Department of Homeland Security
 

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CBP’s and USCG’s Controls Over Exports 


Related to Foreign Military Sales 


OIG-13-119 September 2013
 
 

   

         

   

       

         

         

      

       

   

       

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ector General for Audits

                

     

                             

                        

                        

                       

                       

                   

                       

                

                             

                        

          

                         

  

                           

                 

                            

     

                             

             

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

 Washington, DC 20528 / www.oig.dhs.gov 

SEP 09 2013

MEMORANDUM FOR:	 Susan T. Mitchell

Acting Assistant Commissioner

Office of Field Operations

U.S. Customs and Border Protection

Rear Admiral Bruce D. Baffer

Assistant Commandant for Acquisitions

United States Coast Guard

FROM:	 Anne L. Richa

Assistant Insp

SUBJECT:	 CBP’s and USCG’s Controls Over Exports Related to

Foreign Military Sales

Attached for your action is our final report, CBP’s and USCG’s Controls Over Exports Related

to Foreign Military Sales. We incorporated the formal comments from U.S. Customs and

Border Protection and the United States Coast Guard in the final report.

The report contains three recommendations aimed at improving U.S. Customs and Border

Protection’s (CBP) and the United States Coast Guard’s (USCG) Foreign Military Sales

program’s effectiveness. Your offices concurred with the recommendations. Based on

information provided in your response to the draft report, we consider the

recommendations resolved. Once your offices have fully implemented the

recommendations, please submit a formal closeout letter to us within 30 days so that we

may close the recommendations. The request should be accompanied by evidence of

completion of agreed‐upon corrective actions.

Please email a signed PDF copy of all responses and closeout requests to

OIGAuditsFollowup@oig.dhs.gov.

Consistent with our responsibility under the Inspector General Act, we will provide copies of

our report to appropriate congressional committees with oversight and appropriation

responsibility over the Department of Homeland Security. We will post the report on our

website for public dissemination.

Please call me with any questions, or your staff may contact Mark Bell, Deputy Assistant

Inspector General for Audits, at (202) 254‐4100.

Attachment
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Table of Contents 

Executive Summary............................................................................................................. 1 


Background ........................................................................................................................ 2 


Results of Review ................................................................................................................ 3 


CBP’s FMS-related Export Verification Process ..................................................... 4 


Recommendation ................................................................................................... 5 


Management Comments and OIG Analysis ........................................................... 5 


Guidance and Training for CBP Officers ................................................................. 6 


Recommendation ................................................................................................... 6 


Management Comments and OIG Analysis ........................................................... 7 


The USCG’s FMS Contracts and Access to AES ...................................................... 7 


Recommendation ................................................................................................... 8 


Management Comments and OIG Analysis ........................................................... 8 


Appendixes 

Appendix A: Objectives, Scope, and Methodology .............................................. 9 


Appendix B: Management Comments to the Draft Report ............................... 11 


Appendix C: Major Contributors to This Report ................................................ 14 


Appendix D: Report Distribution ........................................................................ 15 


Abbreviations 

AES Automated Export System 

CBP U.S. Customs and Border Protection 

DHS Department of Homeland Security 

DoD Department of Defense 

FMS Foreign Military Sales 

FY fiscal year 

GAO U.S. Government Accountability Office 

IPO International Programs Office (U.S. Navy) 

JFK John F. Kennedy International Airport 

LOA Letter of Offer and Acceptance 

OFO Office of Field Operations (CBP) 

OIG Office of Inspector General 

USCG United States Coast Guard 

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 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Executive Summary 

Within the Department of Homeland Security, under the Foreign Military Sales program, 

the United States Coast Guard (USCG) procures and provides defense-related articles 

and services to foreign governments, and U.S. Customs and Border Protection (CBP) 

controls exports of articles related to Foreign Military Sales. In February 2013, the U.S. 

Government Accountability Office deemed Foreign Military Sales a high risk area for the 

Federal Government. We performed this audit to determine whether CBP and the 

USCG have adequate controls over the Foreign Military Sales export process. 

CBP and the USCG need to improve their controls over exports related to Foreign 

Military Sales. CBP has a process to assess the risk associated with exports and target 

shipments for physical inspection. However, during this process officers rely on 

potentially unverified and inaccurate information that shippers submit to an export 

database. Additionally, according to officers at the two ports we reviewed, they did not 

physically inspect any Foreign Military Sales-related exports in fiscal year 2012. CBP also 

does not have a centralized system to track Foreign Military Sales-related exports, which 

increases the risk of unauthorized exports and diminishes the efficiency of the process. 

CBP’s guidance to the ports for handling Foreign Military Sales-related shipments is 

outdated, and the component does not provide formal training to its officers on 

handling these exports. Of the USCG contracts for Foreign Military Sales articles that we 

reviewed, not all specified that they were related to the program, nor did they all 

include Foreign Military Sales requirements. Foreign Military Sales regulations do not 

require operating agencies, such as the USCG, to verify accuracy of shipment 

documentation in the Automated Export System that CBP uses to assess risk and target 

shipments for physical inspections. Therefore, the USCG may be unaware of inaccurate 

Foreign Military Sales-related shipment documentation in the system. 

We made three recommendations that, when implemented, should improve CBP’s and 

USCG’s controls over exports related to Foreign Military Sales. CBP and the USCG 

concurred with the recommendations. 

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Department of Homeland Security 

Background 

As part of the Office of Inspector General’s (OIG) fiscal year (FY) 2013 Annual Performance 

Plan, we reviewed the Department of Homeland Security’s (DHS) controls and oversight 

of Foreign Military Sales (FMS). Within the Department, under the FMS program, the 

USCG provides defense-related articles and services to foreign countries and CBP 

controls exports of FMS-related articles. 

The USCG acts as an operating agency for the Department of Defense (DoD) to procure 

defense-related articles and services requested by foreign governments.1

 DoD and 

foreign governments are responsible for associated costs; therefore, DHS does not 

directly use its appropriations to fund the USCG’s FMS-related activities. 

In the FMS process, the U.S. Navy’s International Programs Office (IPO) provides the 

USCG with a Letter of Request from a foreign government. After reviewing the request 

and determining the price, the USCG issues a Letter of Offer and Acceptance (LOA), 

describing the goods and services to be provided and their value. USCG case managers 

forward the LOA, which may involve multiple contracts to provide the defense-related 

articles or services to the U.S. Navy for approval. Prior to shipping FMS-related articles 

to a port, USCG case managers inspect and approve the shipment. 

The Department of State requires that all shippers obtain an export license for FMSrelated shipments. Shippers must also enter shipment and license information into the 

export database, the Automated Export System (AES). When FMS-related shipments 

arrive at a port, CBP officers check AES to determine under which LOA the shipment is 

authorized, confirm that the shipper is approved by the Department of State, and 

ensure that the declared value of goods does not exceed the total authorized value of 

the LOA. 

If the shipment value exceeds the authorized LOA value by more than 10 percent or the 

documentation is not correct, the shipment may be detained or seized. If the shipment 

value exceeds the LOA value by 10 percent or less and the documentation is correct, 

CBP decrements the value of the exported goods from the LOA value, records the 

remaining value of the LOA, and may approve the shipment for export.2 According to 

CBP officials, 126,083 FMS-related shipments were exported in FY 2012, of which the 

1

 DoD is responsible for implementing the FMS program, including issuing Letters of Offer and Acceptance 

(LOA), transmitting Congressional Notifications, and monitoring end use. As an operating agency, the 

USCG works with foreign governments, subject to DoD’s review and approval.

2

 In decrementing an FMS-related shipment, CBP subtracts the declared value of the shipment from the 

value of the Department of State license, which is the total value of goods under the LOA. 

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Department of Homeland Security 

Port of Baltimore Seaport and the John F. Kennedy International Airport (JFK) shipped 

4,421 and 36,199, respectively. 

In May 2009, the U.S. Government Accountability Office (GAO) issued a report on the 

Federal Government’s FMS program, Defense Exports, Foreign Military Sales Program 

Needs Better Controls for Exported Items and Information for Oversight. According to 

GAO, CBP officers did not have key information in export documentation that was 

needed to properly record the value of defense-related articles shipped under FMS 

LOAs. GAO also noted that CBP had not updated the U.S. Customs Control Handbook for 

Department of State Licenses since 2002 and was not adequately instructing its officers 

on tracking shipment and LOA values. Finally, CBP had not acted on GAO’s 2003 

recommendation to update the process for recording information on FMS-related 

shipments at ports because it did not have a centralized database to link records among 

the hundreds of ports processing such shipments. At the time of the 2009 GAO review, 

CBP planned to develop a new centralized system to automatically decrement the value 

of individual FMS-related shipments; however, at the time of our review, CBP had not 

developed the system. 

In a February 2013 report to Congress on high-risk areas of the Federal Government, 

GAO pointed out that DHS, DoD, and the Department of State still needed to improve 

internal and interagency practices to facilitate reliable shipment verification, as well as 

improve monitoring and administration of the FMS program. 

Results of Review 

CBP and the USCG need to improve their controls over the FMS export process. CBP has 

a process to assess the risk associated with exports and target shipments for physical 

inspection. However, according to CBP officers at the two ports we reviewed, no FMSrelated exports were physically inspected in FY 2012. To assess risk and target shipments 

for physical inspection, CBP officers rely on potentially unverified and inaccurate 

information that shippers enter into AES. In addition, CBP does not have a centralized 

system to track FMS-related exports, which diminishes the efficiency of the FMS process 

and increases the risk of unauthorized FMS exports. CBP’s guidance to the ports for 

handling FMS-related shipments is outdated, and the component does not provide 

formal training to its officers on handling FMS exports. Of the USCG contracts for FMS 

articles we reviewed, not all specified that they were related to FMS, nor did they all 

include FMS requirements. Additionally, the USCG does not have access to AES. 

A USCG official said that the USCG is not required by FMS regulations to verify the 

accuracy of shipment documentation in AES. 

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Department of Homeland Security 

CBP’s FMS-related Export Verification Process
 

CBP has a process to assess risk and target shipments for physical inspection. A 

CBP headquarters official and port officials confirmed that FMS-related exports 

may not be targeted through this assessment and, as a result, may not be 

physically inspected. During FY 2012, at the two FMS ports we reviewed, CBP 

officers said they did not physically inspect any FMS-related shipments prior to 

being exported. 

The reliability of AES depends on the accuracy of shipper-submitted data. 

According to a CBP headquarters official, inaccurate information in AES may 

affect the accuracy of CBP’s risk assessment. CBP jointly operates AES with the 

Department of Commerce, the Department of State, other Federal agencies, and 

the export trade community. To help target shipments properly for physical 

inspection and reduce risks to national security, the information in AES should 

correctly identify shipments as FMS-related and include correct shipment values. 

CBP does not have a centralized system to track FMS-related shipments, which 

has led to a more time-consuming FMS process. For example, we tracked a 

USCG FMS-related shipment scheduled to be exported from one port for which 

the shipper had filed an export license at a different port. As a result, the CBP 

officer at the port of exit had to contact the port where the license was filed and 

wait for personnel there to review it and confirm the export was allowable, a 

process which took additional time. CBP officers at the ports we visited also said 

that they have other duties to perform, such as import inspections and outbound 

passenger screening. 

Not having a centralized tracking system also potentially increases the risk of 

exporting FMS-related articles that exceed LOA values. According to a CBP 

headquarters official, CBP does not collect or analyze FMS-related export 

information because ports use non-standardized paper-based and spreadsheet 

tracking systems. Reconciling this export-related information could prevent 

duplicate filings of export licenses. By not reconciling the information, CBP risks 

decrementing shipment values from different ports against the same LOA, 

unknowingly exceeding the value of the LOA and violating Federal laws and 

regulations. 

Following GAO’s 2009 report, CBP planned to implement an International Trade 

Data System to centrally track imports and exports. According to a CBP 

headquarters official, because the component did not have the necessary 

funding, it was unable to implement the system. Such a system could also help 

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 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

CBP eliminate duplicate export licenses and reconcile data from all ports to 

ensure its accuracy. 

Conclusion 

CBP’s reliance on potentially inaccurate shipper-provided information may affect 

the accuracy of CBP’s risk assessment for targeting FMS-related shipments for 

physical inspection. Furthermore, the absence of a centralized system for 

tracking FMS-related shipments results in an inefficient process, which also 

increases the risk of potentially unauthorized exports. By improving the 

information used to target shipments and creating a centralized process for 

tracking FMS-shipments, CBP can improve its controls over the FMS process. 

Recommendation 

We recommend that the Acting Assistant Commissioner for the Office of Field 

Operations at U.S. Customs and Border Protection: 

Recommendation #1: 

Create and implement a centralized process for tracking Foreign Military Salesrelated shipments and enhance the Foreign Military Sales export data validation 

process. 

Management Comments and OIG Analysis 

Management Comments: CBP’s Office of Field Operations (OFO) concurred with 

the recommendation. OFO, the DoD Defense Security Cooperation Agency, the 

U.S. Army, and the U.S. Navy met as a working group in May 2013 to discuss 

streamlining the FMS process. The working group is reviewing a draft process 

diagram. 

OFO is exploring the use of AES to track FMS shipments. Additionally, OFO and 

CBP’s Office of Information Technology are working to improve validation of the 

information received from freight forwarders, increasing field personnel’s access 

to all case information at every port, and enhancing the systems capabilities to 

decrement imported and exported shipments. CBP anticipates fully 

implementing corrective actions by September 30, 2015. 

OIG Analysis: CBP’s proposed actions are responsive to the recommendation. 

However, the recommendation will remain open and resolved until final 

implementation of the proposed corrective actions. 

www.oig.dhs.gov 5 OIG-13-119 
 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Guidance and Training for CBP Officers
 

In response to the 2009 GAO report, CBP has updated its guidance on 

procedures for seizing FMS-related shipments; however, it has not updated the 

U.S. Customs Handbook for Department of State Licenses since 2002. As GAO 

noted, the handbook does not provide sufficient instructions to CBP officers on 

tracking shipments and LOA values. At the time of our review, a CBP 

headquarters official confirmed that a draft update had not been reviewed for 

publication or issued to the ports for implementation. 

Furthermore, during our review, CBP officers said and CBP headquarters officials 

confirmed that officers receive 2 weeks of export officer training, but it does not 

include instruction specifically addressing FMS-related shipments. CBP 

headquarters officials and officers at the ports said that officers receive informal 

FMS-related training on the job, but CBP officers said that this may not be 

effective given the limited staffing and the levels of experience with FMS at the 

various ports. 

Conclusion 

CBP’s guidance for handling FMS-related shipments is outdated. Additionally, 

CBP export officers do not receive formal FMS-specific training. By updating the 

handbook and providing formalized training on these policies and procedures, 

CBP can further improve its controls over the FMS process. 

Recommendation 

We recommend that the Acting Assistant Commissioner for the Office of Field 

Operations at U.S. Customs and Border Protection: 

Recommendation #2: 

Update the U.S. Customs Control Handbook for Department of State Licenses to 

reflect current export-related laws, regulations, and responsibilities; and provide 

formal training to CBP export officers on Foreign Military Sales policies and 

procedures. 

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Department of Homeland Security 

Management Comments and OIG Analysis 

Management Comments: CBP’s OFO concurred with the recommendation.
 

By December 31, 2013, OFO plans to incorporate changes into the U.S. Customs 


Service Control Handbook based on recommendations from the prior GAO and
 

OIG reports. 


On July 1, 2013, OFO began a review of existing training. It plans to establish a 


course for CBP officers and other export staff on FMS policies and procedures. 


Formal training is expected to be completed by December 2014, after revisions 


to the handbook are finished.
 

OIG Analysis: CBP’s proposed actions are responsive to the recommendation. 


However, the recommendation will remain open and resolved until final 


implementation of the proposed corrective actions. 


The USCG’s FMS Contracts and Access to AES 

During the audit survey we conducted a limited review of USCG FMS case files. 

The case files we reviewed indicated that not all USCG FMS contracts specified 

that the contract was for FMS articles, nor did they all specifically require the 

contractor to comply with applicable FMS laws and regulations. In addition, the 

USCG does not have access to AES, is not required to and does not verify the 

accuracy of AES information, and may be unaware of inaccurate FMS-related 

shipment documentation in the system. 

For example, documentation in one case file showed that the USCG was to 

supply a package of FMS-related tools to a foreign country. The USCG 

contracted with a company to provide the tools, but the contract did not identify 

the tools in the shipment as FMS. The company subsequently subcontracted 

with a commercial shipper to send the tools to the foreign country. Our review 

of the shipment documentation showed that CBP had not decremented the 

value of the shipment from an FMS export license because neither the 

contractor nor the subcontracted commercial shipper had identified the tools as 

part of an FMS shipment. Ultimately, the commercial shipper was responsible 

for following FMS-related export laws and regulations and ensuring accurate 

information was entered into AES, but unless shipments are properly identified 

as FMS at the beginning of the process, the shipper may not be held 

accountable. As a result, there is a risk that FMS-related shipments may not be 

exported according to applicable laws and regulations. 

www.oig.dhs.gov 7 OIG-13-119 
 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Changes to USCG contracting practices could help to ensure that FMS-related 

shipments are properly documented. As a result of our review, USCG officials 

said that they would revise their future FMS contracts to include information 

explicitly identifying the shipment as FMS and also include the related export 

requirements. 

Conclusion 

USCG’s contracts for FMS-related items did not always specify that the items 

being procured were part of an FMS agreement, nor did they always include a 

requirement to comply with FMS-related laws and regulations. Furthermore, the 

USCG does not have access to AES or verify that USCG-contracted shippers 

correctly enter FMS export information into AES. By changing these contracting 

practices and verifying AES information for USCG-contracted FMS shipments, the 

USCG can better ensure that FMS items are properly shipped and documented. 

Recommendation 

We recommend that the Chief of the Office of International Acquisitions for the 

United States Coast Guard: 

Recommendation #3: 

Require future USCG contracts related to Foreign Military Sales to specify that 

the contents are being shipped under the Foreign Military Sales program, and 

require shippers to verify that shipments have been identified as Foreign Military 

Sales in the Automated Export System. 

Management Comments and OIG Analysis 

Management Comments: The Chief of the Office of International Acquisitions 

for the USCG concurred with the recommendation. The USCG will ensure that its 

future contracts related to FMS include specific language (1) that the contents 

are being shipped under the FMS program and (2) that shippers verify the 

shipments have been identified as FMS in AES. The USCG expects to fully 

implement these changes by September 30, 2013. 

OIG Analysis: The USCG’s proposed actions are responsive to the 

recommendation. However, the recommendation will remain open and resolved 

until final implementation of the proposed corrective actions. 

www.oig.dhs.gov 8 OIG-13-119 
 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix A 

Objectives, Scope, and Methodology 

The Department of Homeland Security (DHS) Office of Inspector General (OIG) was 

established by the Homeland Security Act of 2002 (Public Law 107-296) by amendment 

to the Inspector General Act of 1978. This is one of a series of audit, inspection, and 

special reports prepared as part of our oversight responsibilities to promote economy, 

efficiency, and effectiveness within the Department. 

This report provides the results of our limited review to determine whether DHS has 

adequate controls over the FMS program. We conducted this review between 

November 2012 and April 2013. We are providing the findings and recommendations 

identified during our limited review for CBP and the USCG to consider. 

As part of our review, we analyzed the USCG and CBP FMS processes. We reviewed the 

GAO report, Defense Exports, Foreign Military Sales Program Needs Better Controls for 

Exported Items and Information for Oversight, issued in May 2009, and GAO report, 

GAO’s 2013 High-Risk Series, An Update, issued February 2013. We interviewed GAO 

officials to determine the status of CBP’s responses to its recommendations. We 

analyzed the DoD Defense Security Cooperation Agency’s published guidance; the 

electronic Security Assistance Management Manual, dated April 30, 2012; and the CBP 

U.S. Customs Control Handbook for Department of State Licenses, dated July 2002. We 

also reviewed relevant Federal regulations on FMS. 

We interviewed an official in the DHS Office of the Chief Readiness Support Officer; DoD 

Defense Transportation System personnel who oversee DoD’s transportation of assets, 

including FMS; personnel from the U.S. Navy’s International Program Office and Naval 

Supply System Command; USCG Office of International Acquisition officials; CBP 

headquarters Outbound Enforcement officials; as well as CBP officers at the Port of 

Baltimore Seaport and the JFK International Airport. We reviewed 4 of 97 open USCG 

FMS case files during our audit survey. Our review included documentation of the 

entire FMS process, such as Letters of Request, LOAs, shipping declarations, 

communications with the requesting country, and inspection checklists. 

OIG staff also directly observed an FMS shipment in transit at the Port of Baltimore 

Seaport and verified shipment documentation at JFK Airport. CBP’s OFO provided FY 

2011 and FY 2012 export data. Because it was a limited review, the OIG audit team did 

not verify or test this data. Based on information obtained during the audit survey, we 

determined our findings were consistent with previous reviews and continuing the audit 

was not appropriate due to current fiscal budget constraints. 

www.oig.dhs.gov 9 OIG-13-119 
 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

We conducted this review under the authority of the Inspector General Act of 1978, as 

amended, and according to the Quality Standards for Inspection and Evaluation issued 

by the Council of the Inspectors General on Integrity and Efficiency. 

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 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

Management Comments to the Draft Report 

U.S. Dcpartmtut of llomtland Stcurit) 

Washin:;ton, DC 20528 

Homeland 

Security 

July 15,2013 

MEMORANDUM FOR: Anne L. Richards 

Assistant Inspector General for Audits 

Office of Inspector General 

FROM: i~n H. Crumpacker\ ~I ~ 0 

D

De

arcctor 

partmental GAO-Oib 

~\._.!,\,.. 

Liaison fice 

~ 

SUBJECT: OJG Draft Report: "U.S. Customs and Border Protection's 

(CBP's) and U.S. Coast Guard's (USCG's) Controls Over Exports 

Related to Foreign Military Sales" 

(Proj ect No. 13-060-AUD-DHS) 

Thank you tor the opportunity to review and comment on this draft report. The U.S. Department 

of Homeland Security (DHS) appreciates the Office of Inspector General's (OIG's) work in 

platming and conducting its review and issuing this report. 

The Department's primary responsibility for Foreign Military Sales (FMS) is export 

enforcement. CBP officials, particularly those at ports, work in close cooperation with officials 

from several other Departments to enforce export laws and regulations. Other federal partners 

are:: re::sponsihle:: fhr the:: regulations governing data, data quality, and availability of data to CBP 

port officials. If data quality and access to additional data were improved, DHS might be able to 

enhance monitoring and controls over FMS without requinng additional resources. DHS 

appreciates OIG's effort to highlight in the draft report the many challenges associated with the 

enforcement of FMS exports via a paper-based system furtl1er complicated by the availability of 

increasingly scarce and limited resources. 

CBP continues to work with stakeholders in the Departments of State, Defense (DOD), 

Commerce, and Justice to improve export control, monitoring systems, and intelligence. This is 

accomplished by sharing intelligence; improving delineation of each agt:ncy's j urisdiction; and 

clarifying guidance, responsibilities, and expectations for all stakeholders, including industry. 

DHS appreciates OlG's insights regarding the development of an automated management 

information system that would improve:: CBP Officers' (CBPOs') access to the data necessary to 

determine if documentation for a shipment is accurate and ensure the shipment is exported under 

the appropriate regulations and controls. 

The draft report initially contained four recommendations. Subsequent to clarifications made 

duri ng and afle::r the:: exit conference, OIG agreed to remove one of the recommendations and 

revise another. The Department concurs with the three agreed upon reconunendations. 

Specifically OIG recommended that the: 

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Department of Homeland Security 

Recommendation 1: Acting Assistant Commissioner for the Office of Field Operations at U.S. 

Customs and Border Protection create and implement a centralized process for tracking Foreign 

Military Sales-related shipments, and enhance the Foreign Military Sales export data validation 

process. 

Response: Concur. CBP's Office of Field Operations (OFO) fully understands the importance 

of having correct and reliable Electronic Export Information (EEl) data on the targeting of highrisk shipments.' CBP OFO is responsible for enforcement of the International Traffic in Arms 

Regulations (IT AR) for FMS shipments. Where incorrect data are found in the Automated 

Export System (AES), CBP OFO takes the appropriate enforcement actions, ensuring informed 

compliance. outreach with the trade community, and, where necessary, seizure of the cargo. 

CBP OFO is currently exploring the usc of the AES to track FMS shipments by using 

information similar to data OFO receives on Department of State (DOS) forms DSP-5 

("Application/License for Permanent Export of Unclassified Defense Articles and Related 

Unclassified Technical Data"). Additionally, to improve validation of the information received 

from the freight forwarders on FMS shipments, OFO and CBP's Office of Information and 

Technology will incorporate a series of edit functions in AES to validate the infonnation 

received. By using this information, field personnel will have access to all the case information 

at any port and the system would decrement the import and/or exported shipments. 

Specific actions already taken or planned to implement this recommendation are outlined below: 

• In May 2013, a working group was established consisting of representatives from 

OFO, and the DOD Defense Security Cooperation Agency (DSCA), the U.S. Army, 

and the U.S. Navy, to streamline the FMS process and work toward formulating a 

process that would allow for electronic submission of key data elements in FMS cases 

to AES, including identifying the appropriate data elements. 

• On June 6, 2013, the working group disseminated a diagram of the process discussed 

by the group to its members for review and response. 

• To further streamline the FMS process, eliminating DOS Form 94 ("Authority to 

Export Defense Articles Sold Under The Foreign Military Sales Program") from the 

process was proposed. CBP OFO and DSCA plan to schedule meetings with DOS to 

discuss potential regulatory changes that would be necessary to make this proposed 

change. The target date for the first meeting is on or before July 31, 2013. 

• The AES is currently being re-cnginccred in an effort to update software and to 

improve functionality. OFO plans to usc the rc-engineered AES to have the system 

decrement the FMS case on the basis of data pulled from the Letter of Offer and 

Acceptance (LOA}. AES will be programmed to incorporate a series of edits to 

1 Under the Foreign Trade Regulauons (IIR), the filing c'portcr or their filing agem is responsible for tiling the 

correct mforrnation about FMS shipments. Pursuan110 15 C.F.R. * 30.71. fa, lure 10 file correct daln is an FTR 

\IOia110n and make> the tiler subject to potenual penalues m the an10un1 ofSIO,OOO prior to any m11lga1ion. 

2 

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 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

validate that the inforn1ation being received from the EEl filers is a specific FMS 

LOA and is going to the country designated on the LOA. This will be scheduled to 

begin after January I, 201 4, and will be on-going through implementation. Current 

budget constraints could delay this process. 

Estimated Completion Date (ECD): September 30, 20 15. 

Recommendation 2: Acting Assistant Commissioner for the Office of Field Operations at U.S. 

Customs and Border Protection update the U.S. Customs Control Handbook for Departmem of 

State Licenses to reflect current export-related laws, regulations, and responsibilities; and 

provide formal training to CBP export officers on Foreign Military Sales policies and 

procedures. 

Response: Concur. DOS has published a number of proposed regulations in conjunction with 

the Department of Commerce to move certain commodities from the U.S. Munitions List, ITAR 

to the Commerce Control List and improve Export Administration Regulations. Additionally, 

DOS has created two new license exemptions based on Defense Trade Treaties with the United 

Kingdom and Australia, and modified the license exemption to !TAR-controlled goods being 

exported to Canada. 

CBP OFO will revise the U.S. Customs Service Control Ilandbook to incorporate these changes 

and to reflect the recommendations identified in both a recent U.S. Government Accountability 

Office audit report2 regarding FMS exports and this OIG report. ECD: December 31, 2013. 

In addition, CBP OFO began a review of existing training on July I, 2013, and will establish a 

course for training CBPOs and other export staff on FMS policies and procedures. OFO will 

begin providing fonnaltraining to export officers on FMS policies and procedures once the 

revisions to the handbook are completed. ECD: December 3 1, 2014. 

Recommendation 3: Chief of the Office o f International Acquisitions for the United States 

Coast Guard require future USCG contracts related to Foreign Military Sales to specify that the 

contents are being shipped under the Foreign Military Sales program, and require shippers to 

verify that shipments have been identified as Foreign Military Sales in the Automated Export 

System. 

Response: Concur. The Chief of the Office of International Acquisitions for USCG will ensure 

that future USCG contracts related to FMS include language specifying that: (I) the contents arc 

being shipped under the FMS program, and (2) shippers will be required to verify that shipments 

have been identified as FMS in the AES. ECD: September 30, 2013. 

Again, thank you for the opportunity to review and comment on this draft report. Technical 

comments were previously provided under separate cover. Please feel free to contact me if you 

have any questions. We look forward to working with you in the future. 

' DEFENSE EXPORTS: "Foreign l\lohtary Sales Pro~:rom Needs Better Controls for Exponed Items and 

lnfonnation for 0\ersight." (GA0-09-454. May 20. 2009) Wa,hongton. D.C. 

3 

www.oig.dhs.gov 13 OIG-13-119 
 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix C 

Major Contributors to This Report 

Alex Best, Director 

Cecilia Carroll, Audit Manager 

Thomas J. Bobrowski, Audit Lead 

Douglas Campbell, Program Analyst 

Falon Newman-Duckworth, Program Analyst 

Heidi Einsweiler, Program Analyst 

Kelly Herberger, Communications Analyst 

Sharon Trodden, Independent Referencer 

www.oig.dhs.gov 14 OIG-13-119 
 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix D 

Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff 

Deputy Chief of Staff 

Under Secretary for Management 

General Counsel 

Executive Secretary 

Director, GAO/OIG Liaison Office 

Assistant Secretary for Office of Policy 

Assistant Secretary for Office of Public Affairs 

Assistant Secretary for Office of Legislative Affairs 

Commandant, United States Coast Guard 

Acting Chief Privacy Officer 

Acting Commissioner of Customs and Border Protection 

Chief Procurement Officer, DHS 

Chief Information Officer, DHS 

Audit Liaison, CBP 

Audit Liaison, USCG 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

U.S. Senate Committee on Appropriations 

U.S. House of Representatives Committee on Appropriations 

U.S. Senate Homeland Security and Governmental Affairs Committee 

U.S. Senate Committee on Finance 

U.S. Senate Committee on the Judiciary 

U.S. House of Representatives Committee on Homeland Security 

U.S. House of Representatives Committee on Government Reform 

U.S. House of Representatives Committee on Transportation and Infrastructure 

www.oig.dhs.gov 15 OIG-13-119 
 

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