Commerce did not screen 
thousands of H-1B change-of-status applications submitted domestically 
to the Immigration and Naturalization Service for foreign nationals 
already in the United States. In addition, Commerce could not readily 
track the disposition of the 160 cases referred to field offices for 
follow-up because it lacks a system for doing so. Commerce attaches 
security conditions to almost all licenses to mitigate the risk of 
providing foreign nationals with controlled dual-use technologies. 
However, according to senior Commerce officials, their staff do not 
regularly visit firms to determine whether these conditions are being 
implemented because of competing priorities, resource constraints, and 
inherent difficulties in enforcing several conditions; 
GAO recommendations; 
Commerce; 
* use available Immigration and 
Naturalization Service data to identify foreign nationals potentially 
subject to deemed export licensing requirements; 
* establish, with Defense, Energy, and State, a risk-based program to 
monitor compliance with deemed export license conditions; if the 
departments conclude that certain security conditions are impractical 
to enforce, they should jointly develop conditions or alternatives to 
ensure that deemed exports do not place U.S. national security 
interests at risk; 
Action taken: Our recommendations have been implemented. 

Export Controls:  Processes for Determining Proper Control of Defense-
Related Items Need Improvement (Sept. 20, 2002, GAO-02-996);
Background: Companies seeking to export defense-related items are 
responsible for determining whether those items are regulated by 
Commerce or State and what the applicable export requirements are. If 
in doubt about whether an item is Commerce-or State-controlled or when 
requesting a change in jurisdiction, an exporter may request a 
commodity jurisdiction determination from State. State, which consults 
with Commerce and Defense, is the only department authorized to change 
export control jurisdiction. If an exporter knows an item is Commerce-
controlled but is uncertain of the export requirements, the exporter 
can request a commodity classification from Commerce. Commerce may 
refer classification requests to State and Defense to confirm that an 
item is Commerce-controlled; 
Main issues: Commerce has improperly classified some State-controlled 
items as Commerce-controlled because it rarely obtains input from 
Defense and State before making commodity classification 
determinations. As a result, the U.S. government faces an increased 
risk that defense items will be exported without the proper level of 
government review and control to protect national interests. Also, 
Commerce has not adhered to regulatory time frames for processing 
classification requests; In its implementation of the commodity 
jurisdiction process, State has not adhered to established time frames, 
which may discourage companies from requesting jurisdiction 
determinations. State has also been unable to issue determinations for 
some items because of interagency disputes occurring outside the 
process; 
GAO recommendations; 
Commerce; 
* promptly review existing guidance and develop criteria with 
concurrence from State and Defense for referring commodity 
classification requests to those departments; 
* work with State to develop procedures for referring requests that are 
returned to companies because the items are controlled by State or 
because they require a commodity jurisdiction review; 
Commerce, Defense and State; 
* revise interagency guidance to incorporate any changes to the 
referral process and time frames for making decisions; * assess the 
resources needed to make jurisdiction recommendations and 
determinations within established time frames and reallocate them as 
appropriate; 
Action taken: With a limited exception, our recommendations have not 
been implemented. In responding to our report, State indicated it 
partially agreed with our recommendations, while Commerce and Defense 
agreed to implement our recommendations; 
Commerce and Defense have added staff to assist with their respective 
processes. State indicated that it intends to seek additional staff to 
assist with its processes. 

Nonproliferation:  Strategy Needed to Strengthen Multilateral Export 
Control Regimes (Oct. 25, 2002, GAO 03-43);
Background: Multilateral export control regimes are a key policy 
instrument in the overall U.S. strategy to combat the proliferation of 
weapons of mass destruction. They are consensus-based, voluntary 
arrangements of supplier countries that produce technologies useful in 
developing weapons of mass destruction or conventional weapons; The 
regimes aim to restrict trade in these technologies to prevent 
proliferation. The four principal regimes are the Australia Group, 
which controls chemical and biological weapons proliferation; the 
Missile Technology Control Regime (MTCR); the Nuclear Suppliers Group; 
and the Wassenaar Arrangement, which controls conventional weapons and 
dual-use items and technologies. All four regimes expect members to 
report denials of export licenses for controlled dual-use items, which 
provide members with more complete information for reviewing 
questionable export license applications. The United States is a member 
of all four regimes; 
Main issues: Weaknesses impede the ability of the multilateral export 
control regimes to achieve their nonproliferation goals. Regimes often 
lack even basic information that would allow them to assess whether 
their actions are having their intended results. The regimes cannot 
effectively limit or monitor efforts by countries of concern to acquire 
sensitive technology without more complete and timely reporting of 
licensing information and without information on when and how members 
adopt and implement agreed- upon export controls. For example, GAO 
confirmed that the U.S. government had not reported its denial of 27 
export licenses between 1996 and 2002 for items controlled by the 
Australia Group. Several obstacles limit the options available to the 
U.S. government in strengthening the effectiveness of multilateral 
export control regimes. The requirement to achieve consensus in each 
regime allows even one member to block action in adopting needed 
reforms. Because the regimes are voluntary in nature, they cannot 
enforce members' compliance with regime commitments. For example, 
Russia exported nuclear fuel to India in a clear violation of its 
commitments under the Nuclear Suppliers Group, threatening the 
viability of this regime. The regimes have adapted to changing threats 
in the past. Their continued ability to do so will determine whether 
they remain viable in curbing proliferation in the future.; 
GAO recommendations; 
State; 
* as the U.S. government's representative to the multilateral regimes, 
establish a strategy to strengthen these regimes. This strategy should 
include ways for regime members to; 
- improve information-sharing; 
- implement regime changes to their export controls more consistently, 
and; 
* identify organizational changes that could help reform regime 
activities; 
* ensure that the United States reports all license application denials 
to regimes; 
* establish criteria to assess the effectiveness of the regimes; 
Action taken: State has not implemented our recommendations. 

Non-proliferation: Improvements Needed to Better Control Technology 
Exports for Cruise Missiles and Unmanned Aerial Vehicles (Jan. 23, 
2004, GAO-04-175);
Background: Cruise missiles and unmanned aerial vehicles (UAV) pose a 
growing threat to U.S. national security interests as accurate, 
inexpensive delivery systems for conventional, chemical, and biological 
weapons. Exports of cruise missiles and military UAVs by U.S. companies 
are licensed by State while government-to-government sales are 
administered by Defense. Exports of dual-use technologies related to 
cruise missiles and UAVs are licensed by Commerce; 
Main issues: U.S. export control officials find it increasingly 
difficult to limit or track dual-use items with cruise missile or UAV-
related capabilities that can be exported without a license. A gap in 
dual-use export control authority enables U.S. companies to export 
certain dual-use items to recipients that are not associated with 
missile projects or countries listed in the regulations, even if the 
exporter knows the items might be used to develop cruise missiles or 
UAVs. The gap results from current "catch- all" regulations that 
restrict the sale of unlisted dual-use items to certain national 
missile proliferation projects or countries of concern, but not to 
nonstate actors such as certain terrorist organizations or individuals. 
Catch-all controls authorize the government to require an export 
license for items that are not on control lists but are known or 
suspected of being intended for use in a missile or weapons of mass 
destruction program.
Commerce, Defense, and State have seldom used their end use monitoring 
programs to verify compliance with conditions placed on the use of 
cruise missile, UAV, or related technology exports. For example, 
Commerce conducted visits to assess the end use of items for about 1 
percent of the 2,490 missile-related licenses issued between fiscal 
years 1998 and 2002. Thus, the U.S. government cannot be confident that 
recipients are effectively safeguarding equipment in ways that protect 
U.S. national security and nonproliferation interests; 
GAO recommendations; 
Commerce; 
*assess and report to the Committee on Government Reform on the 
adequacy of the Export Administration Regulations' catch-all provision 
to address missile proliferation by nonstate actors; this assessment 
should indicate ways the provision should be modified; 
Commerce, Defense and State; 
* as a first step, each department complete a comprehensive assessment 
of cruise missile, UAV, and related dual-use technology transfers to 
determine whether U.S. exporters and foreign end users are complying 
with the conditions on the transfers; 
* as part of the assessment, each department conduct additional 
postshipment verification visits on a sample of cruise missile and UAV 
licenses; 
Action taken: Commerce has addressed our recommendation by revising its 
licensing requirement for missile technology exports.  
While Commerce has taken some actions to address our recommendations, 
the other departments have not done so. 

Export Controls:  Post-Shipment Verification Provides Limited Assurance 
that Dual-Use Items Are Being Properly Used (Jan.12, 2004, GAO-04-357); 
Background: Commerce conducts post-shipment verification (PSV) checks 
to ensure that dual-use items arrive at their intended destination and 
are used for the purposes stated in the export license. To conduct PSV 
checks, Commerce personnel visit foreign companies to verify the use 
and location of exported items. PSVs serve as one of the primary means 
of checking whether end users are complying with conditions imposed by 
the license. Commerce placed conditions on nearly all approved licenses 
for exports to countries of concern for fiscal years 2000 to 2002; 
Main issues: In fiscal years 2000 to 2002, Commerce approved 7,680 
licenses for dual-use exports to countries of concern, such as China, 
India, and Russia. However, we found that during this time Commerce 
completed PSV checks on only 428 of the dual-use licenses it approved 
for countries of concern; We identified three key weaknesses in the PSV 
process that reduce its effectiveness. First, PSVs do not confirm 
compliance with license conditions because U.S. officials often lack 
the technical training needed to assess compliance and end users may 
not be aware of the license conditions by which they are to abide. 
Second, some countries of concern, most notably China, limit the U.S. 
government's access to facilities where dual-use items are shipped, 
making it difficult to conduct a PSV. Third, PSV results have only a 
limited impact on future licensing decisions. Companies receiving an 
unfavorable PSV may receive greater scrutiny in future license 
applications, but licenses for dual-use exports to these companies can 
still be approved. In addition, according to Commerce officials, past 
PSV results play only a minor role in future enforcement actions.
GAO recommendations; 
Commerce; 
* improve technical training for personnel conducting PSV checks to 
ensure they are able to verify compliance with license conditions; 
* ensure that personnel conducting PSV checks assess compliance with 
license conditions; 
* require that the exporter inform the end user in writing of the 
license conditions; 
Action taken: Our recommendations have been implemented. 

Defense Trade:  Arms Export Control System in the Post-9/11 Environment 
(Feb.16, 2005, GAO 05-234).
Background: Over the years, there have been various efforts to change 
the arms export control system overseen by State. One effort was the 
Defense Trade Security Initiative (DTSI) in 2000, which was intended to 
facilitate defense trade with allies in the post-Cold War environment. 
Given the September 2001 terror attacks, the U.S. government has had to 
reevaluate whether existing policies support national security and 
foreign policy goals; 
Main issues: Since the September 2001 terror attacks, the arms export 
control system has not undergone fundamental changes because, according 
to State officials, the system is already protecting U.S. interests. 
While the system essentially remains unchanged, new trends have emerged 
in the processing of arms export cases. In particular, median 
processing times for all arms export cases began increasing in fiscal 
year 2003; 
State and Defense have continued to implement DTSI and related 
initiatives primarily designed to streamline the processing of arms 
export licenses. According to State officials, they have not evaluated 
the effects of these initiatives on the export control system or 
revised the initiatives but maintain that the initiatives remain 
relevant after September 2001. Yet, applications processed under these 
initiatives have generally not been processed within the time frames 
established by State and Defense and exporters have not widely used 
several initiatives; 
State has sought limited coordination with the agencies responsible for 
enforcing U.S. arms export laws--the Departments of Homeland Security 
and Justice--regarding initiatives designed to streamline arms export 
licensing. The only exceptions have been regarding proposed export 
licensing exemptions. Enforcement officials have raised concerns 
regarding licensing exemptions, including the increased risk of 
diversion; 
GAO recommendations; 
No recommendations; Action taken: Not applicable. 

Export Controls: Improvements to Commerce's Dual-Use System Needed to 
Ensure Protection of U.S. Interests in the Post- 9/11 Environment (June 
26, 2006, GAO 06-638);
Background: In regulating dual-use exports, Commerce seeks to allow 
U.S. companies to compete globally while minimizing the risk of items 
falling into the wrong hands. In so doing, Commerce faces the challenge 
of weighing U.S. national security and economic interests, which at 
times can be divergent or even competing-
-a challenge heightened by shifts in the security and economic 
environment; 
Main issues: Commerce has not systematically evaluated whether the dual-
use export control system is meeting its stated goal of protecting U.S. 
national security and economic interests. Specifically, Commerce has 
not comprehensively analyzed available data to determine what dual-use 
items have actually been exported. Commerce has also not established 
performance measures that would provide an objective basis for 
assessing how well the system is protecting U.S. interests. Instead, 
Commerce relies on limited measures of efficiency, as well as 
intelligence reports and meetings with industry to gauge how the system 
is operating. After conducting an ad hoc review of the system, Commerce 
officials determined that no fundamental changes were needed after 
September 2001, but did make some adjustments primarily related to 
controls on chemical and biological agents; Omissions exist in the 
watchlist Commerce uses to screen export license applications. This 
screening is intended to identify ineligible parties or parties 
warranting more scrutiny. The omissions undermine the list's utility, 
which increases the risk of dual-use exports falling into the wrong 
hands. GAO identified 147 parties that had violated U.S. export control 
requirements, had been determined by Commerce to be suspicious end 
users, or had been reported by State as committing acts of terror, but 
these parties were not on the watchlist of approximately 50,000 names. 
Reasons for the omissions include a lack of specific criteria as to who 
should be on the watchlist and Commerce's failure to regularly review 
the list. In addition, a technical limitation in Commerce's 
computerized screening system results in some parties on license 
applications not being automatically screened against the watchlist; 
Commerce has implemented several but not all of GAO's recommendations 
for ensuring that export controls on sensitive items protect U.S. 
interests. Among weaknesses identified by GAO is the lack of clarity on 
whether certain items are under Commerce's control, which increases the 
risk of defense-related items being improperly exported. Commerce has 
yet to take corrective action on this matter; 
GAO recommendations; 
Commerce; 
* use available data and develop performance measures in consultation 
with other agencies to systematically evaluate the effectiveness and 
efficiency of the dual-use export control system in achieving the goal 
of protecting U.S. interests; 
* correct omissions in the watchlist and weaknesses in the screening 
process; 
* report to Congress on the status of GAO recommendations, the reasons 
why recommendations have not been implemented, and what other actions, 
if any, are being taken to address the identified weaknesses; 
Action taken: While Commerce indicated it has plans to evaluate the 
effectiveness of the dual-use export control system, it has not 
implemented them or taken action regarding the report to Congress; 
Commerce has implemented the recommendations concerning the watchlist. 

Analysis of Data for Exports Regulated by the Department of Commerce 
(Nov.13, 2006, (GAO-07-197R)
Background: GAO previously reported that Commerce has not 
systematically evaluated the overall effectiveness and efficiency of 
the dual-use export system. Commerce has not conducted comprehensive 
analyses of available data about items that have actually been exported 
from the United States. GAO made several recommendations in that 
report, including that Commerce should use the available data to 
evaluate the system's effectiveness; 
Main issues: The data we obtained provide an overall picture of the 
dollar value of commodities subject to Commerce regulations and of the 
countries receiving these exports. Most items subject to Commerce's 
regulations do not require government review and approval in the form 
of a license prior to export. We found that less than 1 percent of 
exports subject to Commerce regulations were licensed in 2005.[B] The 
dollar value of unlicensed exports from the United States in 2005 was 
about $624 billion, while the value of licensed exports was about $1.2 
billion; 
The insight we gained from analyzing shipment data further supports the 
prior recommendation to Commerce that is use available data to evaluate 
the effectiveness of its export control system. The data could aid in 
determining the economic impact of current regulations and in 
evaluating whether exporters are complying with regulations. Commerce 
officials told us they periodically use portions of the data for 
enforcement activities but currently do not use the data to evaluate 
the system's effectiveness; 
GAO recommendations; No recommendations; 
Action taken: Not applicable. 

Export Controls: Agencies Should Assess Vulnerabilities and Improve 
Guidance for Protecting Export-Controlled Information at Companies 
(Dec. 5, 2006, GAO-07-69); 
Background: The U.S. government controls exports of defense-related 
goods and services by companies and the export of information 
associated with their design, production, and use. Globalization and 
communication technologies facilitate exports of controlled 
information, which provides benefits to U.S. companies and increases 
interactions between U.S. and foreign companies--making it challenging 
to protect such exports; 
Main issues: Commerce and State have less oversight on exports of 
controlled information than they do on exports of controlled goods. 
Commerce's and State's export control requirements and processes 
provide physical checkpoints on the means and methods companies use to 
export controlled goods to help the agencies ensure such exports are 
made under their license terms, but the agencies cannot easily apply 
these same requirements and processes to exports of controlled 
information. Commerce and State expect individual companies to be 
responsible for implementing practices to protect export-controlled 
information. However, one-third of the companies GAO interviewed did 
not have internal control plans to protect export-controlled 
information; Commerce and State have not fully assessed the risks of 
companies using a variety of means to protect export-controlled 
information. They have not used existing resources, such as license 
data, to help identify the minimal protections for such exports. As 
companies use a variety of measures for protecting export-controlled 
information, increased knowledge of the risks associated with 
protecting such information could improve agency outreach and training 
efforts; 
GAO recommendations; 
Commerce and State; * strategically assess potential vulnerabilities in 
the protection of export-controlled information using available 
resources, such as licensing data, and evaluate company practices for 
protecting such information; * improve interagency coordination in the 
following areas (1) provide specific guidance, outreach, and training 
on how to protect export-controlled information and (2) better target 
compliance activities on company protection of export-controlled 
information; 
Action taken: Commerce and State have not implemented the 
recommendations, but Commerce indicated it is taking steps to address 
them. 

Export Controls: Agencies Should Assess Vulnerabilities and Improve 
Guidance for Protecting Export-Controlled Information at Universities 
(Dec. 5, 2006, GAO-07-70); 
Background: U.S. export control regulations allow foreign students and 
researchers without export licenses to partake in fundamental research, 
defined to mean basic research and applied research in science and 
engineering, the results of which are ordinarily published and shared 
broadly within the scientific community. U.S. policymakers recognize 
that foreign students and researchers have made substantial 
contributions to U.S. research efforts, but the potential transfer of 
knowledge of controlled defense- related technologies to their home 
countries could have significant consequences for U.S. national 
interests; 
Main issues: According to university officials we interviewed, their 
institutions focus almost exclusively on fundamental research, which is 
generally not subject to export controls. By conducting fundamental 
research, universities can openly share and publish their research 
findings within a broad community that includes international students 
and scholars. To ensure their research remains in the public domain, 
most university officials said they extensively screen and review 
potential contracts and grants for fundamental research to ensure there 
are no publication or other dissemination restrictions. If export 
controls apply, university officials stated they sometimes reject the 
research contract, involve only students and scholars who can conduct 
the research under license exclusions, or refer such work to associated 
facilities that can better regulate and control foreign national access 
to such research. However, the universities we visited indicated that 
government-provided training and guidance on export regulations is 
limited in informing their efforts to manage and protect export-
controlled information, and it does not clarify when fundamental 
research exclusions should apply; 
While State and Commerce officials expressed concerns that universities 
may not correctly interpret and apply export regulations, they have not 
conducted an overall assessment of available trend data on technology 
development research and foreign participation in such research at U.S. 
universities to identify potential vulnerabilities. Although State and 
Commerce provide guidance through training seminars, agency Web sites, 
and telephone help desks to assist exporters in understanding and 
complying with regulations, officials stated that their focus is on 
processing export license applications--primarily from industry. 
Recently, Commerce established an advisory committee composed of 
industry and university representatives who are expected to discuss 
issues such as the nature of university research and its relation to 
export controls; 
GAO recommendations; 
Commerce and State
*strategically assess potential vulnerabilities in the conduct and 
publication of academic research through analyzing available 
information on technology development and foreign student populations 
at universities; 
*on the basis of this assessment, coordinate efforts and improve 
guidance and outreach to ensure that universities understand when to 
apply export controls; 
Action taken: 
Commerce and State have not yet implemented the recommendations, but 
Commerce indicated it is taking steps to address them. 

Export Controls: Challenges Exist in Enforcement of an Inherently 
Complex System (Dec. 20, 2006, GAO-07-265); 
Background: A key function of the U.S. export control system is 
enforcement, which consists of various activities that aim to prevent 
or deter the illegal export of controlled defense and dual-use items 
and can result in apprehending violators and pursuing and imposing 
appropriate criminal and administrative penalties. Enforcement 
activities are largely carried out by Commerce, Homeland Security, 
Justice, and State; 
Main issues: The enforcement of export control laws and regulations 
involves multiple agencies with varying roles, responsibilities, and 
authorities. The agencies responsible for export control enforcement 
conduct a variety of activities, including inspecting items to be 
exported, investigating potential export control violations, and 
pursuing and imposing appropriate penalties and fines against 
violators. These agencies' enforcement authorities are granted through 
a complex set of laws and regulations, which give concurrent 
jurisdiction to multiple agencies to conduct investigations; 
Agencies face several challenges in enforcing export control laws and 
regulations. For example, agencies have had difficulty coordinating 
investigations and agreeing on how to proceed on cases. Coordination 
and cooperation often hinge on the relationships individual 
investigators across agencies have developed. Other challenges include 
obtaining timely and complete information to determine whether 
violations have occurred and enforcement actions should be pursued, and 
the difficulty in balancing multiple priorities and leveraging finite 
human resources; 
Each enforcement agency has a database to capture information on its 
enforcement activities. However, outcomes of criminal cases are not 
systematically shared with State and Commerce, the principal export 
control agencies. Without information on the outcomes of criminal 
cases, export control agencies cannot gain a complete picture of an 
individual or a company seeking export licenses or discover trends in 
illegal export activities;
GAO recommendations; 
Commerce, Homeland Security, and Justice; 
* establish a task force to evaluate options to improve coordination 
and cooperation among export enforcement investigative agencies; 
* report the status of task force actions to Congress; 
Commerce and Homeland Security; 
* establish goals for license determinations; 
Commerce, Homeland Security, and State; 
* determine what additional training or guidance is needed on license 
determinations; 
Commerce and Homeland Security; 
* determine the feasibility of establishing a requirement for Customs 
and Border Protection to decrement Commerce licenses and an action plan 
for doing so; 
Justice; 
* establish formal procedures for conveying criminal export enforcement 
results to State and Commerce; 
Action taken:
Justice and Homeland Security indicated that they are taking steps to 
address this recommendation;
Commerce and State have not yet implemented these recommendations. 
Homeland Security has implemented the recommendation concerning 
guidance on license determinations. Commerce and Homeland Security have 
not implemented this recommendation; 
Justice has implemented this recommendation. 

Source: GAO analysis of prior work. 

[A] The U.S. Customs Service is now part of the Homeland Security 
Department's Customs and Border Protection and Immigration and Customs 
Enforcement. 

[B] Amounts do not include data for exports to Canada. 

[End of table]

[End of section] 

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FOOTNOTES 

[1] GAO, High-Risk Series: An Update, GAO-07-310 (Washington, D.C.: 
January 2007). 

[2] "Arms" refers to defense articles and services as specified in 22 
U.S.C. §2778. 

[3] Ronald W. Reagan National Defense Authorization Act for Fiscal Year 
2005, Pub. L. No. 108-375 §1225(b) (2004). 

[4] This amount reflects only the export of items specifically 
identified on Commerce's control list. If an item is not listed on the 
control list but is subject to Commerce's regulations, it falls into 
the category known as EAR99. In 2005, 99.98 percent of EAR99 items were 
exported without licenses. Amounts do not include data for exports to 
Canada. 

[5] GAO, 21st Century Challenges: Reexamining the Base of the Federal 
Government, GAO-05-325SP (Washington, D.C.: February 2005) and 21st 
Century Challenges: Transforming Government to Meet Current and 
Emerging Challenges, GAO-05-830T (Washington, D.C.: July 13, 2005).

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