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GAO-11-135R: 

U.S. Government Accountability Office: 
Washington, DC 20548: 

November 16, 2010: 

The Honorable Jon Kyl:
Ranking Member:
Subcommittee on Terrorism and Homeland Security:
Committee on the Judiciary:
United States Senate: 

The Honorable Russell D. Feingold:
United States Senate: 

Subject: Export Controls: Agency Actions and Proposed Reform 
Initiatives May Address Previously Identified Weaknesses, but 
Challenges Remain: 

Each year, billions of dollars in arms and "dual-use" items--items 
that have both commercial and military applications--are exported to 
U.S. allies and strategic partners.[Footnote 1] To further national 
security, foreign policy, and economic interests, the U.S. government 
controls the export of these items. Over the past 10 years, we have 
reported on numerous weaknesses in the export control system, 
including poor coordination among the multiple agencies involved, 
which have led to jurisdictional disputes and enforcement challenges, 
and the lack of systematic assessment of the overall effectiveness of 
the export control system.[Footnote 2] As a result, since 2007 the 
arms and dual-use export control systems have been included as part of 
our high-risk area on ensuring the effective protection of 
technologies critical to U.S. national security interests.[Footnote 3] 
We have also called for a strategic reexamination of existing programs 
within the U.S. export control system to identify needed changes and 
ensure the advancement of U.S. interests. In August 2009, the 
President announced that he had directed a comprehensive review of the 
U.S. export control system and, in April 2010, proposed a framework 
under which the current system would be streamlined to include a 
single export control list, a single licensing agency, a single 
primary enforcement coordination agency, and a single information 
technology system. The Administration has since provided updates on 
its reform initiatives, announcing specific actions that are being 
implemented using a phased approach. 

In response to your request, we identified the extent to which 
agencies' actions and the proposed export control framework address 
the findings of our previous reports on the U.S. export control system 
in the areas of control lists, licensing, enforcement, and information 
technology. 

Scope and Methodology: 

To identify U.S. export control agencies' actions addressing our prior 
report findings and to obtain a status of the Administration's reform 
efforts, we reviewed the findings and recommendations of 22 reports we 
issued over the past 10 years on the U.S. export control system. 
[Footnote 4] We reviewed documentation on agency actions taken and 
interviewed U.S. government officials, including representatives of 
the Department of Commerce's Bureau of Industry and Security; the 
Department of Defense's (DOD) Defense Technology Security 
Administration; the Department of Homeland Security's Customs and 
Border Protection and Immigration and Customs Enforcement; the 
Department of Justice's Executive Office for U.S. Attorneys, Federal 
Bureau of Investigation, and the National Security Division; the 
Department of State's Directorate of Defense Trade Controls; and the 
Department of the Treasury's Office of Foreign Asset Control. We also 
spoke with export control reform task force members and reviewed 
recent White House press releases on the export reform initiatives. We 
aligned our key findings with the four categories in the proposed 
export control reform framework--control lists, licensing, 
enforcement, and information technology--to determine whether agency 
actions and proposed reform efforts address them. 

We conducted this performance audit from July 2010 through November 
2010 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. 

Results in Brief: 

Agencies have taken actions to address several weaknesses in the U.S. 
export control system that we previously identified and the 
Administration's export control reform initiatives have the potential 
to address others if fully implemented. Specifically, agencies have 
taken actions in several areas, including reducing the time it takes 
to process arms licenses and making initial efforts to coordinate 
export control enforcement activities among multiple agencies. The 
export control reform framework--as proposed--has the potential to 
address weaknesses in the U.S. export control system related to 
control lists, licensing, enforcement, and information technology, 
including areas where agencies have not addressed prior findings. 
However, for a few areas, such as developing measures of effectiveness 
for the arms export control system, agencies have not addressed some 
of our prior findings and the reform framework does not contain 
specific initiatives to address them. Furthermore, the Administration 
may have challenges in implementing fundamental reform of the export 
control system--such as reaching interagency agreement on which items 
need to be controlled and obtaining congressional approval for 
implementing reforms. Enclosure I provides additional details on our 
reports from 2001 to 2010 related to U.S. export controls, including 
their key findings, agency actions in response to these findings, and 
whether the export control reform framework includes actions that may 
address these findings. 

This report includes no new recommendations. We provided a copy of a 
draft of this report to Commerce, Defense, Homeland Security, Justice, 
State, and Treasury for comments. Commerce and Homeland Security 
provided technical comments, which we incorporated as appropriate. 

Background The current U.S. export control system is governed by a 
complex set of laws, regulations, and processes, and involves multiple 
federal agencies in administering the regulatory framework and 
enforcement. The U.S. government's control over the export of arms and 
dual-use items is primarily divided between State and Commerce. 
Generally, unless an exemption applies, exporters may submit a license 
application to State if their items are controlled on the U.S. 
Munitions List or to Commerce if their items are controlled on the 
Commerce Control List to receive export approval. As part of the 
application review process, State and Commerce consult with other 
agencies, including DOD. Additionally, agencies within Commerce, 
Homeland Security, Justice, and State conduct enforcement activities. 
Treasury and Commerce administer the current sanctions program for 
selected countries. 

Our past work highlighted the need for export control reform through 
reports to Congress and testimony at congressional hearings. Over the 
past 10 years, we issued 22 reports with key findings and 
recommendations directed to State, Commerce, DOD, Homeland Security, 
Justice, and Treasury, to improve the U.S. export control system. Some 
of the issues identified through these reports include poor 
interagency coordination, inefficiencies in the license application 
process, and a lack of systematic assessments. 

In April 2010, the Administration announced a reform framework to 
create an export control system that is more effective, transparent, 
and predictable by creating a single control list, licensing agency, 
enforcement agency, and information technology system for licensing. 
Based on the Administration's interagency review, it found that the 
U.S. export control system has a complicated structure involving 
multiple agencies with separate control lists, leading to 
jurisdictional confusion, and has hindered the ability of allies to 
cooperate with U.S. forces. For example, while Commerce and State 
manage their respective export controls lists, there has been 
ambiguity, confusion, and jurisdictional disputes over the items 
controlled on these lists. In addition, licensing procedures and 
conditions are not consolidated or uniform across agencies, and 
various agencies have responsibility for monitoring and enforcing 
export controls. The current process relies on separate information 
systems, some of which are paper-based, which are not accessible to 
all agencies involved. 

The reform framework is structured in a three-phased approach. Phases 
I and II are focused on establishing criteria for creating parallel 
control lists, harmonizing licensing policies and processes, creating 
an export enforcement coordination center, expanding outreach and 
compliance, and consolidating Commerce, DOD, and State on a single 
information technology platform to process licenses. Phase III focuses 
on implementing the reform proposals that would require congressional 
action, such as creating a single licensing agency. The President 
signed an Executive Order in November 2010 directing the Department of 
Homeland Security to establish the Export Enforcement Coordination 
Center and has announced that agencies will begin issuing proposed 
revisions to the control lists and licensing policies later this year. 

Agencies' Actions Address Several Previously Identified Weaknesses, 
Reform Proposals Have the Potential to Address Others, but a Few Areas 
Remain to be Addressed: 

Control Lists: Agencies have taken action to improve time frames for 
responding to requests for clarification of classification and 
jurisdiction issues related to control lists, but have not addressed 
our prior findings relating to the jurisdictional disputes that exist 
between State and Commerce control lists. While the reform initiative 
announced that agencies will apply new criteria for determining 
jurisdiction, several potential challenges remain before aligning the 
State and Commerce control lists. 

* Key findings: Companies seeking to export arms and dual-use items 
are responsible for determining whether these items are regulated by 
State or Commerce and the applicable export requirement. An exporter 
may request a commodity jurisdiction determination from State, if in 
doubt about whether an item is controlled by State or Commerce. An 
exporter may also request a commodity classification decision from 
Commerce if it is uncertain how a dual-use item is classified on the 
Commerce Control List. However, we reported that State was not 
complying with existing time frames established for responding to 
jurisdiction requests to determine proper control of defense-related 
items. Similarly, Commerce was not meeting time frames for 
classification requests. In most cases, Commerce's controls over dual-
use items--which include most items in the U.S. economy--are less 
restrictive than State's controls over arms. State-controlled items 
generally require a license for most destinations unless an exemption 
applies; Commerce-controlled items do not require a license unless 
general prohibitions apply or the export qualifies for certain other 
restrictions. Because State and Commerce have different restrictions 
on the items they control, determining which agency controls exported 
items is fundamental to the U.S. export control system's 
effectiveness. In some cases, both departments have claimed 
jurisdiction over the same items, such as certain missile-related 
technologies. Such jurisdictional disagreements and problems in the 
past have often been rooted in the departments' differing 
interpretations of the regulations and in minimal or ineffective 
coordination among the departments. Unresolved disagreements 
ultimately allow exporters to effectively decide which restrictions 
apply and the type of governmental review that will occur since 
exporters decide whether to approach Commerce or State for approval. 
Not only does this create a competitive disadvantage--because some 
companies obtain access to markets that others do not, depending on 
which system they use--but it also increases the risk that critical 
items will be exported without the appropriate review and resulting 
protections. In our recent review of selected countries' export 
control systems, we found that five of six allied countries use a 
consolidated control list and a single licensing agency to determine 
which controls apply.[Footnote 5] 

* Agency Actions: State and Commerce have taken action to decrease 
processing times for jurisdiction and classification requests, 
respectively. In June 2009, the National Security Council issued 
guidelines on commodity jurisdiction reviews and established a dispute 
resolution mechanism to ensure timely adjudication of cases. According 
to State officials, it has increased its staff from one to five 
persons to process commodity jurisdiction requests and as of July 
2010, the median processing time was 36 days, down from 118 days in 
2002. In addition, State officials also reported that they developed a 
new electronic commodity jurisdiction form to allow applicants to file 
and State offices to process forms electronically. According to 
Commerce, it now tracks and reports timeliness of commodity 
classifications and has recently amended its regulations to clarify 
that Commerce commodity classification determinations may not be 
relied upon as commodity jurisdiction determinations--which can only 
be made by State. However, prior to the reform initiative, State and 
Commerce did not take actions to eliminate overlap between their 
respective control lists.[Footnote 6] 

* Proposed Action in the Reform Initiative: A recent White House 
update on the reform initiative states that a task force will create 
new export control criteria to determine which items and technologies 
should be controlled by Commerce or by State, thus helping to reduce 
uncertainty. According to Commerce officials, the Administration has 
reached agreement on new export control criteria and will revise each 
control list to clearly delineate items controlled under it. Each list 
will also be divided into three tiers based on the types of items and 
how much control the United States needs over these items. Commerce, 
State, and Defense officials involved in the reform initiative will 
need to reach agreement on the appropriate controls over items 
contained in 21 categories of arms and 10 categories of dual-use 
items. So far, the task force has reached agreement on only one of 
these categories--tanks and military equipment--after several months 
of effort. Some of the remaining categories, such as satellites and 
optical equipment, are among those that Commerce and State have 
disagreed on which control list certain items belong. Given this, 
reaching agreement under the new tiered system may take considerable 
time and effort. DOD has set a goal to work with State and Commerce to 
revise the U.S. Munitions List, in conjunction with corresponding 
categories in the Commerce Control List, by June 2011. 

Licensing: Agencies have taken action to address our findings related 
to the U.S. export control licensing system. The reform initiative 
also proposes changes to the system that have the potential to address 
our findings, but it is not clear how certain aspects of the system 
will be implemented, such as whether the new licensing system will 
contain measures of effectiveness. 

* Key Findings: Our findings on the export licensing system centered 
on licensing inefficiencies, lack of clear guidance on export 
exemptions, and State's and Commerce's lack of measures of 
effectiveness in their export control systems. We reported that State 
had a backlog of license applications of over 10,000 cases at the end 
of fiscal year 2006, with an average processing time of 43 days. We 
also found that DOD issued guidance to the military services regarding 
certification of export exemptions in support of DOD activities, but 
non military service components--that were not subject to this 
guidance--were also certifying the use of export exemptions. DOD uses 
the term certify to confirm that an exemption to State export license 
regulations is being used pursuant to an official written request, 
directive, or approval from DOD. The exemption guidelines were also 
unclear and State and DOD lacked comprehensive data to oversee the use 
of DOD-certified exemptions. In addition, for country export 
exemptions, we found that there needs to be up-front agreement on such 
issues as what items are to be controlled, who can have access to 
controlled items, and how to control these items through each 
country's respective export laws and regulations--and that these 
agreements need to be monitored. We found that neither State nor 
Commerce has systematically assessed their priorities and approaches 
to determine the overall effectiveness of their licensing programs, 
nor identified corrective actions that may be needed to fulfill their 
missions--despite heightened terrorism and increased globalization, 
which have significantly changed the national security environment. 

* Agency Actions: In response to our key findings and recommendations, 
State restructured its workforce and revised its procedures to reduce 
license processing times and decrease the number of open cases. In 
September 2010, State reported an average processing time of about 15 
calendar days, down from an average of 43 days in 2006, and a 
reduction of the number of cases in process (i.e., open cases) from 
10,000 to 3,500--despite a 20 percent increase in the number of cases 
received annually. To address our findings for license exemptions, DOD 
and State officials began a working group to discuss changes to State 
licensing regulations and to draft new exemption guidance; however, 
these actions are on hold pending export control reform. For country 
exemptions, State officials established a new division focusing on 
licensing officer training, including training on exemptions. As part 
of the development of the Defense Trade Cooperation Treaties with the 
United Kingdom and Australia, State worked with agencies, including 
Justice and Homeland Security, to evaluate aspects of the Canadian 
exemption. In addition, Commerce has taken steps to review its dual-
use system to increase its effectiveness, including instituting a 
quality assurance program to ensure that Commerce policies and 
procedures have been thoroughly followed by licensing officers and 
conducting assessments of the impact of export controls on U.S. 
economic interests. In addition, Commerce officials noted that they 
have begun to review export data to determine the extent of exporter 
compliance with its regulations, which they stated has increased 
exporter compliance. However, State has not taken steps to assess the 
effectiveness of its arms licensing process. 

* Proposed Action in the Reform Initiative: The reform initiative 
proposes a single licensing agency, which is consistent with our 
finding in five of six selected allied countries. Such action has the 
potential to simplify the U.S. export licensing system, and may also 
result in fewer licenses and a greater number of exemptions for 
exported goods. However, merging the existing licensing 
responsibilities for arms and dual-use items into a single agency will 
require legislative changes. Also, the reform initiative does not 
currently include actions related to country exemptions or treaties 
with the United Kingdom and Australia that were recently approved by 
the Senate and that will allow certain arms to be exported to approved 
entities in those countries without a license. While the 
Administration's proposed single licensing agency is intended to 
eliminate gaps and make the export control system more effective by 
focusing controls on the most sensitive items, the reform framework is 
silent on how it will assess the effectiveness of the licensing 
process. 

Enforcement: Export control agencies have taken action to address our 
findings related to challenges in carrying out their enforcement 
responsibilities. However, agencies have not fully addressed our 
findings relating to monitoring and compliance activities. While the 
export control reform initiative includes actions to improve 
enforcement coordination, the Administration has not announced 
specific actions for monitoring and compliance. 

* Key Findings: U.S. export control enforcement agencies have faced 
considerable challenges in carrying out their respective inspection, 
investigation, and prosecution responsibilities. We found that 
agencies had difficulty coordinating investigations and agreeing on 
how to proceed on cases. We also found that the licensing agencies 
lacked the ability to adequately conduct monitoring and compliance 
activities. For example, we found that Commerce staff lacked the 
awareness of license conditions and the training needed to monitor 
exporters' compliance with these conditions. Further, we found that 
Commerce had not reached an agreement for conducting on-site reviews 
of facilities approved for the Validated End-User program in China and 
that Commerce had not targeted its outreach for release of controlled 
technology to foreign nationals in the United States. 

* Agency Actions: In response to our findings and recommendations, 
Justice established a task force in 2007 with other agencies 
responsible for enforcing export controls to address overlapping 
jurisdiction for investigating potential violations and poor 
interagency coordination. For compliance and monitoring, Commerce 
updated its agent manual, changed its post shipment verification 
checklist, and updated the training of enforcement personnel. 
According to Commerce officials, they conduct several hundred end-use 
checks annually. Commerce officials noted that its analysts research 
and cross-reference threat information found in multiple sources and 
then focus on a smaller set of applications of high national security 
interest. Commerce also revised its regulations to require exporters 
to inform end-users in writing of export license conditions, and 
Commerce officials told us that they reached an agreement with China 
in 2009, and have begun on-site reviews of facilities in the Validated 
End-User program to confirm their compliance with program 
requirements. However, while Commerce instituted a program to improve 
monitoring and compliance when exporting controlled technologies to 
foreign nationals, according to Commerce officials, it has not 
maintained this program due to budgetary constraints. 

* Proposed Action in the Reform Initiative: The reform initiative 
includes the creation of the Export Enforcement Coordination Center to 
coordinate enforcement efforts across all export agencies. According 
to Department of Homeland Security officials, Phase III of the reform 
initiative will examine opportunities to merge export enforcement 
resources. While co-location of the export control agencies in a 
single headquarters'-based facility may help agencies share 
information, further action may be needed to fully coordinate export 
enforcement cases throughout the country. To address compliance and 
monitoring, the reform initiative states that enforcement will include 
additional end-use assurances against diversion by foreign consignees 
and will increase outreach and on-site visits both domestically and 
abroad. At this point, the Administration has not announced specific 
actions on the number and types of monitoring and compliance 
activities that will be conducted. 

Information Technology: Export control agencies have not yet taken 
actions to address our findings that they operate with disparate, 
sometimes antiquated information technology systems, pending reform 
efforts. While the reform initiative has proposed that DOD's USXPORTS 
system be the single information technology system, it does not 
include a specific action to incorporate the enforcement agencies into 
this single system or identify other options to improve information 
management for enforcement activities. 

* Key Findings: We previously found that State and DOD lacked 
comprehensive data to oversee the use of DOD-certified exemptions from 
State export license regulations. We also found that Treasury's 
ability to retrieve and provide timely and accurate information about 
its Iran-related licensing decisions is limited. Further, we found 
that export control enforcement agencies lack a system to identify all 
parties that engage in nuclear proliferation and are impaired from 
judging their progress in preventing nuclear networks because they 
cannot readily identify basic information on the number, nature, or 
details of all their enforcement activities involving nuclear 
proliferation. In addition, we recently found that Congress does not 
have a complete picture of defense exports under current reporting. 
State--which has overall responsibility for regulating arms exports--
and DOD, report to Congress in response to various requirements. 
However, their annual reports on exports have several information gaps 
and inconsistencies in part, because of the differing purposes of the 
agencies' data systems and different reporting methodologies. 

* Agency Actions: DOD and State actions in response to our finding 
that they lacked comprehensive data to oversee the use of DOD-
certified exemptions are on hold, pending export control reform. 
Treasury is in the process of improving its ability to track exports 
approved to embargoed countries, such as Iran. However, Commerce and 
Treasury did not modify their data collection processes to clearly 
identify when enforcement activities involved nuclear proliferation. 
In addition, State does not plan to take action on its reporting of 
defense exports, stating that the resources necessary to change 
reporting formats are not merited given that Congress has not 
requested any change to the substance of its current reporting 
structure. 

* Proposed Action in the Reform Initiative: The reform initiative 
proposes a single information technology system to administer the 
export control system. According to DOD and State officials, DOD's 
USXPORTS database will eventually serve as the single electronic 
system to administer export licensing. The reform initiative is 
proposing a single export license application form for exporters to 
use when submitting Commerce, State, and Treasury export license 
applications. In addition, USXPORTS is currently used by some DOD 
components to record export exemptions. If fully implemented, other 
DOD components could use this system to record their exemptions, which 
could potentially address our finding on the use of DOD-certified 
exemptions. Further, Treasury is expected to enter an agreement with 
DOD to use the USXPORTS database for approving export licenses to 
embargoed countries and DOD has signed separate agreements with State 
and Commerce to adopt DOD's USXPORTS system to improve communication 
and coordination in the export licensing process. However, the reform 
initiative does not propose actions for identifying enforcement 
activities relating to nuclear proliferation. While the reform 
initiative proposes a single information technology system for 
licensing, it does not specifically address reporting of arms export 
data. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Departments of Commerce, 
Defense, Homeland Security, Justice, State, and Treasury for their 
review and comment. Defense, Justice, State, and Treasury did not 
comment on our draft. Commerce and Homeland Security provided 
technical comments, which we incorporated as appropriate. In its 
technical comments, Commerce noted that a review of the current U.S. 
export control system, based on a variety of sources, identified areas 
for enhanced effectiveness. Commerce also noted that it is continually 
evaluating the effectiveness of its dual-use export control system and 
making adjustments as appropriate. We have revised the report to 
reflect actions that Commerce has reported taking, such as Commerce's 
review of export data to determine the extent of exporter compliance 
with its regulations. 

As arranged with your offices, unless you publicly announce the 
contents of this report earlier, we plan no further distribution of it 
until 30 days from the date of this letter. At that time, we will send 
copies of this report to appropriate congressional committees; the 
Secretaries of Commerce, Defense, Homeland Security, Justice, State, 
and Treasury, as well as to other interested parties. In addition, the 
report will be available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov]. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. 

If you have any questions or need additional information, please 
contact me at (202) 512-4841 or martinb@gao.gov. Key contributors to 
this report were Joseph Christoff, Director; John Neumann, Assistant 
Director; Jeffrey Phillips, Assistant Director; Kelly Bradley; Morgan 
DelaneyRamaker; Lisa Gardner; Sherrice Kerns; Jungjin Park; Kenneth 
Patton; Hai Tran; and Alyssa Weir. 

Signed by: 

Belva M. Martin:
Acting Director:
Acquisition and Sourcing Management: 

Enclosure: 

[End of section] 

Enclosure I: GAO Reports on U.S. Export Controls Issued from 2001 
through 2010: Key Findings, Agency Actions, and Export Control Reform 
Proposed Actions: 

GAO report number and title: GAO-10-952: Defense Exports: Reporting on 
Exported Articles and Services Needs to Be Improved; September 21, 
2010; 
Key findings: Information technology: Congress does not have a 
complete picture of defense exports under current reporting. State--
which has overall responsibility for regulating defense exports--and 
DOD, report to Congress in response to various requirements. However, 
their annual reports on exports have several information gaps and 
inconsistencies in part because of the differing purposes of the 
agencies' data systems and different reporting methodologies;
Agency action in response to key findings: Not addressed; State, as the 
agency with overall responsibility for this reporting requirement, does 
not plan to address this finding, stating that the additional resources 
necessary to change reporting formats are not merited given that 
Congress has not requested any change to the substance of its current 
reporting structure;
Does reform initiative propose actions that may address 
findings? No; While the reform initiative proposes a single 
information technology system for licensing, it does not specifically 
address reporting of defense export data. 

GAO report number and title: GAO-10-918: Persian Gulf: U.S. Agencies 
Need to Improve Licensing Data and to Document Reviews of Arms 
Transfers for U.S. Foreign Policy and National Security Goals; 
September 20, 2010; 
Key findings: Licensing: For selected GAO cases, State and DOD did not 
consistently document how arms exports to Gulf countries advanced U.S. 
foreign policy and national security goals. Information technology: 
The total value of arms transfers State authorized to Gulf countries' 
governments could not be determined, in part because its data also 
included arms transfers authorized for U.S. military units stationed 
in the Gulf countries. Additionally, because State's data system does 
not have capability to separate multiple authorizations that cover the 
same equipment, some license values were counted more than once. In 
addition, the system does not separate authorization data by end-
users, such as the host government or U.S. government entities 
operating in the host country; 
Agency action in response to key findings: Ongoing; In response to our 
findings, State and DOD plan to take action to better document arms 
export decisions. State noted that it may require additional resources 
to do so; 
Does reform initiative propose actions that may address findings? No; 
While the reform initiative proposes a single information technology 
system for licensing, it does not specifically address reporting of 
defense export data. 

GAO report number and title: GAO-10-557: Export Controls: Observations 
on Selected Countries' 
Systems and Proposed Treaties; May 27, 2010; 
Key findings: Control list and licensing: Five of the six selected 
allied countries reviewed have a single agency in charge of 
administering export control regulations for arms and dual-use items. 
Enforcement: Four of the six selected allied countries have one agency 
in charge of enforcing export controls. Information technology: Some 
of the selected allied countries have the capability for agencies to 
access a single electronic licensing system when reviewing licenses;
Agency action in response to key findings: Report findings did not 
require action from U.S. export control agencies; 
Does reform initiative propose actions that may address findings? Yes; 
While report findings did not require action from U.S. export control 
agencies, Commerce and State officials noted that the reform 
initiative is considering other countries' export control practices. 

GAO report number and title: GAO-10-375: Iran Sanctions: Complete and 
Timely Licensing Data Needed to Strengthen Enforcement of Export 
Restrictions; March 4, 2010; 
Key findings: Licensing and information technology: Treasury's ability 
to retrieve and provide timely and complete information about its Iran-
related licensing decisions is limited. Treasury uses two paper-based 
information systems to record data on all Iran-related licensing 
decisions. The systems are not integrated with one another, and neither 
can be searched to specifically identify licenses for the export of 
goods to Iran. As a result, Treasury has been unable to consistently 
provide timely responses to requests for complete information on such 
licenses. Enforcement: Despite the sanctions that have been imposed on 
Iran, U.S. officials reported both actual and attempted illegal 
transshipment of U.S. military and dual-use goods through 
intermediaries in third-party nations such as United Arab Emirates, 
Malaysia, and Singapore; 
Agency action in response to key findings: Ongoing; Treasury is in the 
process of improving its ability to track exports to sanctioned 
countries; 
Does reform initiative propose actions that may address findings? Yes; 
The reform initiative announced a single licensing agency and 
enforcement coordination center that will continue U.S. government 
sanctions programs directed towards specific countries such as Iran. 
According to Defense officials, Treasury is expected to enter an 
agreement with Defense to use the USXPORTS database. 

GAO report number and title: GAO-08-1095: Export Controls: Challenges 
with Commerce's Validated End-User Program May Limit its Ability to 
Ensure That Semiconductor Equipment Exported to China is Used as 
Intended; September 25, 2008; 
Key findings: Enforcement: Commerce has not reached a Validated-End-
User-specific agreement with the Chinese government for conducting on-
site reviews of validated end users;
Agency action in response to key findings: Addressed; Commerce stated 
that it has reached an agreement with China and has begun on-site 
reviews; 
Does reform initiative propose actions that may address findings? Yes; 
The reform initiative proposes that agencies focus on and strengthen 
enforcement efforts and notes that there will be additional end-use 
assurances against diversion from foreign consignees, increased 
outreach and on-site visits, both domestically and abroad, as well as 
enhanced compliance and enforcement. 

GAO report number and title: GAO-08-89: Defense Trade: State 
Department Needs to Conduct Assessments to Identify and Address 
Inefficiencies and Challenges in the Arms Export Process; November 30, 
2007; 
Key findings: Licensing: State does not systematically analyze 
licensing data to identify inefficiencies and develop solutions to 
manage its processes and more effectively structure the workforce;
Agency action in response to key findings: Addressed; State performed 
analysis of available licensing data to identify root causes of 
inefficiencies and has significantly improved license processing times;
Does reform initiative propose actions that may address findings? Yes; 
The reform initiative proposes tiered control lists that may result in 
fewer licenses, potentially allowing agencies to focus their resources 
on protecting the items and technologies most critical to national 
security. 

GAO report number and title: GAO-08-21: Nonproliferation: U.S. Efforts 
to Combat Nuclear Networks Need Better Data on Proliferation Risks and 
Program Results; October 31, 2007; 
Key findings: Enforcement: The impact of export control assistance to 
foreign countries to combat the sale of illicit nuclear-related 
technology through proliferation networks is difficult to determine 
because State evaluated neither the proliferation risk for the 
countries in which network activities are alleged to have occurred nor 
the results of its assistance programs. Also, while State's assessments 
characterize a country's export control system and its weaknesses, 
State does not assess how U.S. training efforts contributed to 
correcting weaknesses. Information technology: U.S. agencies collect 
information, maintain lists of companies and individuals that they 
sanction, and maintain investigation case files on suspected violations 
of U.S. law. However, most of these agencies cannot readily identify 
which enforcement activities involve nuclear proliferation as they 
cannot ensure that searching their case file databases for words, such 
as nuclear, would reveal all relevant cases;
Agency action in response to key findings: Ongoing; State disagreed 
with the finding, stating that it used various means to assess its 
assistance programs. Homeland Security and Justice took action to 
address findings related to information technology; Commerce and 
Treasury disagreed with our finding and did not modify their data 
collection processes to clearly identify when enforcement activities 
involved nuclear proliferation;
Does reform initiative propose actions that may address findings? No; 
While the reform initiative includes actions to improve export 
enforcement coordination, it has not announced actions to improve 
agencies' ability to assess foreign country nuclear proliferation 
risks or to address data on nuclear proliferation enforcement 
activities. 

GAO report number and title: GAO-07-1103: Defense Trade: Clarification 
and More Comprehensive Oversight of Export Exemptions Certified by DOD 
Are Needed September 19, 2007; 
Key findings: Licensing: DOD uses the term, certify, to confirm that 
an exemption to State's International Traffic in Arms Regulations is 
being used pursuant to an official written request, directive, or 
approval from DOD. DOD non military service components--that are not 
subject to relevant DOD guidelines--are certifying the use of license 
exemptions in support of international activities, and some components 
had created or were creating their own guidelines, which could lead to 
inconsistent certification practices. In addition, State has raised 
several concerns to DOD about its guidelines, including the use of one 
exemption by contractors. Information technology: State and DOD lack 
comprehensive data to oversee the use of DOD-certified exemptions;
Agency action in response to key findings: On Hold; Defense and State 
officials noted that actions to address this finding are on hold 
pending export control reform;
Does reform initiative propose actions that may address findings? Yes; 
The reform initiative proposes that after aligning the control lists, 
items will be authorized for export to multilateral partners and 
allies under license exemptions or general authorizations. The reform 
initiative also announced that the U.S. government is transitioning to 
a single information technology system to administer its export 
control system. 

GAO report number and title: GAO-07-265: Export Controls: Challenges 
Exist in Enforcement of an Inherently Complex System; December 20, 
2006; 
Key findings: Enforcement: Enforcement agencies have had difficulty 
coordinating investigations and agreeing on how to proceed on cases; 
and neither State nor Commerce systematically receives notification of 
the outcomes of criminal cases from Justice. Licensing: For State 
licenses, CBP tracks the quantity and dollar value of shipments made 
under the license to help ensure that the exporter does not exceed 
authorized amounts and that the license has not expired. CBP does not 
similarly track shipments under Commerce licenses;
Agency action in response to key findings: Addressed; Justice formed 
an interagency working group to enhance export control coordination 
among agencies responsible for enforcing export controls; and Justice 
is providing quarterly reports to the licensing agencies on criminal 
export enforcement results to better inform licensing decisions. Not 
Addressed; Commerce has not required that CBP track the quantity and 
dollar value of shipments made under Commerce licenses; 
Does reform initiative propose actions that may address findings? Yes; 
The reform initiative proposed establishing an Export Enforcement 
Coordination Center that will coordinate enforcement efforts--and 
potentially eliminate gaps and duplication--across all relevant 
departments and agencies. In November 2010, the President issued an 
Executive Order directing the Department of Homeland Security to 
establish the center. While the reform initiative does not contain 
actions relating to tracking the quantity and dollar value of 
shipments made under licenses, according to Commerce officials, this 
is being discussed as part of the reform effort. 

GAO report number and title: GAO-07-70: Export Controls: Agencies 
Should Assess Vulnerabilities and Improve Guidance for Protecting 
Export-Controlled Information at Universities; December 5, 2006; 
Key findings: Enforcement: State and Commerce have not conducted an 
overall assessment of available trend data on technology development 
research and foreign participation in such research at U.S. 
universities to identify potential vulnerabilities. Universities we 
visited indicated that government-provided training and guidance on 
export control regulations is limited in informing their efforts to 
manage and protect export-controlled information in the university 
environment;
Agency action in response to key findings: Ongoing; According to State 
and Commerce officials, they have increased outreach activities. State 
acknowledged that it currently does not have the resources to 
strategically assess research on college campuses, but that it had 
participated in a recent workshop with academia. Commerce also stated 
that it includes deemed exports in every seminar and holds an annual 
seminar to address concerns of the academic community;
Does reform initiative propose actions that may address findings? Yes; 
The reform initiative does not list actions relating to deemed export 
licenses. However, according to Commerce officials, comprehensive 
reform of deemed exports (including compliance), is planned for Phase 
II of the reform initiative. 

GAO report number and title: GAO-07-69: Export Controls: Agencies 
Should Assess Vulnerabilities and Improve Guidance for Protecting 
Export-Controlled Information at Companies December 5, 2006; 
Key findings: Enforcement: State and Commerce have not fully assessed 
the risks of companies using a variety of means to protect export-
controlled information. Increased knowledge of the risks associated 
with protecting such information could improve agency outreach and 
training efforts, which now offer limited assistance to companies to 
mitigate those risks. Commerce's and State's communications with 
companies do not focus on export-controlled information;
Agency action in response to key findings: Ongoing; According to State 
and Commerce officials, they have increased outreach activities to 
companies. State assesses the defense industry's protection of export-
controlled information through its license reviews and monitoring and 
compliance activities and has a website for defense exporters. 
Commerce officials also stated that they include deemed exports in 
every seminar;
Does reform initiative propose actions that may address findings? Yes; 
The reform initiative does not list actions relating to deemed export 
licenses. However, according to Commerce officials comprehensive 
reform of deemed exports (including compliance), is planned for Phase 
II of the reform initiative. 

GAO report number and title: GAO-07-197R: Analysis of Data for Exports 
Regulated by the Department of Commerce; November 13, 2006; 
Key findings: Licensing and information technology: Less than 1 
percent of exports subject to Commerce regulations were licensed in 
2005. This data analysis further supported GAO's prior recommendation 
to Commerce that it use available data to evaluate the effectiveness 
of its export control system. Commerce officials told us that they 
periodically use portions of the data for enforcement activities, but 
currently do not use the data to evaluate the system's effectiveness;
Agency action in response to key findings: Report was a companion 
report to GAO-06-638;
Does reform initiative propose actions that may address findings? See 
response for GAO-06-638. 

GAO report number and title: GAO-06-638: Export Controls: Improvements 
to Commerce's Dual-Use System Needed to Ensure Protection of U.S. 
Interests in the Post-9/11 Environment; June 26, 2006; 
Key findings: Control List and licensing: Commerce has not 
systematically evaluated the dual-use export control system to 
determine whether it is meeting its stated goal of protecting U.S. 
national security and economic interests. GAO found omissions in the 
watch list Commerce uses to screen export license applications. 
Commerce has implemented several but not all of GAO's prior 
recommendations for ensuring that export controls on sensitive items 
protect U.S. interests, including recommendations related to the lack 
of clarity as to which items are controlled by Commerce; 
Agency action in response to key findings: Addressed; Commerce has 
stated that it tracks and reports timeliness of export licenses and 
commodity classifications and has developed a Quality Assurance 
program to measure the quality and efficiency of both processes. It 
also has an annual process to review the Commerce Control List to 
ensure that sensitive items are controlled;
Does reform initiative propose actions that may address findings? No; 
The reform initiative does not contain actions to measure the 
effectiveness of the dual-use export control system in protecting U.S. 
interests. 

GAO report number and title: GAO-05-234: Defense Trade: Arms Export 
Control System in the Post-9/11 Environment; February 16, 2005; 
Key findings: Licensing: Since the September 2001 terror attacks, the 
arms export control system has not undergone fundamental changes. 
While the system essentially remains unchanged, new trends have 
emerged in the processing of arms export cases. The median processing 
time for export license applications and related cases at State began 
increasing in fiscal year 2003. State has sought limited coordination 
with the agencies responsible for enforcing U.S. export laws regarding 
initiatives designed to streamline arms export licensing;
Agency action in response to key findings: Addressed; According to 
State, it has significantly improved the processing time for export 
control licenses; 
Does reform initiative propose actions that may address findings? Yes; 
The reform initiative proposes a single licensing system and tiered 
control lists that may result in fewer licenses and potentially allow 
the government to focus its resources on protecting the items and 
technologies most critical to national security. 

GAO report number and title: GAO-04-175: Nonproliferation: 
Improvements Needed To Better Control Technology Exports For Cruise 
Missiles And Unmanned Aerial Vehicles; January 23, 2004; 
Key findings: Enforcement: A gap in U.S. export control regulations 
could allow missile proliferators or terrorists to acquire U.S. cruise 
missiles or Unmanned Aerial Vehicles dual-use technology without 
violating U.S. export control laws or regulations. The U.S. government 
seldom uses its end-use monitoring programs to verify compliance with 
the conditions placed on items that could be used to develop cruise 
missiles or Unmanned Aerial Vehicles. Thus, the U.S. government does 
not have sufficient information to know whether recipients of these 
exports are effectively safeguarding equipment and technology in ways 
that protect U.S. national security and nonproliferation interests;
Agency action in response to key findings: Addressed; Commerce changed 
its export control regulations to close the gap we had identified and 
modified policy guidance and targeting criteria for future selection 
of cruise missile and unmanned aerial vehicle items for post shipment 
verification. According to State officials, as part of an ongoing 
effort to improve targeting of end-use checks, Unmanned Aerial 
Vehicles, cruise missiles, and other especially sensitive commodities 
are routinely subject to Blue Lantern end-use checks at a level much 
higher proportionally than other commodities; 
Does reform initiative propose actions that may address findings? Yes; 
The reform initiative proposes that agencies will focus and 
strengthen enforcement efforts and that there will be additional end-
use assurances against diversion from foreign consignees, increased 
outreach and on-site visits both domestically and abroad, and enhanced 
compliance and enforcement. 

GAO report number and title: GAO-04-357: Export Controls: Post 
Shipment Verification Provides Limited Assurance That Dual-Use Items 
Are Being Properly Used; January 12, 2004; 
Key findings: Enforcement: We identified three key weaknesses in the 
Commerce post shipment verification process: (1) U.S. officials 
frequently do not check license conditions, they often lack the 
technical training to assess compliance, and end users may not be 
aware of the license conditions. (2) Some countries of concern, most 
notably China, limit the U.S. government's access to facilities where 
dual-use items are shipped, making it difficult to conduct a post 
shipment verification. (3) Verification results have only a limited 
impact on future licensing decisions;
Agency action in response to key findings: Addressed; Commerce updated 
its special agent manual, changed its post shipment verification 
checklist, and updated the training of enforcement personnel. Commerce 
also amended their regulations to require exporters to inform end 
users in writing of export license conditions; 
Does reform initiative propose actions that may address findings? Yes; 
The reform initiative proposes that agencies focus and strengthen 
enforcement efforts and that there will be additional end-use 
assurances against diversion from foreign consignees, increased 
outreach and on-site visits both domestically and abroad, and enhanced 
compliance and enforcement. 

GAO report number and title: GAO-03-694: Defense Trade: Better 
Information Needed To Support Decisions Affecting Proposed Weapons 
Transfers; July 11, 2003; 
Key findings: Information technology and control list: To protect U.S. 
technological advantage, safeguards--such as lowering the capability 
of a transferred weapon and withholding sensitive information on how 
the system operates--are considered for proposed transfers. However, 
the effectiveness of some individual safeguards may be limited. 
Information needed to assess releasability is not always complete, up-
to-date, or available. For example, DOD's centralized database 
contains some of this information, as well as historical case data; 
however, it is not always complete, up-to-date, or easy to access. 
Further, some intelligence information that could have a direct 
bearing on whether an advanced weapon or technology should be released 
is not provided to decision makers involved in releasability 
determinations; 
Agency action in response to key findings: Addressed; The National 
Disclosure Policy System was reviewed and received upgrades. DOD has 
added data to the upgraded system and has made additional user-
suggested modifications to the system;
Does reform initiative propose actions that may address findings? No; 
The reform initiative has not proposed planned actions relating to 
National Disclosure Policy System data. 

GAO report number and title: GAO-03-43: Nonproliferation: Strategy 
Needed To Strengthen Multilateral Export Control Regimes; October 25, 
2002; 
Key findings: Control list and information technology: Multilateral 
export control regimes cannot effectively limit or monitor efforts by 
countries of concern to acquire sensitive technology without more 
complete and timely reporting of licensing information and without 
information on when and how members adopt and implement agreed-upon 
export controls. Several obstacles limit the options available to the 
United States in strengthening the effectiveness of multilateral 
export control regimes. The requirement to achieve consensus in each 
regime allows even one member to block action in adopting needed 
reforms. Because the regimes are voluntary and non binding, they 
cannot enforce members' compliance with regime commitments;
Agency action in response to key findings: Ongoing; According to State 
officials, the Missile Technology Control Regime and the Nuclear 
Suppliers Group have agreed to share catch-all denials and have 
adopted a best practices guide for using and sharing Regime denial 
information; 
Does reform initiative propose actions that may address findings? No; 
While the reform initiative proposes that the U.S. government 
transition to a single information technology system to administer its 
export control system, it does not specifically address reporting of 
license data to multilateral regimes. 

GAO report number and title: GAO-02-996: Export Controls: Processes 
for Determining Proper Control of Defense-Related Items Needs 
Improvement; September 20, 2002; 
Key findings: Control List: State did not comply with existing time 
frames established for responding to commodity jurisdiction requests 
to determine proper control of defense-related items. In addition, 
Commerce and Defense did not provide their recommendations to State 
within the existing time frames. In some cases, both Commerce and 
State have claimed jurisdiction over the same items, such as certain 
missile-related technologies. Such jurisdictional disagreements and 
problems in the past have often been rooted in the departments' 
differing interpretations of the regulations and in minimal or 
ineffective coordination between the departments. Similarly, Commerce 
was not meeting time frames for classification requests; 
Agency action in response to key findings: Addressed; In June 2009, 
the National Security Council issued guidelines on commodity 
jurisdiction reviews and established a dispute resolution mechanism to 
ensure timely adjudication of cases. State and Commerce have taken 
action intended to decrease processing times for jurisdiction and 
classification requests, respectively; 
Not Addressed; However, State and Commerce did not take actions to 
eliminate overlap between their respective control lists; 
Does reform initiative propose actions that may address findings? Yes; 
The reform initiative proposes that agencies will apply new criteria 
for determining what items need to be controlled and a common set of 
policies for determining when an export license is required. The 
control list criteria will be based on transparent rules and controls 
and will use objective parameters. This is intended to greatly reduce 
the uncertainty faced by U.S. allies, industry, and foreign partners, 
and to allow the government to focus on the most sensitive items to 
enhance national security. 

GAO report number and title: GAO-02-972: Export Controls: Department 
of Commerce Controls over Transfers of Technology to Foreign Nationals 
Need Improvement; September 6, 2002; 
Key findings: Enforcement: Vulnerabilities in Commerce's deemed export 
control system could help China and other countries of concern improve 
their military capabilities. Commerce's screening process does not 
include thousands of immigration change-of-status applications from 
foreign nationals already in the United States who may seek work in 
U.S. high-tech firms. Commerce does not have an effective monitoring 
program in place to determine whether firms comply with security 
conditions for deemed export licenses;
Agency action in response to key findings: Ongoing; Commerce stated 
that the Immigration and Naturalization Service was consulted and 
suggested a referral, for Commerce review, of any change-of-status 
Visa applications that may involve foreign nationals seeking 
employment with access to sensitive technology;
Does reform initiative propose actions that may address findings? Yes; 
The reform initiative does not list actions relating to deemed export 
licenses. However, according to Commerce officials, comprehensive 
reform of deemed exports (including compliance), is planned for Phase 
II of the reform initiative. 

GAO report number and title: GAO-02-63: Lessons to Be Learned From the 
Country Export Exemption; March 29, 2002; 
Key findings: Based on the experience with the Canadian exemption, 
some areas need to be addressed when negotiating and executing license 
exemptions with other countries. Licensing: There needs to be up-front 
agreement on such issues as what items are to be controlled, who can 
have access to controlled items, and how to control these items 
through each country's respective export laws and regulations. State 
needs to review guidance and training. Enforcement: The U.S. 
government needs to monitor agreements to assess their effectiveness 
and ensure that unanticipated problems have not arisen. Enforcement 
mechanisms need to be in place to monitor exporters' compliance with 
the exemption and enable prosecution of violators; 
Agency action in response to key findings: Addressed; According to 
State officials, a new division focusing primarily on licensing 
officer training (which includes training on exemptions) and outreach 
was formed in 2009. As part of the development of the Defense Trade 
Cooperation Treaties with the UK and Australia, State worked with 
agencies, including Justice and Homeland Security, to evaluate what 
aspects of existing exemptions, including the Canadian exemption, 
should be included in the treaties. According to Customs and Border 
Protection, it has conducted threat assessments for its Northern and 
Southern Borders. It is in the process of updating its export control 
handbook; 
Does reform initiative propose actions that may address findings? No; 
The reform initiative does not contain actions relating to specific 
country exemptions or the other treaties with the United 
Kingdom and Australia that were recently approved by the Senate. 

GAO report number and title: GAO-02-120: Export Controls: 
Clarification of Jurisdiction for Missile Technology Items Needed; 
October 9, 2001; 
Key findings: Control list: Commerce and State have not clearly 
established which department has jurisdiction for almost 25 percent of 
the items the United States agreed to control as part of its Missile 
Technology Control Regime commitments. Some exporters did not fully 
understand the export control system or certain terms in the 
regulations, thereby making it sometimes difficult to determine where 
to apply for a license to export Regime items; 
Agency action in response to key findings: Not Addressed; Commerce and 
State have not addressed findings. According to State, it updated the 
U.S. Munitions List and corresponding regulations in 2006 and 2008 and 
began a comprehensive review. According to both Commerce and State, 
further action on this issue is pending due to export control reform; 
Does reform initiative propose actions that may address findings? Yes; 
The reform initiative proposes that agencies will apply new criteria 
for determining what items need to be controlled and a common set of 
policies for determining when an export license is required. The 
control list criteria will be based on transparent rules to reduce the 
uncertainty faced by U.S. allies, industry, and foreign partners, and 
to allow the government to focus on the most sensitive items in order 
to enhance national security. 

Source: GAO analysis. 

[End of table] 

[End of enclosure] 

Footnotes: 

[1] For the purposes of this report, the term arms refers to defense 
articles, defense services, and related technical data, as specified 
in 22 U.S.C. § 2778, and the term dual-use refers to items that have 
both commercial and military applications, such as high-performance 
computers, radars, and underwater television cameras. 

[2] See enclosure I for a list of these reports. 

[3] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-09-271] (Washington, D.C.: January 
2009). 

[4] We excluded Foreign Military Sales--a U.S. government program to 
provide foreign governments or international organizations with U.S. 
defense articles and services--as it is not being addressed through 
the President's export control reform initiative. 

[5] We reviewed the export control systems of Australia, Canada, 
France, Germany, Japan, and the United Kingdom. Each of these 
countries had a single licensing agency except for France. More 
information can be found in GAO, Export Controls: Observations on 
Selected Countries' Systems and Proposed Treaties, [hyperlink, 
http://www.gao.gov/products/GAO-10-557] (Washington, D.C.: May 27, 
2010). 

[6] According to Commerce officials, agencies have devoted 
significantly greater time, since 2009, to processing commodity 
jurisdiction requests, which has the potential to reduce overlap 
between State and Commerce control lists. However, the processing of 
commodity jurisdiction requests is completed on a case-by-case basis. 

[End of section] 

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