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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

February 2011: 

Export Controls: 

Improvements Needed to Prevent Unauthorized Technology Releases to 
Foreign Nationals in the United States: 

GAO-11-354: 

GAO Highlights: 

Highlights of GAO-11-354, a report to congressional requesters. 

Why GAO Did This Study: 

Countries posing national security concerns to the U.S. could upgrade 
their military forces with certain technologies having civilian and 
military (dual-use) applications. The Department of Commerce 
(Commerce) may require employers to obtain a “deemed export” license 
before they can transfer these technologies to foreign nationals in 
the U.S. The State Department also requires foreign nationals to 
obtain specialty occupation visas to work in the U.S. in occupations 
such as engineering, computers, and biotechnology. GAO was asked to 
examine the risk that foreign nationals in the U.S. may gain 
unauthorized access to controlled technologies, and the extent to 
which Commerce and other agencies implemented recommended changes to 
the deemed export licensing process and enforcement system. GAO 
analyzed licensing and visa data from Commerce and Homeland Security, 
respectively; reviewed reports; and met with law enforcement agencies, 
companies, and universities in Boston, Los Angeles, and San Francisco. 

What GAO Found: 

Four factors together may indicate the risk that foreign nationals 
could gain unauthorized access to controlled dual-use technology. 
First, according to unclassified intelligence reports and law 
enforcement officials, foreign businessmen, scientists, engineers, and 
others have gained unauthorized access in the United States to 
controlled dual-use technologies. Second, during fiscal years 2004 
through 2009, Commerce suspended the export privileges of three 
violators and fined 14 U.S. companies about $2.3 million for allowing 
foreign nationals unauthorized access to controlled technologies. 
Third, Commerce’s screening of overseas visa applications for 
potential unlicensed deemed exports dropped from 54,000 in fiscal year 
2001 to 150 in fiscal year 2009. Fourth, from fiscal years 2004 to 
2009, the United States issued about 1.05 million specialty occupation 
visas in high-technology fields to foreign nationals from 13 countries 
of concern to work in the United States, while Commerce issued deemed 
export licenses authorizing transfers of technology to about 3,200 
foreign nationals from these countries. 

Commerce and Immigration and Customs Enforcement (ICE) have not 
implemented prior recommended changes to the deemed export licensing 
process involving outreach, and Commerce has taken action to clarify a 
regulatory definition, but confusion may remain. As a result, 
employers may not be aware of deemed export licensing requirements and 
obtaining the licenses required. GAO and other audit organizations 
made two key recommendations to correct weaknesses in the deemed 
export licensing process. The first recommended that Commerce develop 
an approach or plan to better inform employers about requirements to 
apply for deemed export licenses. However, Commerce still lacks an 
approach or plan to provide such information, particularly to small 
and mid-size companies. The second recommended that Commerce eliminate 
confusion by modifying the regulatory definition that is part of 
determining when foreign nationals can access controlled technologies 
in fundamental research without triggering the deemed export licensing 
requirement. In response, Commerce clarified the definition but may 
not have eliminated the confusion, as shown by uncertainty within 
Commerce over the definition, which resulted in a misunderstanding 
with a U.S. agency. Based on guidance from Commerce, the agency 
applied for 37 deemed export licenses, which Commerce processed over a 
17-month period before advising the agency that it no longer needed to 
apply for such licenses. 

Commerce has not implemented GAO’s and others’ recommendations to the 
export enforcement system involving monitoring license compliance and 
using immigration data for deemed export enforcement. Commerce has not 
created a program to monitor security conditions in licenses or used 
existing immigration data to enforce deemed export regulations. 
Commerce, ICE, and the Federal Bureau of Investigation have also not 
implemented recommendations to improve coordination on export control 
investigations, including those of foreign nationals subject to deemed 
export controls. 

What GAO Recommends: 

Commerce should (1) assess issuance of specialty occupation visas 
covered by deemed export license applications and (2) report to 
Congress on how it will implement prior deemed export recommendations 
as part of the export control reform process. Commerce agreed with the 
first recommendation, but did not comment on reporting to Congress. 

View [hyperlink, http://www.gao.gov/products/GAO-11-354] 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: 

Foreign Nationals from Countries of Concern Have Gained Unauthorized 
Access to Controlled Technologies in the United States: 

Commerce and ICE Have Not Implemented Recommended Changes to the 
Deemed Export Licensing Process Involving Outreach, and Commerce Has 
Taken Actions to Clarify a Regulatory Definition but Confusion May 
Remain: 

Commerce and Other Agencies Have Not Implemented Recommended Changes 
to Improve Enforcement of Deemed Exports: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comparison of Numbers of Foreign Nationals from 13 
Countries of Concern to Foreign Nationals from the Same Countries 
Covered by Deemed Export Licenses, Fiscal Years 2004 to 2009: 

Appendix III: Summary of Outreach Activities of Commerce and ICE: 

Appendix IV: Draft of DHS's Changes to the Form I-129 "Petition for 
Nonimmigrant Worker:" 

Appendix V: Comments from the Department of Commerce: 

Appendix VI: Comments from the Federal Bureau of Investigation: 

Appendix VII: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Comparison of Numbers of Foreign Nationals from 13 Countries 
of Concern with Specialty Occupation Visas in Four Occupational Fields 
to Numbers of Foreign Nationals from the Same Countries Covered by 
Deemed Export Licenses, Fiscal Years 2004 to 2009: 

Table 2: Summary of Outreach Efforts by Commerce and ICE, Fiscal Years 
2004-2009: 

Figures: 

Figure 1: Comparison of the Number of Foreign Nationals from Countries 
of Concern Approved to Receive Specialty Occupation Visas to Those 
Covered by Deemed Export Licenses, Fiscal Years 2004-2009: 

Figure 2: Percentage of Foreign Nationals Covered by Deemed Export 
Licenses from the Four Principal Countries of Concern, as well as 
Other Countries, Fiscal Years 2004-2009: 

Figure 3: Composition of Technologies Listed in Deemed Export Licenses 
Approved in Fiscal Years 2004 through 2009: 

Figure 4: Revisions to USCIS Form I-129 That Address Deemed Export 
Concerns: 

Abbreviations: 

CCL: Commerce Control List: 

Commerce: Department of Commerce: 

DEAC: Deemed Export Advisory Committee: 

DHS: Department of Homeland Security: 

DOD: Department of Defense: 

DTSA: Defense Technology Security Administration: 

EAR: Export Administration Regulations: 

FBI: Federal Bureau of Investigation: 

ICE: U.S. Immigration and Customs Enforcement: 

IG: Inspector General: 

NEECN: National Export Enforcement Coordination Network: 

NIH: National Institutes of Health: 

ONCIX: Office of National Counterintelligence Executive: 

USCIS: U.S. Citizenship and Immigration Service: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

February 2, 2011: 

The Honorable Joseph Barton:
Chairman Emeritus:
Committee on Energy and Commerce:
House of Representatives: 

The Honorable Michael C. Burgess:
House of Representatives: 

Countries posing national security concerns to the United States could 
upgrade their military forces with controlled dual-use U.S. 
technologies--technologies that have both civilian and military uses. 
To protect its national security and foreign policy interests, the 
United States controls the export of dual-use technologies having both 
civilian and military uses to certain countries of concern.[Footnote 
1] For this purpose, the Department of Commerce (Commerce) may require 
exporters of these goods to obtain an export license; similarly, 
Commerce regulations also deem certain transfers of controlled 
technology or source code to foreign nationals in the United States to 
be exports, requiring companies, universities, and agencies in some 
instances to obtain a "deemed export" license before they can transfer 
these technologies to foreign nationals.[Footnote 2] According to the 
2007 report of the Deemed Export Advisory Committee (DEAC), which was 
formed to review deemed export policy, deemed export controls can 
significantly strengthen national security by preventing foreign 
governments or terrorists from acquiring cutting-edge civilian 
technologies for military use. However, deemed export controls can 
have an adverse effect on U.S. industry and academia by imposing added 
costs not faced by overseas competitors.[Footnote 3] The executive 
branch is currently considering reforms to the U.S. export control 
regime in an Export Control Reform Initiative that would also affect 
deemed export licensing and enforcement. For instance, in August 2009 
the President created an interagency task force to examine proposed 
export control reforms, and in November 2010, signed an executive 
order establishing an Export Enforcement Coordination Center to 
coordinate and strengthen the U.S. government's export enforcement 
efforts, including for deemed exports.[Footnote 4] 

In prior reports, we identified numerous weaknesses in the deemed 
export control system that could allow the unauthorized transfer of 
controlled technologies to foreign nationals in the United States. We 
also made several recommendations designed to prevent the unauthorized 
transfer of such technologies. For instance, in 2002, we reported that 
Commerce did not have a program to monitor compliance with the license 
security conditions imposed on almost all of the deemed export 
licenses approved.[Footnote 5] We recommended that Commerce work with 
the Departments of Defense (DOD), State, and Energy to develop a risk-
based program to monitor compliance with deemed export licensing 
security conditions. We also found that Commerce did not screen 
thousands of immigration applications from foreign nationals in the 
United States who may seek work in U.S. high-technology industries. We 
recommended that Commerce use all existing U.S. immigration data to 
identify foreign nationals who could be subject to deemed export 
licensing requirements. Since our 2002 report, the Commerce and the 
Department of Homeland Security (DHS) Inspector Generals (IG), GAO, 
and other auditing organizations have issued several additional 
reports that discuss in full or in part the deemed export control 
system.[Footnote 6] 

In response to your request, we have updated our 2002 report on deemed 
exports, examining (1) the risk that foreign nationals in the United 
States may gain unauthorized access to controlled dual-use 
technologies, (2) the extent to which Commerce and other agencies have 
implemented recommended changes to the deemed export licensing 
process, and (3) the extent to which Commerce and other agencies have 
implemented recommended changes to the deemed export enforcement 
system. 

To address these objectives, we examined applicable laws and 
directives and obtained fiscal year 2004-2009 data from Commerce's 
export licensing database system. We also obtained fiscal year 2004-
2009 data from a DHS database that documents specialty occupation visa 
trends.[Footnote 7] We chose these time frames due to concerns about 
the reliability of data produced before fiscal year 2004. Based on 
GAO's and others' reports and interviews with agency officials, we 
determined that the data were sufficiently reliable for our use. For 
the purposes of this report, we selected four broad "specialty 
occupation" employee fields: engineering, computers, the physical 
sciences, and the life sciences, which generally correspond to 
employees working with technologies on the Commerce Control List 
(CCL). We chose these fields and not others such as the social 
sciences because they include some of the most technologically 
advanced occupational fields such as aeronautical engineering. We also 
based our decision to include these fields on unclassified 
intelligence and law enforcement reports, as well as deemed export 
data. We quantified the number of foreign nationals approved for 
specialty occupation visas from 13 countries of concern using DHS 
immigration data. We reviewed Commerce, DHS, and interagency IG 
reports, and other reports. In Washington, D.C., we met with officials 
of the agencies responsible for reviewing license applications--the 
departments of Commerce, Defense, State, and Energy--as well as the 
agencies that outreach to companies, universities, and agencies and 
enforce deemed export licensing conditions and regulations--Commerce, 
DHS (the U.S. Immigration and Customs Enforcement (ICE)), and the 
Department of Justice (principally the Federal Bureau of Investigation 
(FBI)). We also met with officials of DHS's U.S. Citizenship and 
Immigration Service (USCIS) to discuss a change to their Form I-129 
that would require employers to acknowledge deemed export licensing 
requirements. In addition, we met with officials of law enforcement 
agencies in Washington, D.C.; Boston; Los Angeles; and San Francisco, 
as well as representatives of 33 associations, companies, 
universities, nonprofits, and agencies in these cities. We selected 
the nonprobability sample based in part on an analysis of Commerce's 
fourth quarter fiscal year 2007 and fiscal year 2008 deemed export 
outreach plan. 

We conducted this performance audit from July 2009 to January 2011 in 
accordance with generally accepted government auditing standards. 
These 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. Appendix I 
provides a more detailed description of our objectives, scope, and 
methodology. 

Results in Brief: 

Four factors--intelligence and law enforcement sources; fines and 
suspensions for deemed export violations; a reduced number of overseas 
visa applications that Commerce screens; and a large number of foreign 
nationals in the United States with specialty occupation visas in high-
technology fields that may have required an export license--together 
may indicate the continuing risk that foreign nationals could gain 
unauthorized access to controlled technology.[Footnote 8] First, 
foreign businessmen, scientists, engineers, and academics from 
countries of concern have gained unauthorized access to controlled 
dual-use technologies in the United States, according to intelligence 
and law enforcement sources. Second, from fiscal years 2004 to 2009, 
Commerce fined 14 U.S. companies about $2.3 million for making 
unauthorized transfers of controlled technologies to foreign nationals 
from 25 countries. Commerce also suspended the export privileges of 
one company and two individuals for 20 years each. The majority of the 
enforcement actions involved foreign nationals from three countries. 
Third, Commerce officials stated that they screened 150 visa 
applications from U.S. posts overseas in fiscal year 2009 to identify 
potential unlicensed deemed exports--fewer than the 54,000 visa 
applications screened in fiscal year 2001--because of a change in 
procedures that is more reactive, focusing on leads and intelligence 
information, rather than proactive screening. Finally, we found that 
while USCIS approved a large number of foreign nationals for specialty 
occupation visas from 2004 to 2009, Commerce issued deemed export 
licenses authorizing the transfer of technology to a smaller number of 
foreign nationals during the same period. The U.S. government 
addressed shortages of U.S.-born engineers and scientists by approving 
specialty occupation visas in occupational fields including 
engineering, computers, electronics, and the biological sciences to 
approximately 1.05 million foreign nationals from 13 countries of 
concern. From fiscal years 2004 to 2009, Commerce issued deemed export 
licenses authorizing the release of technology to 3,178 foreign 
nationals from the same 13 countries. However, not all foreign 
nationals with H-1B specialty occupation visas are required to apply 
for deemed export licenses. 

Commerce and ICE have not implemented recommended changes to the 
deemed export licensing process involving outreach, and Commerce has 
taken action to clarify a regulatory definition, but confusion may 
remain. As a result, employers may be obtaining deemed export licenses 
for transfer of technology to fewer foreign nationals than should be 
the case. GAO and other audit organizations previously made two key 
recommendations to correct weaknesses in the deemed export licensing 
process.[Footnote 9] The first recommendation focused on providing 
better outreach, such as Commerce developing an approach or outreach 
plan to inform companies, universities, and agencies that employ 
foreign nationals of deemed export control requirements so they would 
apply for deemed export licenses when required. While Commerce has 
incorporated information on deemed export requirements in its training 
materials, it continues to lack an approach or outreach plan to 
provide information on deemed export licensing requirements, 
particularly to small-and mid-size companies, many of which employ 
foreign nationals but may not be familiar with the requirements. Such 
an outreach plan would have annual goals and identify priority 
industries, U.S. agencies, and academic institutions that are not 
currently applying for export licenses for the release of controlled 
technology to foreign nationals in the United States. According to 
Commerce and company representatives, such outreach would be 
particularly useful to the growing biotechnology sector. The second 
recommendation advised Commerce to modify the regulatory definition of 
"use" set forth in the Export Administration Regulations (EAR), which 
determines when technology to use controlled commodities can be 
released without triggering a deemed export licensing requirement. 
After reviewing the issue, including public comments on the 
recommendation, Commerce has not modified this definition, but has 
taken actions to clarify it. However, as shown by uncertainty within 
Commerce over the definition of "use" technology that resulted in a 
misunderstanding with the National Institutes of Health (NIH), 
Commerce's clarification may not have eliminated the confusion. Based 
on guidance from Commerce on the definition, NIH applied for 37 deemed 
export licenses, which Commerce processed over a 17-month period 
before advising NIH that it no longer needed to apply for such 
licenses, though the definition itself remained the same. 

Commerce has not implemented recommendations that we and others made 
involving monitoring compliance with deemed export licensing 
conditions and using immigration data to improve deemed export 
enforcement, while Commerce, ICE, and FBI have not implemented 
recommendations to improve coordination, as described below: 

* Commerce continues to lack a compliance program to monitor security 
conditions on deemed export licenses, even though our 2002 and the 
Commerce IG's 2004 reports recommended that it establish one.[Footnote 
10] A compliance program should involve on-site inspections of 
facilities to determine whether the license holder is complying with 
specific license conditions. In particular, all potential points of 
access to the controlled technology should be reviewed for appropriate 
safeguards, and a technology control plan to prevent foreign nationals 
from accessing controlled technologies should be implemented to ensure 
compliance with license conditions, according to the Commerce IG. The 
security conditions are imposed to help prevent foreign nationals from 
obtaining unlicensed access to controlled technologies and are 
attached to almost all of the deemed export licenses approved. In 
fiscal year 2006, Commerce established a program to monitor licensing 
conditions, but discontinued it after fiscal year 2007, citing 
competing priorities and budget constraints. 

* Commerce does not use all existing DHS immigration data to detect 
firms that should have applied for deemed export licenses. In 2002, we 
recommended that Commerce use all existing immigration data, including 
data from change-of-status applications, to identify foreign nationals 
who could be subject to deemed export licensing regulations. In 
response to our recommendation, Commerce and DHS have begun discussing 
how to share these data, but have not finalized arrangements. DHS 
announced proposed changes to its primary immigration form in February 
2010 that would make it easier for Commerce, ICE, and FBI to use 
immigration data for deemed export enforcement. 

* Commerce, ICE, and FBI have not resolved weaknesses in the 
coordination of their overall export enforcement activities, 
notwithstanding our recommendations in 2006, which could impact deemed 
export enforcement.[Footnote 11] For example, Commerce, ICE, and FBI 
have not created new written agreements or updated existing ones 
between and among these agencies to assign clear roles and 
responsibilities among the agencies as we recommended. According to 
Commerce, ICE, and FBI officials, the lack of such agreements has in 
some cases led to a duplication of efforts and ineffective sharing of 
investigative information, although they cited no specific cases 
involving deemed exports. 

To better direct its efforts to detect possible unauthorized deemed 
exports and conduct outreach, we are recommending that the Secretary 
of Commerce, in consultation with the U.S. Attorney General and the 
Secretary of Homeland Security, assess the extent to which foreign 
nationals from countries of concern who were issued specialty 
occupation visas also should have been covered by deemed export 
licenses and use the results to identify vulnerabilities in the deemed 
export control system, target and inform employers about deemed export 
licensing requirements, and incorporate immigration data into its 
enforcement screening activities. In addition, to ensure that Commerce 
more fully addresses the deficiencies identified in this and prior 
reports, as part of the export control reform process, we are 
recommending that the Secretary of Commerce report to Congress on the 
steps being taken to implement past GAO and Commerce IG 
recommendations. 

Commerce agreed with our first recommendation and stated that it would 
review prior GAO and IG recommendations as part of the ongoing Export 
Control Reform process. However, Commerce did not specifically agree 
or disagree with our recommendation to report to the Congress on the 
steps being taken to implement past GAO and Commerce IG 
recommendations. We believe this recommendation remains valid because 
resolving the deficiencies identified repeatedly since 2002 could be 
critical to the success of any export control initiative. Responding 
for the Attorney General, the FBI stated that it has conducted deemed 
export outreach to small-to-medium size biotechnology companies 
through several venues, including strategic task forces, 
counterintelligence working groups, conferences and other initiatives 
in coordination with the U.S. intelligence community and federal law 
enforcement agencies, including ICE and Commerce. FBI also stated that 
through participation at the National Export Enforcement Coordination 
Network (NEECN) and other arenas, FBI, ICE, and Commerce have worked 
to resolve coordination of export enforcement activities. In our 
report we discuss the role of the NEECN, which ICE established to 
coordinate export control investigations, but note that ICE officials 
told us that the NEECN primarily focuses on investigations involving 
exports of goods, rather than deemed exports. Commerce's and FBI's 
written comments are contained in appendices V and VI. Commerce, FBI, 
and DHS also provided technical comments, which we have incorporated 
as appropriate. 

Background: 

Under the Export Administration Act of 1979, as amended,[Footnote 12] 
and the implementing EAR,[Footnote 13] companies, universities, and 
agencies may be required to obtain an export license before releasing 
controlled dual-use technology or source code subject to the EAR 
[Footnote 14] to a foreign national who is not a permanent resident of 
the United States or a member of certain groups of protected 
individuals such as asylum holders.[Footnote 15] Pursuant to the EAR, 
a transfer of technology within the United States to such a foreign 
national is deemed to be an export to his or her home country. 
[Footnote 16] To determine whether a license is required, the employer 
or university researcher needs to (1) determine whether technologies 
under consideration for release to certain foreign nationals are on 
the CCL, (2) determine whether a license is required to export the 
technology to the home country of the foreign national, and (3) 
determine whether any license exceptions apply.[Footnote 17] If it is 
determined that a licensing requirement applies, the employer must 
obtain a deemed export license before releasing controlled 
technologies to foreign nationals.[Footnote 18] "Release" may include 
opportunities to review written materials or discussions about 
controlled technologies. Violators may face administrative or criminal 
penalties, including fines, denial of export privileges, and 
imprisonment.[Footnote 19] The EAR generally does not cover 
information that arises during, or results from, fundamental research. 
[Footnote 20] As a result, information that falls within the scope of 
the EAR's "fundamental research" provision does not require a license 
for release to a foreign national. However, authorization may be 
required if technology that is controlled (typically, on the CCL) is 
transferred to a foreign national during the course of undertaking 
fundamental research.[Footnote 21] 

Commerce reviews and issues export and deemed export licenses, in 
consultation with other agencies, and enforces the EAR. Within 
Commerce's Bureau of Industry and Security, Export Administration 
reviews license applications, issues licenses, and provides 
information or outreach to companies, universities, and agencies that 
employ foreign nationals about deemed export licensing requirements 
principally through its own seminars and conferences, as well as 
seminars and conferences sponsored by other organizations.[Footnote 
22] Commerce intends for such information to inform and help exporters 
comply with export control requirements. Commerce's Office of Export 
Enforcement also provides outreach about deemed export licensing rules 
and regulations as part of its investigative efforts, often in 
meetings with representatives of companies, universities, agencies, 
and relevant associations. 

To work in the United States, foreign nationals and their employers 
must also comply with U.S. visa regulations for nonimmigrants wanting 
to work and study in the United States. Many foreign nationals who are 
not permanent residents in the United States that seek work here apply 
for H-1B specialty occupation visas. An H-1B visa allows a U.S. 
employer to temporarily fill specialty occupations (such as those 
requiring electrical or software engineers) with foreign workers. A 
foreign national overseas may obtain an H-1B visa from State, if USCIS 
determines that an employer may employ the foreign national as a 
temporary worker. USCIS is the agency within DHS that oversees lawful 
immigration to the United States. A foreign national already in the 
United States may also have his or her immigration status changed to H-
1B by USCIS. For example, an employer seeking to hire a foreign 
student who has graduated from a U.S. college or university could 
petition USCIS to change the foreign national's immigration status 
from student to H-1B. 

Executive Order 12981,[Footnote 23] as amended, governs the 
interagency licensing review process for all dual-use exports. 
Pursuant to this order, other agencies provide recommendations to 
Commerce in the review of all export license applications, including 
deemed export license applications, as follows: 

* State's Bureau of International Security and Nonproliferation 
reviews the deemed export license applications that Commerce refers to 
it for proliferation concerns and makes recommendations on whether 
these licenses should be approved, approved with conditions, or 
denied. In addition, State's Bureau of Consular Affairs shares with 
Commerce and DOD certain information obtained from some foreign 
nationals during the visa application process.[Footnote 24] 

* DOD, principally the Defense Technology Security Administration 
(DTSA), reviews and evaluates deemed export licenses for technical, 
policy, and intelligence concerns, referring some licenses to the 
Army, Navy, and Air Force for additional study. In addition, DTSA 
refers some deemed export licenses to the Defense Intelligence Agency 
for information on foreign nationals from certain countries. 

* The Department of Energy reviews deemed export license applications 
that Commerce refers to it involving nuclear uses and nuclear end 
users, as well as other technologies, and makes recommendations on 
whether these license applications should be approved, approved with 
conditions, or denied. Energy principally relies on its network of 20 
national laboratories to conduct its review. 

* FBI conducts checks of its records on behalf of Commerce when 
requested. 

In addition, two agencies assist with deemed export enforcement, which 
includes providing investigations-related outreach: 

* ICE enforces deemed export licensing regulations by conducting 
criminal investigations, indicting and prosecuting potential 
violators, and referring noncriminal violators to Commerce. In 
addition, since fiscal year 2001, ICE has provided outreach to 
companies, universities, and agencies that hire foreign nationals as 
part of a program known as Project Shield America.[Footnote 25] The 
focus of this program is to prevent the (1) proliferation of 
controlled technology and components; (2) unlawful acquisition of 
nuclear, chemical, and biological weapons; and (3) unlawful 
exportation of weapon systems and classified or controlled technical 
data. ICE's outreach efforts involve face-to-face discussions with 
representatives of companies, universities, and agencies, as well as 
discussions at seminars and conferences. 

* FBI enforces deemed export license regulations by conducting 
criminal investigations, indicting and prosecuting potential 
violators, and referring noncriminal violators to Commerce. FBI takes 
the lead in investigations involving counterintelligence and 
counterterrorism. In addition, FBI provides outreach through its 
Counterintelligence Strategic Partnership Program. The program entails 
the use of focus groups and meetings with leading universities and 
companies to raise awareness of threats and vulnerabilities involving 
controlled technologies to industry and academia. FBI's outreach 
efforts, like ICE's, involve face-to-face meetings as well as 
discussions at seminars and conferences. 

The review process for a deemed export license parallels the review 
process for an application for a license to export commodities or 
technologies overseas.[Footnote 26] Under the EAR's deemed export 
provisions, an employer or university researcher is required to seek a 
deemed export license if the export of the technology to the foreign 
national's country of citizenship would require a license. If a 
license is required, the exporter (e.g., company, university, or 
agency) must submit a license application to Commerce identifying the 
technology, end use, and Export Control Classification Number; the 
proposed destination; and the intended end user.[Footnote 27] In the 
case of deemed export license applications, employers or university 
researchers must also provide the foreign national's resume, visa 
type, and a list of his or her publications. An application for a 
deemed export license may list more than one individual, and an 
organization may also apply for more than one deemed export license 
for an individual, depending on the technologies that the employer or 
researcher wants to provide to the foreign national. 

Foreign Nationals from Countries of Concern Have Gained Unauthorized 
Access to Controlled Technologies in the United States: 

Four factors--intelligence and law enforcement findings; fines and 
suspensions for deemed export violations; a reduced number of overseas 
visa applications that Commerce screens; and a large number of foreign 
nationals with specialty occupation visas in high-technology fields-- 
together may indicate the continuing risk that foreign nationals could 
gain unauthorized access to controlled technology. First, countries of 
concern use their foreign nationals in the United States to acquire 
controlled dual-use technologies for military purposes, according to 
intelligence and law enforcement sources. Second, during fiscal years 
2004 through 2009, Commerce fined 14 U.S. companies about $2.3 million 
for the unauthorized transfer of controlled technologies to foreign 
nationals from 25 countries, and applied criminal penalties to one 
company and two individuals. It also suspended the export privileges 
of some exporters. Third, Commerce officials stated that they screened 
150 visa applications from U.S. posts overseas in fiscal year 2009 to 
identify potential unlicensed deemed exports--fewer than the 54,000 
visa applications screened in fiscal year 2001--because of a change in 
procedures. Finally, we found that while USCIS approved specialty 
occupation visas for a large number of foreign nationals from 2004 to 
2009, Commerce approved deemed export licenses to cover a smaller 
number of foreign nationals during the same time period. 

According to Reports and Officials, Countries of Concern Use Some of 
Their Citizens in the United States to Collect Controlled Dual-Use 
Technologies: 

According to intelligence reports and law enforcement sources, as well 
as congressional testimony and law enforcement officials, a small 
group of countries is responsible for most of the efforts to acquire 
controlled technologies for military purposes. The countries included 
in this small group are detailed in the December 2010 classified 
version of this report. According to congressional testimony presented 
in September 2005 by the Director of the Office of the National 
Counterintelligence Executive (ONCIX),[Footnote 28] and intelligence 
assessments, some countries use some of their foreign nationals as 
part of organized programs to obtain controlled technologies while 
working, studying in, or visiting the United States.[Footnote 29] In 
addition, the Director of ONCIX also testified that the U.S. 
government has limited insight into foreign intelligence operations in 
the United States. The Director of ONCIX also said that much of the 
intelligence collection against the U.S. technology base is carried 
out by those who are employing nontraditional collection means against 
the United States, rather than by known intelligence officers. As a 
result, the U.S. government has little knowledge of when individuals 
who ostensibly come to the United States for legitimate business 
purposes might have illegitimate objectives, according to this 
official.[Footnote 30] 

According to the ONCIX and other assessments, the technologies most 
often targeted for theft since 2002 have included aeronautics, 
computers and information systems, electronics, lasers and optics, 
sensors and marine technology, and unmanned aerial vehicles. In 
addition, according to ONCIX's 2003 Annual Report, biotechnology has 
been of particular interest.[Footnote 31] Moreover, the ONCIX has 
expressed concern about emerging military technologies or commercial 
breakthrough technologies that have not yet been added to the CCL 
because these technologies are often hard to identify in their early 
phases and are more vulnerable to loss or compromise. 

Although the types of technologies involving deemed export licenses 
have changed little over the past 5 years, some industry sectors have 
grown and hired increasing numbers of foreign nationals. For example, 
the biotechnology industry--one area that the ONCIX identified as most 
often targeted by theft--has enjoyed rapid growth in both revenues and 
employment over the past few years. Although the economic downturn 
from 2008 to the present has generally resulted in lower levels of 
hiring and investment by U.S. industry, the biotechnology sector had 
previously grown at a rapid pace. According to a private sector study, 
the biotechnology industry's sales and revenues increased at least 80 
percent from 2002 to 2006.[Footnote 32] The number of employees 
involved in biotechnology research and development in the United 
States also doubled, from approximately 75,000 in 2003 to 
approximately 150,000 in 2006, according to the Organization of 
Economic Co-Operation and Development.[Footnote 33] The Department of 
Labor's 2010-2011 edition of the Occupational Outlook Handbook 
forecast that the sector will continue to experience above-average 
employment growth rates of about 21 percent over the 2008-2018 period. 
[Footnote 34] 

Countries targeting U.S. dual-use technologies have the opportunity to 
send their foreign nationals to work in the United States because the 
United States has shortages of qualified workers. Sixty-five percent 
of U.S. manufacturers report experiencing shortages of qualified 
employees, particularly of engineers and scientists, according to the 
2007 report of the DEAC. About 18 percent of U.S. manufacturers report 
serious shortages and 47 percent report moderate shortages.[Footnote 
35] As the DEAC reported in 2007, many of these positions could be 
filled by foreign nationals with H-1B specialty occupation visas. 

Penalties on Companies Show That Some Foreign Nationals from Countries 
of Concern Gained Unauthorized Access to Controlled Technologies: 

Information obtained from analysis of Commerce investigations closed 
during fiscal years 2004 through 2009 provides evidence that some 
foreign nationals have gained unauthorized access to controlled dual- 
use technologies. These foreign nationals were predominantly from 
three countries of concern. Of the 16 dual-use deemed export 
enforcement investigations resulting in penalties, such as fines or 
suspension of trading privileges, 9 involved nationals of one country, 
as did all 3 investigations that concerned criminal violations of law 
involving the unauthorized release of technology. For example, 
Commerce levied fines of $517,000 and suspended the export privileges 
of one company and two individuals for 20 years each in criminal cases 
for releasing CCL technology to nationals of one country without a 
license. Commerce also levied the largest fine for a deemed export 
case--$560,000--against another company for releasing technical data 
to a national from the same country without authorization. 

Commerce No Longer Screens Many Overseas Visa Applications: 

We reported in 2002 that Commerce screened visa applications submitted 
overseas; however, Commerce officials stated that they now screen few 
overseas visa applications.[Footnote 36] In fiscal year 2001, Commerce 
screened about 54,000 visa applications submitted to overseas posts, 
referring about 160 potential cases to Commerce's field offices for 
further limited follow up and review. Pursuant to Commerce guidance in 
2001, agency analysts screened State visas by using Commerce's 
enforcement database, DOD comments on rejected license applications, 
and other sources of information to detect linkages between foreign 
entities of concern and visa applicants. By contrast, in fiscal year 
2009, Commerce screened only 150 visa applications submitted overseas, 
referring just 1 to a Commerce field office for further review. 
Commerce officials stated that the agency reviewed thousands fewer 
overseas visa applications in fiscal year 2009 as compared to fiscal 
year 2001 because of a change in its procedures. The new procedures 
are more reactive because they focus on leads and intelligence 
information rather than proactive screening. According to these 
officials, the resulting change in procedures has led to better 
investigations; however, Commerce officials did not provide 
documentation to show how investigations were better. In technical 
comments provided on a draft of this report in November 2010, Commerce 
stated that a methodology that does not involve the review of every 
visa application does in fact constitute a proactive and effective 
approach. Commerce also stated that it would not be sound practice, 
with limited resources, to perform data reviews en masse of State's 
large database of visa cases, which could result in an overwhelming 
amount of data and unfocused research. However, we affirm our 
characterization that the new procedures are more reactive, as they 
rely on Commerce receiving leads or information, rather than 
proactively and routinely reviewing a portion of the database. 

Immigration and Licensing Data Suggest a Pool of Risk That Commerce 
Has Not Assessed: 

Based on analysis of DHS and Commerce data from fiscal years 2004 
through 2009, we found that USCIS approved approximately 1.05 million 
foreign nationals from 13 countries of concern for specialty 
occupation visas, and Commerce approved deemed export licenses 
authorizing release of technology to approximately 3,200 foreign 
nationals from the same countries of concern (see figure 1).[Footnote 
37] This, combined with the other factors already described--
intelligence and law enforcement sources; fines and suspensions for 
deemed export violations; and the reduced number of overseas visa 
applications that Commerce screens--could indicate a continuing risk 
of foreign nationals gaining unauthorized access to controlled 
technology. In particular, our analysis of DHS and Commerce data 
focused on companies, universities, and agencies hiring foreign 
nationals to work in such areas as computer technology and the 
biological sciences. Figure 1 compares the number of foreign nationals 
from 13 countries of concern who worked in certain high-technology 
specialty occupations to the number of foreign nationals from the same 
countries who were covered by deemed export licenses for each fiscal 
year from 2004 through 2009. It also shows the total numbers of 
specialty occupation visas and deemed export licenses authorizing 
release of technology to foreign nationals from the same countries of 
concern over the period of fiscal years 2004 through 2009. The figure 
also shows that while the number of deemed export licenses approved to 
cover foreign nationals from these countries of concern peaked in 
fiscal year 2004 at 655 and was lower in subsequent years, the number 
of foreign nationals approved to receive H-1B specialty occupation 
visas increased until fiscal year 2007 to 204,095, then declined in 
fiscal year 2009 to 142,758. 

Figure 1: Comparison of the Number of Foreign Nationals from Countries 
of Concern Approved to Receive Specialty Occupation Visas to Those 
Covered by Deemed Export Licenses, Fiscal Years 2004-2009: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2004; 
Number of foreign nationals for whom deemed export licenses were 
approved: 655; 
Number of H1-B visas approved for certain high technology fields: 
165,804. 

Fiscal year: 2005; 
Number of foreign nationals for whom deemed export licenses were 
approved: 375; 
Number of H1-B visas approved for certain high technology fields: 
156,969. 

Fiscal year: 2006; 
Number of foreign nationals for whom deemed export licenses were 
approved: 452; 
Number of H1-B visas approved for certain high technology fields: 
185,243. 

Fiscal year: 2007; 
Number of foreign nationals for whom deemed export licenses were 
approved: 556; 
Number of H1-B visas approved for certain high technology fields: 
204,095. 

Fiscal year: 2008; 
Number of foreign nationals for whom deemed export licenses were 
approved: 572; 
Number of H1-B visas approved for certain high technology fields: 
193,821. 

Fiscal year: 2009; 
Number of foreign nationals for whom deemed export licenses were 
approved: 568; 
Number of H1-B visas approved for certain high technology fields: 
142,758. 

Fiscal year: Total; 
Number of foreign nationals for whom deemed export licenses were 
approved: 3,200; 
Number of H1-B visas approved for certain high technology fields: 
1,048,700. 

Sources: GAO analysis of Commerce and State data. 

[End of figure] 

To address the serious shortage of qualified engineers and scientists, 
during fiscal years 2004 to 2009, the United States approved 
approximately 1.7 million foreign nationals to work in the United 
States in certain high-technology occupational fields such as 
engineering, computers, the biological sciences, and the physical 
sciences. This number includes about 1.05 million specialty occupation 
visas that the United States approved for foreign nationals from 13 
countries of concern. 

By comparing the overall number of foreign nationals from countries of 
concern receiving specialty occupation visas to work in high-
technology occupations with the number of deemed export licenses 
issued, we found that Commerce issued deemed export licenses covering 
a relatively smaller number of foreign nationals from countries of 
concern. However, there is no requirement that a foreign national who 
holds a specialty occupation visa also be covered by a deemed export 
license. Furthermore, transfer of technology to multiple foreign 
nationals can be covered by a single deemed export license.[Footnote 
38] From fiscal years 2004 through 2009, Commerce approved deemed 
export licenses authorizing transfers of technology or source code to 
3,178 foreign nationals of certain countries of concern.[Footnote 39] 
Our comparison of USCIS and Commerce data showed specialty occupation 
visas for approximately 818,000 foreign nationals from one country or 
about 78 percent of the approximately 1.05 million total H-1Bs 
approved during this time period, compared to deemed export licenses 
authorizing release of technology or source code to 444 foreign 
nationals from the same country. We found specialty occupation visas 
for approximately 149,000 foreign nationals from a second country 
compared to deemed export licenses authorizing transfer of technology 
or source code to 2,184 foreign nationals from the same country. 
Appendix II shows the number of foreign nationals approved by USCIS to 
receive certain high-technology H-1B specialty occupation visas from 
the 13 countries of concern that we selected as part of this review 
and the number of foreign nationals from the same countries that 
Commerce approved for deemed export licenses. 

In technical comments on this report, Commerce stated that the report 
should put deemed exports in the context of the proportion of all 
exports to exports licensed by Commerce. Commerce concluded that the 
proportion of transactions requiring a Commerce license for deemed 
exports is about the right order of magnitude. It stated that the 
proportion of transactions requiring a Commerce license for actual 
exports--0.3 percent--is roughly the same as the proportion of high- 
technology visas identified by GAO to deemed export licenses--1.05 
million specialty occupation visas in high-technology fields and 3,200 
deemed export licenses to foreign nationals (0.3 percent). However, 
Commerce provided no rationale for why the ratio of the number of all 
Commerce licenses to the number of all deemed export licenses should 
be comparable--or even relevant--to the proportion of specialty 
occupation visas compared to deemed export licenses. Commerce also 
stated other reasons that may explain the proportionately small number 
of deemed export licenses: (1) under the EAR, a technology license 
exception is available for release of controlled technology to 
nationals from three countries of concern, but is not reflected in 
licensing data; (2) the economic downturn from 2008 to the present has 
resulted in lower levels of hiring and investment by U.S. industry; 
(3) there has been a significant development of high-technology 
research and development offshore; and (4) the emergence of leading 
foreign research and technical schools has supplied more indigenous 
engineering and technology skills to foreign companies. 

In addition, the officials said that employers have an incentive to 
police themselves and reduce the number of opportunities for foreign 
nationals to obtain sensitive technologies for use in their home 
country since a loss of such proprietary information could pose a 
financial risk to employers. However, Commerce Office of Enforcement 
officials told us that many small-to-medium-size employers do not have 
mechanisms for protecting sensitive technologies. 

Our analysis of Commerce data shows that for fiscal years 2004 to 
2009, foreign nationals from four countries of concern accounted for 
79 percent of all the foreign nationals covered by deemed export 
licenses for this period. One country alone accounted for 
approximately 55 percent of the total. Figure 2 shows the percentage 
of foreign nationals from the four countries that received the most 
deemed export licenses during fiscal years 2004 through 2009 as well 
as the percentage of foreign nationals covered by deemed export 
licenses for fiscal years 2004 through 2009 from all other countries. 

Figure 2: Percentage of Foreign Nationals Covered by Deemed Export 
Licenses from the Four Principal Countries of Concern, as well as 
Other Countries, Fiscal Years 2004-2009: 

[Refer to PDF for image: pie-chart] 

Country A (2184): 55%; 
Country B (444): 11%; 
Country C (314): 8%; 
Country D (188): 5%; 
Remaining countries (855): 21%. 

Source: GAO analysis of Commerce deemed export licensing data. 

[End of figure] 

Our analysis of Commerce's deemed export licensing data for fiscal 
years 2004 through 2009 showed a concentration of licenses in some of 
these technologies, particularly computers and electronics, but little 
change in the distribution of technologies licensed for release (see 
figure 3). While our analysis identified some differences in the 
percentages of deemed export licenses approved for the individual 
categories of electronics and computers, the technologies of 
computers, telecommunications and information security, and 
electronics together comprised at least 80 percent of the deemed 
export licenses issued in each fiscal year. 

Figure 3: Composition of Technologies Listed in Deemed Export Licenses 
Approved in Fiscal Years 2004 through 2009: 

[Refer to PDF for image: stacked vertical bar graph] 

Fiscal year: 2004; 
Computers: 36%; 
Telecommunications and information security: 27%; 
Electronics: 23%; 
Materials, chemicals, microorganisms, and toxins: 4%; 
Materials processing: 4%; 
Propulsion systems, space vehicles, and related equipment: 3%; 
Navigation and avionics: 3%; 
Lasers and sensors: 1%. 

Fiscal year: 2005; 
Computers: 25%; 
Telecommunications and information security: 29%; 
Electronics: 29%; 
Materials, chemicals, microorganisms, and toxins: 2%; 
Materials processing: 6%; 
Propulsion systems, space vehicles, and related equipment: 6%; 
Navigation and avionics: 2%; 
Lasers and sensors: 1%. 

Fiscal year: 2006; 
Computers: 30%; 
Telecommunications and information security: 25%; 
Electronics: 23%; 
Materials, chemicals, microorganisms, and toxins: 4%; 
Materials processing: 9%; 
Propulsion systems, space vehicles, and related equipment: 4%; 
Navigation and avionics: 4%; 
Lasers and sensors: 2%. 

Fiscal year: 2007; 
Computers: 30%; 
Telecommunications and information security: 25%; 
Electronics: 25%; 
Materials, chemicals, microorganisms, and toxins: 9%; 
Materials processing: 5%; 
Propulsion systems, space vehicles, and related equipment: 4%; 
Navigation and avionics: 2%; 
Lasers and sensors: 0%. 

Fiscal year: 2008; 
Computers: 36%; 
Telecommunications and information security: 26%; 
Electronics: 25%; 
Materials, chemicals, microorganisms, and toxins: 3%; 
Materials processing: 5%; 
Propulsion systems, space vehicles, and related equipment: 3%; 
Navigation and avionics: 3%; 
Lasers and sensors: 0%. 

Fiscal year: 2009; 
Computers: 30%; 
Telecommunications and information security: 26%; 
Electronics: 26%; 
Materials, chemicals, microorganisms, and toxins: 6%; 
Materials processing: 5%; 
Propulsion systems, space vehicles, and related equipment: 4%; 
Navigation and avionics: 2%; 
Lasers and sensors: 1%. 

Fiscal year: Totals; 
Computers: 32%; 
Telecommunications and information security: 26%; 
Electronics: 25%; 
Materials, chemicals, microorganisms, and toxins: 5%; 
Materials processing: 6%; 
Propulsion systems, space vehicles, and related equipment: 4%; 
Navigation and avionics: 3%; 
Lasers and sensors: 1%. 

Source: GAO analysis of Commerce data. 

Note: Two CCL categories--marine; and nuclear materials, facilities, 
and equipment--are not listed because only one foreign national was 
approved for a deemed export license in these two technology 
categories. 

[End of figure] 

Commerce and ICE Have Not Implemented Recommended Changes to the 
Deemed Export Licensing Process Involving Outreach, and Commerce Has 
Taken Actions to Clarify a Regulatory Definition but Confusion May 
Remain: 

Commerce and ICE have not implemented recommended changes to the 
deemed export licensing process involving outreach. As a result, 
employers may be obtaining deemed export licenses for release of 
technology to fewer foreign nationals than should be the case. GAO and 
other audit organizations previously made two key recommendations to 
correct weaknesses in the deemed export licensing process. The first 
recommendation focused on providing better outreach to inform 
companies, universities, and agencies that employ foreign nationals of 
deemed export control requirements so they would apply for deemed 
export licenses when required. The second recommendation advised 
Commerce to modify the regulatory definition of "use" set forth in the 
EAR. Commerce has taken actions to clarify this definition, but 
confusion about its application may remain. 

Commerce and ICE Have Not Implemented Prior Recommendations to Improve 
Outreach to Companies, Universities, and Agencies: 

Commerce and ICE have not implemented prior recommendations to improve 
outreach to companies, universities, and U.S. agencies to address 
weaknesses identified by GAO and the Commerce and DHS IGs. As a 
result, employers may be obtaining deemed export licenses for transfer 
of technology or source code to fewer foreign nationals than should be 
the case. The Commerce IG noted in 2004 that overall export licensing 
data and interviews with company officials suggested that Commerce was 
doing little to raise awareness of deemed export licensing 
requirements among companies and industry sectors that have not 
traditionally applied for deemed export licenses. Specifically, the 
Commerce IG reported that Commerce's outreach program for deemed 
export controls did not include entities other than those applying for 
export licenses for the release of export-controlled technology to 
foreign nationals in the United States. Overall, the lack of awareness 
and understanding of laws and regulations pertaining to the release of 
export-controlled technology to foreign nationals in the United States 
could harm national security if militarily sensitive technology is 
released to unauthorized foreign nationals, according to the Commerce 
IG. Similarly, in 2006, we reported that Commerce needed to improve 
its efforts to provide information and outreach to companies and 
universities.[Footnote 40] 

In response to GAO's and the Commerce IG's recommendations that 
Commerce improve outreach to companies and universities, Commerce 
conducted deemed export outreach and prepared and adopted outreach 
plans; however, it did not implement all of these plans. Specifically, 
the Commerce IG recommended that Commerce develop written outreach 
plans. We also recommended that, among other things, Commerce use 
immigration, student, and other data to more precisely target outreach 
activities to companies and universities based on an assessment of the 
vulnerabilities of their use of controlled information, improve 
interagency coordination, and conduct additional outreach. Commerce IG 
recommended that Commerce's strategic outreach plan for exports of 
controlled technology to foreign nationals in the United States have 
annual goals and identify priority industries, federal agencies, and 
academic institutions that are not currently applying for export 
licenses for the release of export-controlled technology to foreign 
nationals in the United States. Commerce stated that it would continue 
to identify priority industries and conduct outreach to small-and 
medium-sized businesses and defense contractors to educate those types 
of companies about dual-use export control rules involving deemed 
exports. In addition, Commerce stated that it had already targeted 
outreach in the area of biotechnology by discussing export policies 
and procedures with the biotechnology industry and academia, as well 
as visits to U.S. government research labs, universities, small 
business associations, and foreign student associations. Among other 
things, to better identify emerging priority technologies for 
inclusion on the CCL, Commerce established an Office of Technology 
Evaluation in fiscal year 2006. 

However, our analysis of Commerce's Export Administration's outreach 
plans for fiscal years 2004 and 2005 found they did not include a 
strategy to improve outreach, but instead listed organizations that 
Export Administration decided to meet with during the year.[Footnote 
41] While Commerce did prepare and adopt a strategy for outreach as 
part of an enhanced deemed export initiative for the fourth quarter of 
fiscal year 2007 and fiscal year 2008, according to agency officials, 
it never implemented the outreach plan due to funding constraints and 
eventually provided outreach to only about 11 percent of the 
approximately 300 companies and universities it had originally 
targeted. The strategy explicitly recognized that Commerce needed to 
better inform companies in sectors of the economy that have not 
traditionally applied for deemed export licenses, specifically, 
biotechnology, and to use specialty occupation H-1B data and student 
data to better target outreach.[Footnote 42] In addition, the deemed 
export initiative included an additional $2.6 million in fiscal year 
2006 to hire eight additional staff to focus on such things as 
enhanced deemed export outreach. However, Commerce officials stated 
that a budget cut of approximately 3 percent that occurred during 
fiscal year 2007 and the departure of the three staff hired under the 
deemed export initiative adversely affected the fourth quarter fiscal 
year 2007 and fiscal year 2008 outreach plan. As of August 2010, 
Commerce had not replaced the staff and currently has not assigned any 
staff to focus exclusively on deemed export outreach. According to 
Commerce Export Administration officials, they currently do not have a 
national outreach plan focused on deemed exports. However, Commerce 
does conduct outreach specific to deemed exports and includes the 
topic of deemed exports in overall export control seminars. According 
to Commerce, it began conducting seminars focused exclusively on 
deemed exports in January 2006.[Footnote 43] 

Similarly, Commerce's Office of Export Enforcement also conducts 
outreach to inform companies, universities, and agencies about deemed 
export licensing requirements, but lacks a national outreach plan, 
according to Office of Export Enforcement officials. Commerce Office 
of Export Enforcement officials told us that each of Commerce's nine 
export enforcement field offices could develop outreach plans for 
their areas of jurisdiction. However, we found that none of the three 
Commerce field offices in the cities that we visited--Boston, Los 
Angeles, and San Francisco--had developed such plans. 

ICE has taken actions in response to the DHS IG's 2004 recommendations 
that it improve its deemed export outreach, but continues to lack 
written guidance for its agents on what information outreach 
activities should present. The DHS IG found that ICE had not 
incorporated into its outreach written guidance or a checklist for 
Project Shield America that agents could refer to when selecting 
export control topics to present during their outreach visits. The DHS 
IG noted that without adequate guidance about export laws and 
regulations, particularly those specific to deemed exports, agents 
might fail to present this critical information. It recommended that 
ICE implement standard operating procedures and a standardized 
checklist of items as part of its Project Shield America outreach to 
companies, universities, and agencies to ensure that the release of 
controlled technology to foreign nationals is included in ICE 
presentations. ICE concurred with this recommendation. ICE has 
developed a component for deemed export outreach and investigations 
known as Operation Tech Defense as part of Project Shield America. 
However, since fiscal year 2004, ICE has reduced the number of 
outreach activities by approximately 35 percent (from 2,322 outreach 
meetings in fiscal year 2004 to 1,504 in fiscal year 2009) and, like 
Commerce, lacks a national outreach plan.[Footnote 44] 

FBI officials stated that its field offices also develop local 
outreach plans and that FBI considers outreach on deemed exports to be 
an integral part of its outreach; however, agency officials noted that 
it does not have any outreach focused exclusively on deemed exports. 
Although both ICE and FBI officials in Washington told us that 
outreach plans are developed locally, we found that none of the ICE 
and FBI field offices in the cities that we visited had developed such 
plans. ICE and FBI officials in Boston, Los Angeles, and San Francisco 
said that resource constraints made it difficult to prepare such plans. 

We found that the Commerce IG's critique of Commerce's outreach 
activities in 2004--a lack of focus on companies other than those that 
were applying for licenses and a general lack of awareness of deemed 
export laws and regulations among other companies--pertained to 
Commerce, ICE, and FBI in the cities we visited. According to 
Commerce, ICE, and FBI officials in the three cities where we 
conducted field work, the three agencies tended to focus their deemed 
export outreach on the same types of companies and universities--
principally larger companies, universities, and agencies that are 
either defense contractors or are undertaking major defense-related 
work. None could demonstrate that they have focused their attention on 
the small-to-mid-size companies, such as biotechnology companies, that 
officials of all three agencies told us are least likely to be aware 
of deemed export licensing requirements. Commerce licensing officials, 
Commerce, ICE, and FBI law enforcement officials, and representatives 
of most of the 33 companies, universities, and agencies that we met 
with as part of our field work stated that many small-to-mid-size 
companies, particularly in quickly expanding fields such as 
biotechnology, are not aware of deemed export licensing requirements. 
Commerce, ICE, and FBI officials attributed the lack of awareness to 
the sheer number of such companies and the lack of staffing to address 
these numbers. For instance, FBI officials told us that in the San 
Francisco Bay Area alone there are close to 500 biotechnology 
companies, most of which are small-to-mid size, and only a limited 
number of Commerce, ICE, and FBI officials to provide 
outreach.[Footnote 45] 

In written comments on this report, the FBI stated it has conducted 
deemed export outreach to small-to-mid-size biotechnology companies 
through several venues, including strategic task forces, 
counterintelligence working groups, conferences, and other initiatives 
in coordination with the U.S. intelligence community and federal law 
enforcement agencies, including ICE and Commerce. However, FBI did not 
provide us with evidence of this outreach except for a single-page 
document whose details about the companies that the FBI met with had 
been entirely redacted. For that reason, we cannot validate the FBI's 
assertion. 

Appendix III provides a summary of Commerce's and ICE's outreach 
seminars, conferences, meetings, discussions, and e-mails during 
fiscal years 2004 through 2009. As FBI classified its outreach data, 
we cannot present it in this report. 

Commerce Has Taken Actions to Clarify the Regulatory Definition of 
"Use" Technology but Confusion About Its Application May Remain: 

In response to a Commerce IG recommendation to modify the definition 
of "use" technology that determines whether a deemed export licensing 
requirement is triggered, Commerce has clarified the definition. 
However, as one example shows, this clarification may not have 
eliminated the confusion surrounding the application of this 
regulation. In March 2004, the Commerce IG stated that confusion 
exists over what is meant by "use" of EAR-controlled equipment by 
foreign nationals, especially in relation to fundamental 
research.[Footnote 46] According to Commerce's interpretation, "use" 
technology is specific information necessary to perform all six of the 
following activities: installing, operating, maintaining, repairing, 
overhauling, and refurbishing an item.[Footnote 47] If the technology 
available to the foreign national does not meet all six of these 
attributes, then it is not "use" technology for deemed export 
licensing purposes. For example, if a foreign national only has access 
to information that is necessary to "operate" equipment, as opposed to 
information necessary for all six activities, a release of "use" 
technology to the foreign national has not occurred. Consequently, the 
information at issue would not be subject to the EAR and, hence, no 
license requirement would apply. According to Commerce officials, the 
definition is designed to allow foreign nationals conducting research 
to operate controlled equipment, while at the same time preventing 
these individuals from reverse-engineering the equipment. The Commerce 
IG pointed out that the definition was confusing because it did not 
take into account that controlled information is often transferred to 
foreign nationals as part of the process of training the foreign 
national to operate the machine.[Footnote 48] As evidence of the 
confusion, the Commerce IG reported on differences among Commerce 
senior licensing officials, multilateral export control regimes, and 
DTSA in interpreting "use" as applied in the CCL and the control lists 
from the four multilateral export control regimes. These differences 
in interpretation are critical in determining how to implement and 
enforce the deemed export provisions in the EAR, according to the 
Commerce IG. For instance, while some of the university and U.S. 
government officials who spoke to the Commerce IG said they believed 
that "use" technology in the context of fundamental research is exempt 
under the regulations, Commerce holds that "use" technology is subject 
to the deemed export provisions regardless of whether the research 
being conducted with that equipment is fundamental or not. The IG 
reported that many university and government laboratories would need 
to seek deemed export licenses for some foreign nationals working with 
controlled equipment or otherwise restrict their access to such 
equipment. 

In response to the Commerce IG's recommendation, Commerce stated that 
it would work with State and DOD to determine whether the definition 
of "use" technology should be modified, and has taken actions to 
clarify the definition as of May 2006. In 2005, Commerce sought public 
comments prior to making any revision to the regulation, and companies 
and universities raised numerous concerns about the proposed revision. 
[Footnote 49] In a May 2006 Federal Register notice, Commerce 
clarified that all of the activities listed in the definition of "use" 
technology are required to trigger a deemed export licensing 
requirement, and did not modify its definition.[Footnote 50] Commerce 
stated that this clarification resolved any inconsistency suggested by 
the IG report.[Footnote 51] Commerce also posted questions and answers 
on its Web site to provide additional information clarifying deemed 
export regulatory requirements in response to the IG report.[Footnote 
52] Despite these actions taken by Commerce, the IG does not believe 
that Commerce fully implemented its recommendation to modify the 
definition of "use" of EAR-controlled equipment by foreign nationals. 

However, as shown by uncertainty within Commerce over the definition 
of "use" technology that resulted in a misunderstanding with NIH, 
Commerce's clarification may not have eliminated the confusion. Based 
on guidance from Commerce on the definition of "use" technology, NIH 
applied for 37 deemed export licenses, which Commerce processed over a 
17-month period before verbally advising NIH that it no longer needed 
to apply for such licenses, though the definition itself remained the 
same. A May 2007 Commerce presentation discussing Commerce's 
clarification of the definition of "use" technology raised concerns 
among NIH officials that they might now be subject to deemed export 
licensing requirements, since they employed foreign nationals to work 
in new highly secure laboratories with controlled technologies, 
according to NIH officials. Prior to this presentation, NIH had 
considered itself not subject to these requirements because its 
research was fundamental. As a result, NIH initially requested 
additional guidance from Commerce about deemed export licenses in 
April 2008, according to NIH officials and documents. In response to 
the NIH inquiry, Commerce said that NIH should apply for a deemed 
export license, according to NIH officials. From August 2008 to 
December 2009, NIH applied for 37 deemed export licenses out of 
concern that it might be subject to deemed export licensing 
requirements; Commerce approved 28 and returned without action 9 
others. In February 2009, a Commerce e-mail to NIH raised further 
concerns by requesting a letter of explanation for the presence of 
foreign national scientists in NIH laboratories without appropriate 
deemed export licenses during the time period when NIH had considered 
itself not subject to these requirements. However, according to NIH 
officials and e-mails, in December 2009, a Commerce official verbally 
informed NIH that it could in fact claim the fundamental research 
exemption and need apply for no further deemed export licenses, based 
on the definition of "use" technology. Commerce officials said the 
confusion over the NIH's employment of foreign nationals to work in 
the new laboratories was solved due to a better understanding of NIH's 
business process in relation to the definition of "use" technology and 
fundamental research. 

Commerce and Other Agencies Have Not Implemented Recommended Changes 
to Improve Enforcement of Deemed Exports: 

Commerce and other agencies have not implemented recommendations that 
we and the Commerce IG made to improve the enforcement of deemed 
exports. First, notwithstanding our 2002 and the Commerce IG's 2004 
recommendations for Commerce to establish a program to monitor 
companies', universities', and agencies' compliance with deemed export 
license security conditions, Commerce continues to lack such a 
program. Second, in its efforts to detect unlicensed deemed exports, 
Commerce does not use all existing DHS immigration data, 
notwithstanding our 2002 recommendation that it make more use of such 
data. Finally, notwithstanding our 2006 report recommendation to 
enhance coordination, Commerce, ICE, and FBI continue to lack written 
agreements defining the current roles and responsibilities among 
agencies. Officials said that deemed export enforcement coordination 
continues to be a challenge after the creation of interagency export 
enforcement task forces and networks. 

Commerce Continues to Lack a Program to Monitor Compliance with 
License Security Conditions: 

Commerce continues to lack a monitoring system to ensure companies', 
universities', and agencies' compliance with security conditions in 
deemed export licenses. Officials at Commerce's enforcement field 
offices in Boston, Los Angeles, and San Francisco stated that Commerce 
does not currently have a program to monitor compliance with firms' 
deemed export license security conditions--notwithstanding our 2002 
and the Commerce IG's 2004 recommendation to create such a program. 

In 2002, we reported that Commerce did not have a program to monitor 
compliance with the license security conditions imposed on almost all 
deemed export licenses approved.[Footnote 53] We recommended that 
Commerce work with DOD, State, and Energy to develop a risk-based 
program to monitor compliance with deemed export licensing security 
conditions. In response, Commerce asserted it had an effective 
monitoring system but stated it would explore the practicality of our 
recommendation.[Footnote 54] 

The Commerce IG has also reported that Commerce lacks a monitoring 
system to ensure compliance with security conditions in deemed export 
licenses. In 2004, the Commerce IG reported that Commerce was not 
performing on-site inspections or reviews to ensure compliance with 
export laws and regulations related to controls over the release of 
export-controlled technology to foreign nationals in the United 
States. The IG stated that the lack of compliance, monitoring, and 
adequate policies could degrade the integrity of the interagency 
licensing process. The Commerce IG further reported that because 
Commerce was not performing on-site inspections or reviews of entities 
holding an export license for the release of export-controlled 
technology to foreign nationals to ensure compliance with license 
conditions, license holders were not held accountable for complying 
with license conditions. Commerce informed the IG that it was not 
monitoring compliance with any deemed export licenses because it did 
not have the resources to do so. As a result, the IG concluded that 
the same companies were continually receiving export licenses for the 
release of export-controlled technology to foreign nationals 
regardless of whether they complied with previous license conditions. 
The IG recommended that Commerce develop a compliance program to 
effectively evaluate deemed export license holders' compliance with 
license conditions. In response to the IG's recommendation, Commerce 
stated that it would establish a pilot program to determine compliance 
with deemed export license conditions. 

In fiscal year 2006 Commerce established a program to monitor 
licensing conditions, but discontinued it after fiscal year 2007. 
Commerce officials cited competing priorities and budget constraints 
as factors that resulted in the discontinuation of this program. 

DOD officials told us in 2002 that deemed export licenses need these 
security conditions to mitigate the risk to U.S. national security of 
releasing controlled dual-use technology to certain foreign nationals. 
DOD officials repeated this assertion to us in August 2010. Commerce 
uses several of these security conditions to limit the level of 
technology for transfer to foreign nationals who may be in employment 
or academic settings in which an entity might require deemed export 
licenses for release of controlled technology to the foreign national. 
For example, security conditions might bar foreign nationals from (1) 
unmonitored use of high-performance computers, (2) involvement in the 
design of computers that exceed a specified performance limit, and (3) 
accessing technical data on advanced microprocessors or certain types 
of lithography equipment. DOD officials said that security conditions 
are critical to DOD's willingness to recommend approval for many 
deemed export license applications during the interagency deemed 
export license review process. 

Although Commerce lacks a monitoring system to ensure this compliance, 
it includes language in many deemed export licenses requiring 
applicants to develop procedures for ensuring compliance with such 
security conditions in approved licenses and to provide copies of 
these procedures to Commerce. These instructions specify that Commerce 
"will monitor [security conditions] to ensure that the applicant's 
compliance is effective."[Footnote 55] 

Commerce Does Not Use All Existing DHS Immigration Data to Detect 
Potential Unlicensed Deemed Exports: 

Notwithstanding our 2002 recommendation, Commerce does not screen all 
DHS immigration data--H-1B change-of-status visa applications 
submitted domestically--to identify foreign nationals who may be 
engaging in release of technology or source code that requires a 
deemed export license. During fiscal years 2004 through 2009, about 
361,000 foreign nationals applied for a change of status to an H-1B 
visa within the United States. Our 2002 report found that Commerce did 
not screen thousands of Immigration and Naturalization Service (whose 
function processing applications for immigration benefits was placed 
within USCIS) immigration applications from foreign nationals already 
in the United States. We recommended that Commerce use these 
immigration data to identify foreign nationals who could be engaging 
in a transfer of technology or source code requiring a deemed export 
license. Concurring with this recommendation, Commerce consulted DHS, 
which suggested the establishment of a referral process so that any 
changes in visa status potentially requiring deemed export licenses 
are forwarded to Commerce for review. The DHS IG reported in 2004 that 
DHS was not providing information to Commerce that could support its 
efforts to identify and investigate potential violations related to 
the release of export-controlled technology to foreign nationals. As a 
result, information from thousands of change-of-status visa 
applications filed domestically with USCIS was not reviewed to 
generate investigative leads for Commerce, according to the IG. The IG 
recommended that USCIS provide Commerce with access to data from 
foreign nationals' approved change-of-status applications to help 
identify possible investigative leads for follow up. DHS management 
concurred with these recommendations. 

USCIS began in early 2010 to respond to these recommendations to 
screen thousands of DHS immigration change-of-status visa applications 
submitted domestically by proposing a revision of the USCIS form that 
employers must complete, which among other things would change a 
foreign national's immigration status to H-1B specialty employment. 
Commerce officials said that they have been working with USCIS to make 
such data easier to analyze. As a result of this collaboration, USCIS 
issued notices in the Federal Register in February and June 2010 
requesting comments about a proposed change to the form employers must 
complete to change a foreign national's immigration status to H-1B 
specialty employment, request an extension of status, or employ a 
foreign national outside the United States.[Footnote 56] This change 
will require employers to acknowledge if the position for which they 
want to hire a foreign national could require a deemed export license. 
In August 2010, USCIS officials told us that the comment period had 
ended and the revised form containing the proposed change had been 
submitted to the Office of Management and Budget for review.[Footnote 
57] According to USCIS, in October 2010 the Office of Management and 
Budget approved the revision to the form. However, USCIS noted it is 
not able to electronically track employers' responses to this new 
section of the form. See appendix IV for a draft of the form change. 

In addition to making it easier for Commerce to screen thousands of H- 
1B change-of-status visa applications submitted domestically, 
Commerce, ICE, and FBI officials said that, if implemented, the 
addition of a "deemed export acknowledgement" section to the form 
could make it easier to enforce deemed export control regulations by 
helping to ensure that companies employing foreign nationals endeavor 
to comply with the EAR. Since our 2002 report, the U.S. government 
levied criminal convictions and civil penalties totaling about $2.3 
million against 14 companies and two individuals for violating deemed 
export regulations. Commerce, Justice, ICE, and FBI officials told us 
that one reason for the low number of criminal convictions and civil 
penalties is the difficulty of proving that an individual or 
organization willfully intended to violate deemed export regulations. 
According to Commerce, "willful intent" is a criminal standard that 
only applies in the context of criminal deemed export prosecution. 
According to Commerce, while a deemed export certification would 
rarely provide sufficient evidence to prove that an entity willfully 
intended to violate deemed export regulations, it could be used to 
support a false statement charge or other violation of the EAR. This 
could potentially lead to an increase in the number of successful 
deemed export investigations resulting in penalties. 

Changes That Commerce, Justice, ICE, and FBI Implemented Have Not 
Fully Resolved Deemed Export Enforcement Coordination Weaknesses, 
According to Officials: 

Changes that Commerce, Justice, ICE, and FBI have made since our 2006 
report to enhance coordination among export enforcement agencies have 
not fully resolved deemed export enforcement coordination weaknesses, 
according to officials of these agencies in areas we visited. In order 
to address overall weaknesses in export enforcement coordination, our 
2006 report recommended that the enforcement agencies establish a task 
force to evaluate options to improve coordination and cooperation 
among export enforcement investigative agencies. These options could 
include (1) creating new or updating existing operating agreements 
between and among these agencies, (2) identifying and replicating best 
practices for routinely collaborating on or leading investigations, 
and (3) establishing a mechanism for clarifying roles and 
responsibilities for individual export control cases involving foreign 
counterintelligence. 

Justice and ICE made changes in response to these recommendations, but 
these changes have not fully resolved the coordination weaknesses, 
according to Commerce, ICE, and FBI officials. According to Justice 
officials, Justice began setting up Counter-Proliferation Task Forces 
in several judicial districts throughout the country beginning in 
2008. In addition, Justice has established a Technology Protection 
Enforcement Group to improve coordination among the export enforcement 
agencies at senior levels. Moreover, according to ICE, the three 
agencies have collaborated with one another to improve matters related 
to deemed exports as part of the interagency task force established by 
the President in August 2009 to examine export control reforms. 
However, officials from Commerce, ICE, and FBI said the task forces 
have not fully resolved coordination challenges in part because each 
agency maintains discretion over the degree of its participation in 
the task forces. Moreover, outdated or absent written agreements among 
agencies have not defined overlapping enforcement jurisdictions. ICE 
established the National Export Enforcement Coordination Network 
(NEECN) in fiscal year 2007 to coordinate investigations by DHS, law 
enforcement, intelligence, and foreign officials to prevent countries 
of concern from acquiring controlled technologies. Commerce, ICE, and 
FBI officials told us that representatives from their agencies attend 
weekly NEECN meetings where participants coordinate export control 
investigations and may work to resolve conflicts among agencies. 
However, ICE officials stated that NEECN primarily focuses on 
investigations involving the export of goods, rather than deemed 
exports. 

Deemed export enforcement coordination challenges among Commerce, ICE, 
and FBI stem in part from overlapping jurisdictions and the lack of 
defined roles and responsibilities among these agencies.[Footnote 58] 
For example, Commerce officials said that ICE does not always 
coordinate with Commerce to ensure that ICE transfers cases without 
criminal penalties that require additional follow up to Commerce so 
that it may consider civil penalties. Commerce and DHS officials said 
that coordination and collaboration among deemed export enforcement 
agencies became more challenging in 2004 when the Attorney General 
reiterated the FBI's role as the lead enforcement agency in all export 
control cases "relating to any foreign counterintelligence matter." 
[Footnote 59] Commerce and ICE officials said that coordination with 
FBI can be particularly challenging because FBI often classifies 
information for investigations--making it more difficult for Commerce 
and ICE officials to use information originating from the FBI due to 
its classification. Commerce, FBI, and ICE officials said that 
coordination and cooperation continue to hinge on the relationships 
between individual investigators across agencies in the absence of 
current formal agreements. A 1993 agreement between Customs and 
Commerce outlines the investigative responsibilities of each agency, 
but it does not reflect departmental changes that occurred as a result 
of the establishment of DHS in March 2003--including the creation of 
ICE. In addition, ICE and FBI do not have any formal agreement for 
collaboration to coordinate cases involving export control violations. 
Because the enforcement agencies do not have formal agreements for 
collaboration, the lack of defined roles and responsibilities persists. 

Conclusions: 

In 2002 we reported that the deemed export licensing system did not 
provide adequate assurance that U.S. national security interests were 
protected from countries that gather information on dual-use 
technologies to build weapons systems. This conclusion remains 
relevant today. In the 8 years since the publication of our report and 
its recommendations, we and other organizations have issued additional 
reports with further recommendations to strengthen the deemed export 
system. Nonetheless, Commerce and other agencies have not implemented 
key recommended changes. As a result, U.S. agencies acknowledge the 
continued risk of releasing controlled technologies to foreign 
nationals in the United States, particularly in rapidly expanding 
sectors of the economy such as biotechnology. Commerce has reduced its 
screening of overseas visa applications that it had used to refer to 
enforcement offices to help determine if companies should have applied 
for deemed export licenses and for outreach and does not screen 
thousands of H-1B change-of-status visa applications submitted 
domestically. The United States approved about a million foreign 
nationals from 13 countries of concern to work in high-technology 
occupations in the United States, while approving deemed export 
licenses for a much smaller number of foreign nationals from the same 
countries to work in related technologies. Although not all are 
required to have deemed export licenses, the approximately 1 million 
foreign nationals with specialty occupation visas from the 13 
countries of concern that we identified in our work represent a pool 
of risk that Commerce could use to assess the nature and scope of 
compliance with deemed export requirements and to better direct 
outreach and enforcement efforts. Until the scope of the risk is 
assessed, it will be difficult for U.S. agencies to determine where 
their outreach, monitoring, and enforcement efforts should be focused 
and to know how to correct the deficiencies that we and the Inspectors 
General have reported in the past. The executive branch has announced 
plans to reform the export control system, including the export 
licensing and enforcement systems for deemed exports. Resolving the 
deficiencies identified repeatedly since 2002 could be important to 
the effectiveness of any new export control reform. 

Recommendations for Executive Action: 

We recommend the Secretary of Commerce take the following two actions: 

* To better direct its efforts to detect possible unauthorized deemed 
exports and conduct outreach, in consultation with the U.S. Attorney 
General and the Secretary of Homeland Security, assess the extent to 
which foreign nationals from countries of concern who were issued 
specialty occupation visas also should have been covered by deemed 
export license applications. This assessment, using all available data 
from the three agencies, might involve reviewing a sample of H-1B 
specialty visas for employment in particular technologies, such as 
computers, electronics, or biotechnology, to determine whether 
employers of the applicants should have applied for deemed export 
licenses. The Secretary should use the results of this assessment to 
identify the vulnerabilities in the deemed export control system; plan 
to better target and inform companies, universities, and agencies 
about deemed export licensing requirements; and develop and implement 
procedures for incorporating DHS immigration data into its enforcement 
screening activities. 

* To ensure that Commerce takes actions to more fully address the 
deficiencies identified in this and prior reports as part of any 
export control reform effort, report to Congress the specific steps 
being taken to implement past GAO and Commerce IG recommendations in 
the context of the current Export Control Reform Initiative. These 
recommendations relate to (1) improving outreach; (2) implementing a 
program to monitor compliance with deemed export license security 
conditions; (3) screening foreign nationals who change their 
immigration status in the United States for deemed export 
requirements; and (4) improving coordination among the law enforcement 
agencies responsible for enforcing deemed export license regulations. 

Agency Comments and Our Evaluation: 

We provided a draft of this report for comment to the Departments of 
Commerce, State, Defense, Homeland Security, Justice, and Energy; as 
well as the FBI and NIH. Commerce and FBI provided written comments, 
while the Departments of State, Defense, and Energy, and NIH did not 
provide comments. The Departments of Commerce and Homeland Security, 
and FBI provided technical comments, which we have incorporated as 
appropriate. 

In its written comments, Commerce agreed with our recommendation to 
assess the extent to which foreign nationals from countries of concern 
who were issued specialty occupation visas also should have been 
covered by deemed export licenses and use the results to identify 
vulnerabilities in the deemed export control system, target and inform 
employers about deemed export licensing requirements, and incorporate 
immigration data into its enforcement screening activities. Commerce 
also stated that it would review prior GAO and Inspectors General 
recommendations as part of the ongoing Export Control Reform process. 
However, Commerce did not comment on our recommendation to report to 
Congress on the steps being taken to implement past GAO and Commerce 
IG recommendations. We believe that this recommendation remains valid 
because resolving the deficiencies in deemed export licensing and 
enforcement identified repeatedly since 2002 could be critical to the 
success of any export control reform initiative. Commerce's written 
comments are contained in appendix V. 

In its written comments, FBI stated it has conducted deemed export 
outreach to small-to-midsize biotechnology companies through several 
venues, including strategic task forces, counterintelligence working 
groups, conferences, and other initiatives, in coordination with the 
U.S. intelligence community and federal law enforcement agencies, 
including ICE and Commerce. FBI also stated that through participation 
in the NEECN and other arenas, FBI, ICE, and Commerce have worked to 
resolve coordination of export enforcement activities. In our report, 
we discuss the role of the NEECN, which ICE established to help 
coordinate export control investigations, but note that ICE officials 
told us that the NEECN primarily focuses on export control 
investigations involving goods, rather than deemed exports. Finally, 
FBI also commented on the relationship between additional attention on 
deemed exports and the need for more resources for outreach and 
investigation. We did not address this topic in the scope of our work. 
FBI's written comments are contained in appendix VI. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies of this report 
to the Attorney General; the Secretaries of Commerce, Defense, 
Homeland Security, and State, and other interested parties or 
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 staff have questions about this report, please contact 
me at (202) 512-8979 or at christoffj@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made key contributions to 
this report are listed in appendix VII. 

Signed by: 

Joseph A. Christoff: 
Director, International Affairs and Trade: 

[End of section] 

Appendix I: Scope and Methodology: 

To examine the risk that foreign nationals in the United States may 
gain unauthorized access to controlled dual-use technologies, we 
reviewed unclassified assessments discussing the methods that 
countries use to illicitly obtain controlled technologies and the 
technologies most at risk. These include the Annual Report to the 
Congress on Foreign Economic Collection and Industrial Espionage 
issued during fiscal years 2002-2008 by the Office of the National 
Counterintelligence Executive. Using law enforcement data, we also 
documented the total number of deemed export violations committed 
during the 2002-2009 period. Not all foreign nationals approved for H- 
1B visas work in occupations that could involve controlled technology. 
For this reason, to estimate the risk that foreign nationals working 
in high-technology fields could gain unauthorized access to controlled 
technology, we selected four broad specialty occupation fields based 
on an examination of the categories of technology contained in the 
Export Administration Regulations (EAR) and a review of unclassified 
reports detailing the types of dual-use technologies that countries 
are attempting to obtain. The four broad specialty occupation fields 
we selected were occupations in the computer, engineering, and 
physical and biological sciences, including biotechnology. We excluded 
other H-1B occupational fields such as those in the social sciences, 
the arts, and modeling because these typically do not involve work in 
researching or manufacturing high-technology applications. We then 
quantified the number of foreign nationals approved for the specialty 
occupation visas in these four broad specialty occupations from 13 
countries of concern using U.S. Citizenship and Immigration Service 
(USCIS) immigration data for fiscal years 2004-2009. We selected this 
time period due to data reliability concerns about data produced 
before fiscal year 2004. 

The countries of concern whose foreign nationals we included as part 
of this report were selected based on several sources. First, the EAR 
groups countries into five main groups (A through E) by their level of 
restrictions and concern, varying from country to country. The most 
restricted destinations--those in country group E--are the embargoed 
countries and those countries designated as supporting terrorist 
activities. The next most restricted destinations--those in country 
group D--are those for which worldwide restrictions on some products 
apply, controlling items for national security, and nuclear, chemical/ 
biological, and missile proliferation reasons. We judgmentally 
selected six countries from country group D to which Commerce applies 
at least three of the four reasons for control. In addition, we 
selected two additional countries of concern based on (1) intelligence 
reports and discussions with U.S. law enforcement officials, (2) an 
analysis of trends in deemed export enforcement cases from fiscal 
years 2002 through 2009, and (3) the publicly reported associations of 
one country's citizens with export enforcement cases over the past 
several years. We assessed the reliability of USCIS and Commerce data 
by reviewing reports discussing the limitations of these databases and 
meeting with USCIS and Commerce officials responsible for managing the 
databases. Based on the information obtained, we determined the data 
were sufficiently reliable for our use. 

To examine the extent to which Commerce and other agencies have 
implemented recommended changes to the deemed export licensing 
process, we reviewed the recommendations made in GAO and Commerce and 
interagency Inspectors General reports issued during fiscal years 2002-
2009 as well as the report issued by the Deemed Export Advisory 
Committee (DEAC). Based on the information in these reports, we 
documented the concerns raised in the reports and the agency's 
response. We provided Commerce with a matrix summarizing the concerns 
raised and the agency's responses and obtained its views. We met with 
officials of the agencies responsible for reviewing license 
applications in Washington, D.C.--principally Commerce, but also the 
Departments of State, Defense, and Energy--to determine how 
information is shared, as well as the agencies that conduct outreach 
and enforce compliance with licensing conditions and regulations--
Commerce, ICE, and FBI. We met with 33 associations, companies, 
nonprofits, universities, and state government agencies to obtain 
their views about the extent to which companies, universities, and 
firms are familiar with deemed export license regulations. These were 
judgmentally selected based on our review of Commerce's fourth quarter 
fiscal year 2007 and fiscal year 2008 outreach plan, which showed that 
Commerce planned to focus on biotechnology as one of several areas for 
outreach and an examination of the USCIS H-1B specialty occupation 
visa database. 

To examine the extent to which Commerce and other agencies have 
implemented recommended changes to the deemed export enforcement 
system, we reviewed the recommendations contained in GAO, and Commerce 
and interagency Inspectors General reports issued during fiscal years 
2002-2008, as well as the report issued by the DEAC. Based on the 
information in these reports, we documented the concerns raised and 
the agencies' responses. We provided Commerce with a matrix 
summarizing the concerns raised and the agency's responses and 
obtained its views. We met with officials of the agencies responsible 
for monitoring licensing conditions and enforcement deemed export 
rules and regulations--principally Commerce, but also ICE and FBI. We 
also met with USCIS officials to discuss a proposed change to their 
Form I-129 that would require employers to acknowledge deemed export 
licensing requirements. We conducted fieldwork in Washington, D.C., as 
well as Boston, Los Angeles, and San Francisco. We selected these 
cities for fieldwork because all three have major clusters of 
biotechnology firms. 

We conducted this performance audit from July 2009 to February 2011 in 
accordance with generally accepted auditing standards. These 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. 

[End of section] 

Appendix II: Comparison of Numbers of Foreign Nationals from 13 
Countries of Concern to Foreign Nationals from the Same Countries 
Covered by Deemed Export Licenses, Fiscal Years 2004 to 2009: 

During fiscal years 2004 to 2009, a total of approximately 1.05 
million foreign nationals from 13 countries identified by Commerce and 
other sources as countries of proliferation or other concerns were 
approved to work in the United States in specialty occupations that 
included computers, electronics, engineering, and biotechnology. Of 
the approximately 1.05 million, about 94 percent were foreign 
nationals from four countries. By comparison, foreign nationals from 
the same four countries accounted for 98 percent of the foreign 
nationals from the countries of concern covered by deemed export 
licenses during this period. Table 1 compares the number of foreign 
nationals approved to receive H-1B specialty occupation visas during 
fiscal years 2004 through 2009 from the 13 countries of concern we 
selected to the number of foreign nationals from the same countries 
covered by deemed export licenses. Appendix I provides an explanation 
of how we selected these countries. 

Table 1: Comparison of Numbers of Foreign Nationals from 13 Countries 
of Concern with Specialty Occupation Visas in Four Occupational Fields 
to Numbers of Foreign Nationals from the Same Countries Covered by 
Deemed Export Licenses, Fiscal Years 2004 to 2009: 

Country: A; 
Number of foreign nationals: 148,998; 
Number of foreign nationals covered by deemed export licenses: 2,184. 

Country: B; 
Number of foreign nationals: 818,468; 
Number of foreign nationals covered by deemed export licenses: 444. 

Country: C; 
Number of foreign nationals: 14,300; 
Number of foreign nationals covered by deemed export licenses: 314. 

Country: D; 
Number of foreign nationals: 5,772; 
Number of foreign nationals covered by deemed export licenses: 188. 

Country: E; 
Number of foreign nationals: 25,014; 
Number of foreign nationals covered by deemed export licenses: 14. 

Country: F; 
Number of foreign nationals: 22,755; 
Number of foreign nationals covered by deemed export licenses: 14. 

Country: G; 
Number of foreign nationals: 9,609; 
Number of foreign nationals covered by deemed export licenses: 9. 

Country: H; 
Number of foreign nationals: 2,453; 
Number of foreign nationals covered by deemed export licenses: 6. 

Country: I; 
Number of foreign nationals: 188; 
Number of foreign nationals covered by deemed export licenses: 2. 

Country: J; 
Number of foreign nationals: 49; 
Number of foreign nationals covered by deemed export licenses: 2. 

Country: K; 
Number of foreign nationals: 813; 
Number of foreign nationals covered by deemed export licenses: 1. 

Country: L; 
Number of foreign nationals: 249; 
Number of foreign nationals covered by deemed export licenses: 0. 

Country: M; 
Number of foreign nationals: 22; 
Number of foreign nationals covered by deemed export licenses: 0. 

Country: Total; 
Number of foreign nationals: 1,048,690; 
Number of foreign nationals covered by deemed export licenses: 3,178. 

Source: GAO analysis of USCIS and Commerce data. 

[End of table] 

[End of section] 

Appendix III: Summary of Outreach Activities of Commerce and ICE: 

Commerce provides educational information and outreach about deemed 
export rules and regulations to companies, universities, and agencies 
in three ways. Commerce's Export Administration provides educational 
outreach primarily through export control seminars and conferences, 
some of which were general in nature and some of which exclusively 
focus on deemed exports. Commerce-sponsored general export control 
seminars and conferences have a module that addresses deemed exports. 
Commerce has also made increasing use of its Internet Web site, which 
features training modules and Webinars, some of which focus on deemed 
exports. Commerce's Export Administration also participates in 
seminars and conferences sponsored by other private and public sector 
organizations. In addition, Commerce's Office of Export Enforcement 
provides investigative-related outreach through meetings with 
associations and companies. As part of this outreach, in fiscal year 
2005 Commerce's Office of Export Enforcement began its Project 
Guardian program to focus on outreach to companies and universities 
conducting research or manufacturing specific goods and technologies 
that illicit proliferation networks seek to acquire. Commerce Office 
of Export Enforcement officials told us that each of Commerce's nine 
export enforcement field offices could develop outreach plans for 
their areas of jurisdiction; however, we found that none of the three 
Commerce field offices in the cities that we visited--Boston, Los 
Angeles, and San Francisco--had developed such plans. All three cities 
are important in the development of cutting edge commercial 
technology--for instance, Boston and San Francisco have major 
concentrations of biotechnology companies. 

ICE and FBI also provide investigative-related outreach to 
associations, companies, and universities through association- 
sponsored seminars and meetings with university and company officials. 

Table 2 summarizes the two agencies' export control outreach efforts. 

Table 2: Summary of Outreach Efforts by Commerce and ICE, Fiscal Years 
2004-2009: 

Agency: Commerce Export Administration; 
Type of outreach: Educational; 
Number of general export control outreaches: About 300 Commerce- 
sponsored conferences and seminars reaching about 25,000 people. 
Commerce also participated in about 200 conferences and seminars 
sponsored by other organizations reaching about 12,000 people; 
Outreaches specific to deemed exports: About 600, including in-person 
presentations, e-mails, and phone conversations. 

Agency: Commerce Office of Export Enforcement; 
Type of outreach: Investigative; 
Number of general export control outreaches: About 3,500; 
Outreaches specific to deemed exports: About 50. 

Agency: ICE; 
Type of outreach: Investigative; 
Number of general export control outreaches: About 9,500; 
Outreaches specific to deemed exports: None. However, according to ICE 
officials, the agency incorporates materials on deemed exports as part 
of its outreach efforts. 

Source: GAO analysis of Commerce and ICE data. 

Note: The FBI also provided outreach data; however, because the data 
provided were classified, we did not include them in this report. 

[End of table] 

[End of section] 

Appendix IV: Draft of DHS's Changes to the Form I-129 "Petition for 
Nonimmigrant Worker:" 

In fiscal year 2002, we recommended that Commerce use all existing 
U.S. immigration data to identify foreign nationals who could be 
subject to deemed export licensing requirements. Commerce agreed with 
the recommendation and officials told us that they have been working 
with USCIS to make such data easier to analyze.[Footnote 60] As a 
result of this collaboration, USCIS issued notices in the Federal 
Register in February and June 2010 requesting comments about a 
proposed change to the Form I-129 employers must complete to enable 
foreign nationals to apply for new employment, extend their status, or 
change a foreign national's immigration status to H-1B specialty 
employment or other status. This change would require employers to 
acknowledge if the position for which they want to hire a foreign 
national could require a deemed export license. The revised form 
contains two parts: One provides instructions on how to fill out the 
form, and the other contains the form itself. Figure 4 contains the 
revised form, which according to USCIS, was approved by the Office of 
Management and Budget in October 2010.[Footnote 61] 

Figure 4: Revisions to USCIS Form I-129 That Address Deemed Export 
Concerns Appendix V: Comments from the Department of Commerce: 

[Refer to PDF for image: illustration] 

Certification Pertaining to the Release of Controlled Technology or 
Technical Data to Foreign Persons in the United States: 

U.S. Export Controls on Release of Controlled Technology or Technical 
Data to Foreign Persons. The Export Administration Regulations (EAR) 
(15 CFR Parts 770-774) and the International Traffic in Arms 
Regulations (ITAR) (22 CFR Parts 120-130) require U.S. persons to seek 
and receive authorization from the U.S. Government before releasing to 
foreign persons in the United States controlled technology or 
technical data. Under both the EAR and the ITAR, release of controlled 
technology or technical data to foreign persons in the United States--
even by an employer--is deemed to be an export to that person's 
country or countries of nationality. One implication of this rule is 
that a U.S. company must seek and receive a license from the U.S. 
Government before it releases controlled technology or technical data 
to its nonimmigrant workers employed as H-IB, L-I or O-IA 
beneficiaries. 

Requirement to Certify Compliance with U.S. Export Control 
Regulations. The U.S. Government requires each company or other entity 
to certify that it has reviewed the EAR and ITAR and determined 
whether it will require a U.S. Government export license to release 
controlled technology or technical data to the beneficiary. If an 
export license is required, then the company or other entity must 
further certify that it will not release or otherwise provide access 
to controlled technology or technical data to the beneficiary until it 
has received from the U.S. Government the required authorization to do 
so. The petitioner must indicate whether or not a license is required 
on Page 5, Part 6 of Form 1-129. 

Application: 

Part 6. Certification Regarding the Release of Controlled Technology 
or Technical Data to Foreign Persons in the United States: 

(For H-lB, H-lB1 Chile/Singapore, L-l, and O-lA petitions only. This 
section of the form is not required for all other classifications. See 
Page 3 of the Instructions before completing this section.) 

Check Box 1 or Box 2 as appropriate: 

With respect to the technology or technical data the petitioner will 
release or otherwise provide access to the beneficiary, the petitioner 
certifies that it has reviewed the Export Administration Regulations 
(EAR) and the International Traffic in Arms Regulations (ITAR) and has 
determined that: 

1. A license is not required from either U.S. Department of Commerce 
or the U.S. Department of State to release such technology or 
technical data to the foreign person; or; 

2. A license is required from the U.S. Department of Commerce and/or 
the U.S. Department of State to release such technology or technical 
data to the beneficiary and the petitioner will prevent access to the 
controlled technology or technical data by the beneficiary until and 
unless the petitioner has received the required license or other 
authorization to release it to the beneficiary. 

Source: U.S. Citizenship and Immigration Service. 

[End of figure] 

[End of section] 

Appendix V: Comments from the Department of Commerce: 

United States Department Of Commerce: 
Under Secretary for Industry and Security: 
Washington, D.C. 20230: 

November 9, 2010: 
	
Mr. Joseph Christoff: 
Director, International Affairs and Trade: 
Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Christoff: 

Thank you for the opportunity to comment on the draft Government 
Accountability Office (GAO) report entitled "Export Controls: 
Improvements Needed to Prevent Unauthorized Technology Transfers to 
Foreign Nationals in the United States (11-70)." 

The Department of Commerce concurs with the first recommendation and 
will review the prior recommendations in the ongoing Export Control 
Reform process. The Department also has attached technical comments on 
the report. 

If you need further assistance, please contact Mark Crace of the 
Office of Administration. Mr. Crace may be reached at (202) 482-8093 
or via e-mail at mcrace@bis.doc.gov. 

Sincerely, 

Signed by: 

Eric L. Hirschhorn: 

[End of section] 

Appendix VI: Comments from the Federal Bureau of Investigation: 

U.S. Department of Justice: 
Federal Bureau of Investigation: 
Washington, D.C. 20530-0001: 

November 23, 2010: 

Mr. Joseph Christoff: 
Director, International Affairs and Trade: 
Government Accountability Office: 
441 G St., NW: 
Washington, DC 20548: 

Dear Mr. Christoff: 

Thank you for the opportunity to review the draft Government 
Accountability Office (GAO) report entitled, Export Controls: 
Improvements Needed to Prevent Unauthorized Technology Transfers to 
Foreign Nationals in the United States (hereinafter, "Report"). In an 
effort to ensure the Federal Bureau of Investigation's (FBI) 
involvement in the area of deemed exports is accurately represented in 
the Report. I have attached our previously submitted factual accuracy 
comments For your direct consideration and review. 

In addition, the FBI has previously identified to the GAO many areas 
of the Report which contain classified information. As discussed with 
your auditing team, the identification of vulnerabilities or specific 
areas of investigative focus most be redacted due to national security 
matters. 

As noted in our earlier comments, the FBI enforces deemed export 
license regulations by conducting criminal investigations as well as 
taking the lead in investigations involving counterintelligence and 
counterterrorism. The FBI has conducted outreach to small-to-mid-size 
companies in the biotechnology industry to foster awareness deemed 
exports pose. Specifically, the FBI has engaged biotechnology 
companies through several venues, including strategic task forces, 
counterintelligence working groups, conferences, and other 
initiatives. The FBI has also coordinated this outreach with the 
United States Intelligence Community and federal law enforcement 
agencies, including Immigration and Customs Enforcement (ICE) and 
Department of Commerce (DOC), Office of Export Enforcement on these 
outreach programs. Through participation at the National Export 
Enforcement Coordination Network (NEECN) and other arenas, the DOC, 
ICE, and the FBI have worked to resolve coordination of export 
enforcement activities. 

As duly noted in your Report, in order to ensure that deemed exports 
receive additional attention, law enforcement agencies need to receive 
more resources, particularly for the areas of outreach and 
investigations. 

Thank you for your efforts, and should you have any additional 
questions please do not hesitate to contact me or my office. 

Sincerely, 

Signed by: 

C. Frank Figliuzzi: 
Deputy Assistant Director: 
Counterintelligence Division: 

Attachment: 

Unclassified when separated from Classified attachment. 

[End of section] 

Appendix VII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Joseph A. Christoff, (202) 512-8979 or christoffj@gao.gov: 

Staff Acknowledgments: 

In addition to the individual contact named above, Jeff Phillips 
(Assistant Director), José M. Peña III, James E. Lloyd III, and Debbie 
Chung made key contributions to this report. Technical assistance was 
provided by Jena Sinkfield, Martin De Alteriis, Etana Finkler, Erin 
Godtland, Grace Lui, Kara Marshall, Amanda Miller, John Neumann, Nina 
Pfeiffer, Minette Richardson, Ellery Scott, and Pierre Toureille. 

[End of section] 

Footnotes: 

[1] For the purposes of this report, we selected 13 countries of 
concern. We based this selection on several criteria, including (1) 
Commerce regulations that group countries by their level of 
restrictions and concern; (2) unclassified intelligence reports and 
discussions with U.S. law enforcement officials; (3) the ranking of 
countries by the number of deemed export enforcement cases from fiscal 
years 2002 through 2009; and (4) the publicly reported associations of 
some countries' citizens with export enforcement cases over the past 
several years. Appendix I more fully explains how we selected these 
countries. The names of the countries of concern, while provided in a 
classified report, are omitted here. 

[2] The Export Administration Regulations (EAR), 15 C.F.R. § 730-774, 
define technology as specific information necessary for the 
"development," "production," or "use" of a product. 15 C.F.R. § 772.1. 
The technologies controlled for export are generally contained in the 
Commerce Control List (CCL), Supplement 1 to Part 774,and fall into 10 
categories including computers, chemical and biological substances, 
electronics, and materials processing. An example of a technology that 
is controlled and on the CCL involves certain fermenters used for 
growing bacteria and fungi in laboratories. These can be used in the 
development of vaccines and medical treatments but are controlled 
because they can also be used to create dangerous toxins for 
biological warfare. 

[3] According to the DEAC, the United States is the only nation that 
implements a deemed export control system and participates in 
multilateral export control regimes. Other nations depend largely on 
their visa processes, intelligence information, and commercial 
intellectual property controls rather than a formal deemed export 
licensing system. 

[4] Executive Order 13558, 75 Fed. Reg. 69,573 (Nov. 9, 2010). 

[5] See for instance GAO, Export Controls: Department of Commerce 
Controls over Transfers of Technology to Foreign Nationals Need 
Improvement, [hyperlink, http://www.gao.gov/products/GAO-02-972] 
(Washington, D.C.: Sept. 6, 2002). 

[6] GAO, Export Controls: Agencies Should Assess Vulnerabilities and 
Improve Guidance for Protecting Export-Controlled Information at 
Companies, [hyperlink, http://www.gao.gov/products/GAO-07-69] 
(Washington, D.C.: Dec. 5, 2006); Export Controls: Agencies Should 
Assess Vulnerabilities and Improve Guidance for Protecting Export-
Controlled Information at Universities, [hyperlink, 
http://www.gao.gov/products/GAO-07-70] (Washington, D.C.: Dec. 5, 
2006); and Export Controls: Challenges Exist in Enforcement of an 
Inherently Complex System, [hyperlink, 
http://www.gao.gov/products/GAO-07-265] (Washington, D.C.: Dec. 20, 
2006). 

[7] A U.S. employer may temporarily hire a foreign national in a 
specialty occupation or as a fashion model of distinguished merit and 
ability by applying for an H-1B specialty occupation visa, which in 
general requires the theoretical and practical application of a body 
of specialized knowledge. This includes a bachelor's degree or the 
equivalent in fields such as the sciences, medicine and health care, 
education, or biotechnology. 

[8] To estimate the risk that foreign nationals working in high- 
technology fields could gain access to controlled technology, we 
selected four broad specialty occupations based on an examination of 
the categories of technology contained in the CCL and a review of 
unclassified reports detailing the types of dual-use technologies that 
countries are attempting to obtain. The four broad specialty 
occupation fields were computers, engineering, the physical sciences, 
and the biological sciences, including biotechnology. We excluded 
other H-1B occupational fields such as those in the social sciences. 
We then quantified the number of foreign nationals from 13 countries 
of concern working in these specialty occupation fields. We selected 
these 13 countries based on our analysis of the Export Administration 
Regulations, which groups countries by their level of restrictions, as 
well as intelligence reports, discussions with law enforcement 
officials, and the publicly reported associations of some countries' 
citizens with export enforcement cases over the past several years. 
Appendix I more fully details our methodology. We identified the names 
of these countries in our classified report. 

[9] The other audit organizations were the Commerce IG and the DHS IG. 

[10] [hyperlink, http://www.gao.gov/products/GAO-02-972]; U.S. 
Department of Commerce/Office of Inspector General, Deemed Export 
Controls May Not Stop the Transfer of Sensitive Technology to Foreign 
Nationals in the U.S., Final Inspection Report No. IPE-16176 
(Washington, D.C.: Mar. 31, 2004); Offices of the Inspectors General 
of the Departments of Commerce, Defense, Energy, Homeland Security and 
State, and the Central Intelligence Agency, Interagency Review of 
Foreign National Access to Export-Controlled Technology in the United 
States, Report No. D-2004-062 (Washington, D.C., Apr. 16, 2004). 

[11] [hyperlink, http://www.gao.gov/products/GAO-07-265]. 

[12] 50 U.S.C. App. §§ 2401-2420. The Export Administration Act of 
1979, as amended (EAA) is not permanent legislation. Since August 21, 
2001, the EAA has been in lapse. However, the President has continued 
the regulations in effect through Executive Order 13222 of August 17, 
2001 (3 C.F.R., 2001 Comp 783 (2002)), which most recently was 
extended by Presidential Notice on August 12, 2010, under the 
authority provided by the International Emergency Economic Powers Act 
(50 U.S.C. §§1701 et seq.). See 75 Fed. Reg. 50,681 (Aug. 12, 2010). 

[13] 15 C.F.R. parts 730-780. 

[14] For purposes of deemed export rules, technology and source code 
that are on the CCL are of particular significance. According to 
Commerce, with a few exceptions, only controlled technology and source 
code listed on the CCL are subject to deemed export licensing 
requirements. 

[15] 15 C.F.R. § 734.2(b)(2)(ii). 

[16] 15 C.F.R. § 734.2(b)(2)(ii). 

[17] 15 C.F.R. § 738.4. 

[18] 15 C.F.R. § 736.2. 

[19] 15 C.F.R. § 764.3. 

[20] The EAR describes this information as technology and software. In 
addition, certain software is subject to the EAR. 15 C.F.R. § 
734.3(b)(3). 

[21] Revisions and Clarification of Deemed Export Related Regulatory 
Requirements, 71 Fed. Reg. 30,840 (May 31, 2006). 

[22] In addition, Commerce's Export Administration conducts outreach 
through phone conversations, e-mails, Internet-based training modules, 
and Webinars. A Webinar is a workshop or conference delivered over the 
Internet. 

[23] 60 Fed. Reg. 62,981 (Dec. 5, 1995). 

[24] Separately, State also licenses the export of weapons and 
military technology. 

[25] Project Shield America assists in the prevention of export 
violations. Under the program, special agents cultivate relationships 
with and obtain the cooperation of U.S. companies, universities, and 
research facilities involved in the manufacture, sale, or export of 
U.S. strategic technology and munitions that could harm the country if 
illegally exported to countries or entities of concern. ICE began 
Project Shield America in fiscal year 2001, but according to ICE 
officials, an outreach program also existed before fiscal year 2001. 

[26] The time it takes to process an export control license can vary. 
Under Executive Order 12981, license application determinations are 
supposed to be resolved or referred to the President within 90 days of 
the Bureau of Industry and Security having registered the completed 
license application. However, Executive Order 12981 also provides that 
agencies can "stop the clock" for various reasons, including to 
request additional information. 60 Fed. Reg. 62,981 (Dec. 5, 1995). 

[27] See 15 C.F.R. part 748. The Export Control Classification Number 
(ECCN) is an alphanumeric code, e.g., 3A001, that describes a 
particular item or type of item, and shows the controls placed on it. 
All ECCNs are on the CCL. 

[28] The ONCIX is part of the Office of the Director of National 
Intelligence and is staffed by senior counterintelligence and other 
specialists from across the national intelligence and security 
communities. Among other things, the ONCIX develops, coordinates, and 
produces annual foreign intelligence threat assessments. 

[29] Sources and Methods of Foreign Nationals Engaged in Economic and 
Military Espionage: Hearing before the Subcommittee on Immigration, 
Border Security and Claims, of the Committee on the Judiciary, House 
of Representatives, 109th Cong. (2005). 

[30] Commerce officials noted that emerging technologies are examined 
as part of an interagency process that involves preparing proposals to 
the four multilateral export control regimes and subsequently revising 
the CCL to add and delete technologies as appropriate, based on 
national security and other concerns. 

[31] Annual Report to Congress on Foreign Economic Collection and 
Industrial Espionage--2003, Office of the National Counterintelligence 
Executive, February 2004. 

[32] Guide to Biotechnology 2008; Biotechnology Industry Association, 
Washington, D.C. 

[33] van Beuzekom, Brigitte and Arundel, Anthony; OECD Biotechnology 
Statistics 2006 & OECD Biotechnology Statistics 2009, Organization for 
Economic Co-operation and Development, Paris. 

[34] Occupational Outlook Handbook, U.S. Bureau of Labor Statistics, 
Washington, D.C. (January 2010). 

[35] More recent data suggest that employers continue to rely heavily 
on foreign nationals to fill specialty positions, including high- 
technology positions. For instance, according to USCIS, in fiscal year 
2009, approximately 214,000 H-1B visas were approved for foreign 
nationals offered employment by U.S. companies, universities, and 
agencies. 

[36] [hyperlink, http://www.gao.gov/products/GAO-02-972]. 

[37] The DHS data were obtained from USCIS. We limited ourselves to 
analyzing H-1B specialty occupation visa data because ICE, which 
obtains student and visitor data, did not provide these data in time 
for this report. 

[38] A single deemed export license issued to a company may authorize 
the release of controlled technology to 10 or more foreign nationals 
to access controlled technology. However, Commerce data show that in 
some years the number of licenses approved was greater than the number 
of foreign nationals involved in the release of technology. Commerce 
officials explained that in some cases companies apply for more than 
one license for each foreign national because licenses tend to be 
narrowly focused with respect to the type of technology approved for 
release and the companies might need the foreign national to access 
more than one type of technology. 

[39] Commerce approved 4,101 deemed export licenses in this period 
authorizing release of technology or source code to a total of 3,985 
foreign nationals. 

[40] [hyperlink, http://www.gao.gov/products/GAO-07-69]; [hyperlink, 
http://www.gao.gov/products/GAO-07-70]. 

[41] We requested a copy of Commerce's fiscal year 2006 outreach plan 
on at least two occasions, but Commerce did not provide a copy. 

[42] In comments provided to us in November 2010, Commerce stated that 
its understanding of the types of companies that attend its export 
control seminars is limited because it does not collect the data 
needed to distinguish between small, medium-sized, and large 
companies. It further noted that it has published a Notice of Inquiry 
in the Federal Register requesting input on the impact of export 
controls on small and medium-sized enterprises. 

[43] Commerce also began offering Webinars focusing on deemed exports 
as early as August 2007. 

[44] ICE statistics show that the number of outreaches dropped 
significantly from about 2,300 in fiscal year 2004 to about 1,600 in 
fiscal year 2005 and have averaged about 1,450 outreaches per year. 

[45] Commerce and ICE officials provided us with the number of staff 
in their San Francisco Bay Area offices that are dedicated full time 
to export control activities; however, FBI officials told us they 
could not provide the number of staff dedicated full time to export 
control activities because they do not track the information in this 
manner. 

[46] National Security Decision Directive 189 defines fundamental 
research as basic and applied research in science and engineering, the 
results of which ordinarily are published and shared broadly within 
the scientific community. Examples include work on nuclear 
engineering, lasers, sensors, ceramics, radars, and virology. The EAR 
states that certain technology and software that arise during or 
result from fundamental research, the results of which are intended to 
be published, are not subject to deemed export licensing requirements. 

[47] 15 C.F.R. 772.1 and "Questions and Answers to Supplement 
Clarification of Deemed Export Related Regulatory Requirements" at 
[hyperlink, 
http://www.bis.doc.gov/deemedexports/deemedexportssupplementqa.html], 
last visited September 30, 2010. 

[48] The DEAC also noted that the definition of "use" for a deemed 
export license appeared not to withstand the test of logical 
consistency, since the definition could allow two individuals working 
in collusion to perform enough functions to gain full knowledge of all 
six activities without triggering a requirement for a deemed export 
license. Commerce officials noted in technical comments provided to us 
in November 2010 that such a circumstance could constitute an evasion 
of the EAR and evasion would be a prosecutable violation of the EAR. 

[49] Revision and Clarification of Deemed Export Related Regulatory 
Requirements, 70 Fed. Reg. 15,607 (Mar. 28, 2005). 

[50] 71 Fed. Reg. 30,840. 

[51] Id. 

[52] [hyperlink, 
http://www.bis.doc.gov/deemedexports/deemedexportssupplementqa.html]. 

[53] [hyperlink, http://www.gao.gov/products/GAO-02-972]. 

[54] We disagreed with Commerce's assertion because its monitoring 
system then consisted of conducting administrative checks to ensure 
that firms were submitting the correct paperwork. 

[55] Department of Commerce, Bureau of Industry and Security, 
"Guidelines for Preparing Export License Applications Involving 
Foreign Nationals." 

[56] Agency Information Collection Activities: Form I-129, Revision of 
an Existing Information Collection; Comment Request, 75 Fed. Reg. 
6,212 (Feb. 8, 2010); and Agency Information Collection Activities: 
Form I-129, Revision of an Existing Information Collection; Comment 
Request, 75 Fed. Reg. 37,822 (June 30, 2010). According to USCIS, 
other nonimmigrant visa categories will also be required to file the 
deemed export certification. 

[57] Under the Paperwork Reduction Act of 1980 (Pub. L. No. 96-511, 94 
Stat 2812 ) the Office of Management and Budget is required to review 
all proposed changes in government forms that could result in an added 
collection burden on the public. 

[58] According to FBI, it has been designated to take charge of 
investigative work in matters relating to espionage, sabotage, 
subversive activities, and related matters, including investigating 
any potential violations of the Arms Export Control Act, the Export 
Administration Act, the Trading with the Enemy Act, or the 
International Emergency Economic Powers Act, relating to any foreign 
counterintelligence matter. 

[59] Delegations of Authority; Federal Bureau of Investigation, 69 
Fed. Reg. 65,542 (Nov. 15, 2004). 

[60] GAO, Export Controls: Department of Commerce Controls over 
Transfers of Technology to Foreign Nationals Need Improvement, 
[hyperlink, http://www.gao.gov/products/GAO-02-972] (Washington, D.C.: 
Sept. 6, 2002). 

[61] Under the Paperwork Reduction Act of 1980 (Pub. L. No. 96-511, 94 
Stat 2812), the Office of Management and Budget is required to review 
all proposed changes in government forms that could result in an added 
collection burden on the public. 

[End of section] 

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