Briefing Report to the Chairman and

Ranking Member, Subcommittee on

Readiness and Management Support,

Committee on Armed Services, U.S.

Senate

United States General Accounting Office

GAO

June 2001 EXPORT CONTROLS

State and Commerce

Department License

Review Times Are

Similar

GAO-01-528
Page i GAO-01-528 Export Controls

Letter 1

Briefing Section I State Department Export Licensing Process and

Timing 8

Briefing Section II Commerce Department Export Licensing Process and

Timing 28

Appendix I Scope and Methodology 44

Appendix II Comments From the Department of State 46

Appendix III Comments From the Department of Commerce 48

Figures

Figure 1: State and Commerce Departments’ License Processing

Time, Fiscal Year 2000 2

Figure 2: Final Action of State and Commerce Departments’

Licenses, Fiscal Year 2000 5

Contents
Page 1 GAO-01-528 Export Controls

June 1, 2001

The Honorable James M. Inhofe

Chairman

The Honorable Daniel Akaka

Ranking Member

Subcommittee on Readiness

 and Management Support,

Committee on Armed Services

United States Senate

The U.S. defense industry and some U.S. and allied government officials

have suggested in recent years that the U.S. export control process be

reformed. Much of the debate on reforming the process has focused on the

amount of time required to process an export license application. As a

result, you asked that we analyze the time it takes to process export

license applications. In March 2001, we briefed your staff on the results of

our work. As agreed with your staff, we are providing the briefing as a

report (see app. I for a discussion of our scope and methodology). As also

agreed with your staff, we plan further work to determine why some

license applications take significantly longer than the average time to

process and will be reporting on this issue in the future.

Under the authority of the Arms Export Control Act,1

 the State Department

controls the export and import of defense articles and services. The State

Department’s International Traffic in Arms Regulations provide licensing

procedures and define the defense articles and services that require a

license in the U.S. Munitions List.2

 The regulations, however, do not

mandate or recommend timelines for the review of license applications.

The Export Administration Act3

 and Executive Order 12981 grant the

Commerce Department authority to review and issue licenses for the

export of dual-use commodities (those having both commercial and

military applications). The Commerce Department’s Export

Administration Regulations establish procedures for licensing and define

 1

 22 U.S.C. secs. 2751 et seq.

2

 22 C.F.R. secs. 120-130.

3

 50 U.S.C. App. secs. 2401 et seq.

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-528 Export Controls

items that require an export license in the Commerce Control List.4 An

automated system tracks the time spent reviewing license applications

both within the Commerce Department and among other agencies. The

executive order mandates specific timelines for the review of dual-use

license applications and requires that the Commerce Department refer

license applications to other executive branch agencies for review. For

example, the Department of Defense reviews applications for national

security concerns and the Department of State reviews applications for

foreign policy concerns.

In fiscal year 2000, the average State Department license application

review took 46 days while the average Commerce Department review took

50 days.5

 In that fiscal year, the State Department completed over 46,000

license application reviews and the Commerce Department completed

over 11,000. Figure 1 shows the time it took the State and Commerce

Departments to process licenses applications in 30-day increments.

Figure 1: State and Commerce Departments’ License Processing Time, Fiscal Year

2000

Source: GAO analysis of the State and Commerce Departments’ data.

 4

 15 C.F.R. secs. 730-774.

5

 We measured review time as total elapsed calendar time from receipt of a license

application to the final action taken.

Average License

Application

Processing Time for

State and Commerce

Is Similar

11 %

56 %

13 %

20 %

41 %

13 %

12 %

34 %

0 to 30 days 31 to 60 days 61 to 90 days 91 days and over

State Department

46,048

Commerce Department

11,041
Page 3 GAO-01-528 Export Controls

The State Department had 23 licensing officers to review license

applications in fiscal year 2000. In addition to reviewing license

applications, these officers responded to inquiries from other agencies and

Congress. The State Department is currently hiring additional licensing

officers. The Commerce Department had 51 licensing officers to review

license applications in fiscal year 2000. Besides reviewing license

applications, these officers process several thousand commodity

classification requests and advisory opinions annually and, as at the State

Department, Commerce licensing officers are responsible for responding

to inquiries from other agencies and from the Congress.

We examined selected variables to determine their impact on the amount

of time needed to process license applications. These included the extent

of interagency review, the commodity being exported, the type of license

granted, and the country of destination of the planned export.

The interagency review process has a significant effect on the time needed

to process a license application at both the State and Commerce

Departments. The State Department’s Office of Defense Trade Controls

processes two-thirds of the license applications it receives without an

interagency review. For fiscal year 2000, the State Department took an

average of 23 days to reach a decision on these license applications. The

other one-third of license applications submitted to the State Department

are referred to other agencies through the interagency review process and,

in fiscal year 2000, took an average of 91 days before State reached a final

decision. For fiscal year 2000, the Commerce Department sent 83 percent

of its license applications out for interagency review.6

 These reviews

averaged 54 days to reach a final decision, as opposed to an average of

28 days for the 17 percent not referred for interagency review.

The commodity being exported and the type of license being requested

had a significant effect on processing time at the State Department. For

the State Department, the license applications to export launch vehicles

and missiles; military and space electronics; fire control systems, guidance

systems and night vision equipment; and space systems and technology

 6

 Executive Order 12981 grants authority for the Departments of State, Defense, and Energy

to review any license applications submitted to the Department of Commerce. The order

allows these agencies to indicate that they do not wish to review certain types of licenses.

Several Variables

Affect Processing

Time
Page 4 GAO-01-528 Export Controls

took the longest to process. License applications for agreements7 and for

temporary export licenses were the license types that took the longest to

process. A State Department official said that agreements are generally the

most complex cases and temporary exports frequently require interagency

review because they are related to marketing efforts for defense articles to

a country that does not already have those articles.

For the Commerce Department, the commodity being exported also

affected the time taken to process the license application. The Commerce

Department’s Export Control Automated Support System does not

differentiate the time it takes to process different license types. Therefore,

we were not able to determine variations in time by license type for

Commerce Department applications. License applications to export

commodities in the computer, electronics,

telecommunications/information security, lasers, and navigation/avionics

categories had the longest review times.

In general, the country of destination is not a major differentiating factor

when measuring State Department license application processing time, but

can be in the Commerce Department process. Seventy-seven percent of

fiscal year 2000 license applications submitted to the State Department for

North Atlantic Treaty Organization (NATO) countries and 75 percent of

license applications for non-NATO countries were completed within

60 days. State Department officials stated that the lack of variation in

processing time for applications to export to NATO versus non-NATO

countries can be explained by the fact that non-NATO countries to which

we export munitions list items are generally our allies, for example, Japan

or Australia. Therefore, as a group these countries have a relationship to

the United States that is similar to that of our NATO allies. On the other

hand, the Commerce Department’s restrictions for NATO countries are not

as stringent as for non-NATO countries. Furthermore, many of the license

applications received by the Commerce Department are for licenses to

export to countries that are not our allies and may in some cases be

considered countries of concern. For fiscal year 2000, nearly 90 percent of

license applications for exports to NATO countries were completed in

 7

 Agreements include manufacturing license agreements that allow a U.S. person to grant a

foreign person an authorization to manufacture defense articles abroad; technical

assistance agreements that permit the performance of defense services or the disclosure of

technical data; and distribution agreements that allow the establishment of a warehouse or

distribution point abroad for defense articles exported from the United States for

distribution to entities in an approved sales territory.
Page 5 GAO-01-528 Export Controls

60 days; in contrast, only 73 percent of applications to export to nonNATO countries were completed in 60 days.

The results of license application reviews are generally similar for State

and Commerce. Figure 2 shows the final actions associated with the State

and Commerce Departments’ license application reviews for fiscal year

2000. Over 80 percent of license applications at both Departments were

approved. However, of the 86 percent of applications that were approved

by State Department for fiscal year 2000, about one-third were approved

with conditions that limited the use of the exported item. Nearly all of the

fiscal year 2000 Commerce Department license application were approved

with conditions.

Figure 2: Final Action of State and Commerce Departments’ Licenses, Fiscal Year

2000

Source: GAO analysis of the State and Commerce Departments’ data.

In commenting on a draft of this report the State Department said that the

report demonstrates that the U.S. government munitions control system is

relatively efficient and responsive. State also commented that they have

supplemented their staff and their processing time has been reduced. The

data presented in this report provides information on the length of time

taken for license application reviews and some insight into reasons why

some reviews take longer than others. We do not believe the data is a

sufficient basis for conclusions on the efficiency of the munitions export

license control system. While the report shows that many licenses are

Final Dispositions of

License Applications

by State and

Commerce Are

Similar

Agency Comments

State Department Licenses Commerce Department Licenses

 1 %

< 1 %

12 %

86 % 4 %

16 %

80 %

Approved Returned without action Denied Other
Page 6 GAO-01-528 Export Controls

processed quickly, the report also shows that over 5,200 license

applications took over 90 days to review in fiscal year 2000. The causes

for long review times vary, and we have begun an assessment to determine

why these reviews take so long.

In commenting on a draft of the report, the Department of Commerce

expressed a strong belief that comparing the number of license

applications the Commerce and State Departments each process and the

time each Department takes to process license applications can invite

readers to draw erroneous conclusions about the two processes. We

believe this report accurately describes the Commerce and State

Departments’ processes for reviewing license applications. While the

report shows that overall processing time is similar between the two

systems, the report also describes additional factors. For example, about

two-thirds of State Department license applications are reviewed

internally while the Commerce Department sends most applications out

for interagency review as authorized by Executive Order 12981.

Commerce also objected to our use of calendar days when calculating

license application processing time. The Commerce Department believes

that we should exclude federal holidays, weekends, and the time

Commerce is permitted to hold an application without action as

prescribed in Executive Order 12981. The Executive Order and the Export

Administration Regulations both reference calendar days and do not

exclude weekends and federal holidays. We note in our report that the

results of our analysis may differ from Commerce’s because we use

calendar days.

Commerce also commented that it is misleading to compare their calendar

time with the State Department’s because State does not hold applications

so that applicants can provide additional information when it is needed in

the review of an application. Commerce is not correct. State and Defense

Department officials told us that both State licensing officers and Defense

license reviewers hold munitions license applications while awaiting

additional information from the applicant. However, the State Department

does not have a process to track licenses when they are held without

action, and as a result, we were not able to compare the time licenses are

held at both the State and Commerce Departments.

The Commerce Department provided additional comments on factors that

they believe underlie the results of our analysis. We did not address these

because they were beyond the scope of our review.
Page 7 GAO-01-528 Export Controls

The State and Commerce Departments’ comments in full are included in

Appendix II and III.

As agreed with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days after its

issuance. At that time, we will send copies to Senator Jesse Helms,

Chairman, Committee on Foreign Relations; Senator Joseph Biden,

Ranking Member, Committee on Foreign Relations; Senator Phil Gramm,

Chairman, Committee on Banking, Housing, and Urban Affairs; Senator

Paul Sarbanes, Ranking Member, Committee on Banking, Housing, and

Urban Affairs; Representative Henry Hyde, Chairman, Committee on

International Relations; Representative Tom Lantos, Ranking Minority

Member, Committee on International Relations; Representative Bob

Stump, Chairman, Committee on Armed Services; and Representative Ike

Skelton, Ranking Minority Member, Committee on Armed Services. We

will also send copies to the Honorable Colin L. Powell, Secretary of State;

the Honorable Donald L. Evans, Secretary of Commerce; the Honorable

Donald H. Rumsfeld, Secretary of Defense; and the Honorable Mitchell E.

Daniels, Jr., Director, Office of Management and Budget. This report will

also be made available on GAO’s home page http://www.gao.gov.

If you or your staff have questions concerning this report, please contact

me at (202) 512-4841. Others making key contributions to this report were

Blake Ainsworth, Raymond H. Denmark, Thomas J. Denomme, Minette D.

Richardson, and John P. Ting.

Katherine V. Schinasi

Director, Acquisition and Sourcing Management
Briefing Section I: State Department Export

Licensing Process and Timing

Page 8 GAO-01-528 Export Controls

The State Department’s approval authority for export licenses is

established in the Arms Export Control Act. Specific licensing procedures

are explained in the International Traffic in Arms Regulation. Companies

that manufacture defense articles or provide defense services are required

to register with the State Department’s Office of Defense Trade Controls.

An exporter may file a license application with the Office of Defense Trade

Controls either electronically or in hard-copy. Applications are assigned a

number and logged into the Office’s database.

Briefing Section I: State Department Export

Licensing Process and Timing

State Department License Process

Exporter

files license

application

Licensing

officer

initial

review

Sent to

Congress

Log in and

distribute

to

licensing

officer

Interagency

review

(34 percent)*

Licensing

officer

final

review

Final

action

License

screening

*During FY 2000, 66 percent of license applications reached final action without interagency review.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 9 GAO-01-528 Export Controls

Logged-in applications are assigned to licensing officers for initial review

according to the munitions categories. For example, munitions categories

include firearms, aircraft, ammunition, and spacecraft systems. During this

initial review, licensing officers decide whether an application needs to be

reviewed by other agencies, such as the Defense Department or other

State Department bureaus.1 The names of the parties involved in the

application are also screened against a watch list of parties about whom

concerns have been raised to determine if more intensive reviews are

necessary. If an application is not referred to another agency for review,

the licensing officer can decide on the disposition of the application.

When agencies complete their review, they send their recommendation to

the Office of Defense Trade Controls. The State Department process does

not contain timelines for other agency reviews. The Defense Department,

however, instituted an internal requirement in October 1999 to complete

and return the results of its reviews within 31 days. When the Office of

Defense Trade Controls has received a response from all the agencies

asked to review the application, the file is returned to the licensing officer

for final review and disposition.

The State Department must notify Congress prior to approving

applications that involve exports of defense articles and services valued

over $50 million or exports of major defense equipment valued over

 $14 million. Several offices within the State Department must review the

congressional notification paperwork prior to its’ submission to Congress.

Notifications are only delivered when Congress is in session. After

notifying Congress, the State Department must wait 15 days if the country

is a NATO ally or 30 days for other countries. If Congress has no objection

within the waiting period, the Office of Defense Trade Controls can

approve the export license. In fiscal year 2000, about 120 applications

were sent to Congress. The processing time for these applications ranged

from 54 to 847 days.

 1

 Since the license reviews conducted by other State Department offices and bureaus are

external to the office of Defense Trade Controls, we categorized these reviews by these

offices and bureaus as part of the interagency review process.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 10 GAO-01-528 Export Controls

State Department Cases,

Average Review Times, FY 1997-2000

0

10

20

30

40

50

60

1997 1998 1999 2000

Number of days

Source: GAO analysis of State Department data.

32 days

39 days

48 days 46 days

Fiscal year
Briefing Section I: State Department Export

Licensing Process and Timing

Page 11 GAO-01-528 Export Controls

Average munitions license processing time increased from 32 days in fiscal

year 1997 to 48 days in fiscal year 1999; but it improved to 46 days in fiscal

year 2000. The median processing time, the point at which 50 percent of

the cases took more time and 50 percent less time, was 25 days for fiscal

year 2000.1

 State Department officials explained that several factors

contributed to the increased time including the Office of Defense Trade

Controls’ loss of several experienced licensing officers, an increase in the

number of license agreement applications that generally require more

review time, and the transfer of licensing jurisdiction over commercial

satellites from the Commerce Department to the State Department in

March 1999. The improvement in fiscal year 2000 may be the result of the

Defense Department’s reform of its license review process. This reform

took effect in October 1999 and imposed an internal Defense Department

deadline of 31 days to review and return license applications unless an

extension is granted.

 1

 We are reporting the median processing time because the average processing time can be

significantly affected by a small number of license applications that had much longer

review times than the majority of applications.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 12 GAO-01-528 Export Controls

State Department Cases,

Review Time, FY 2000

56 percent 0 to 30 days

20 percent 31 to 60 days

13 percent 61 to 90 days

11 percent 91 days and over

State Department Cases

46,048

Source: GAO analysis of State Department data.

State Department Cases,

Review Time, FY 1997-2000

0 to 30 days 31 to 60 days 61 to 90 days 91 plus days Total

FY 1997 30,538 6,552 3,718 3,060 43,868

FY 1998 27,532 7,036 4,443 4,563 43,574

FY 1999 24,427 7,909 5,107 6,595 44,038

FY 2000 25,865 9,074 5,864 5,245 46,048

Source: GAO analysis of State Department data.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 13 GAO-01-528 Export Controls

Applications that took over 60 days have increased from about 15 percent

of the total in fiscal year 1997 to about 24 percent of the total in fiscal year

2000. The number of applications over 60 days increased by 4,331 from

6,778 applications in fiscal year 1997 to 11,109 applications in fiscal year

2000, while those under 60 days decreased.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 14 GAO-01-528 Export Controls

State Department Cases, Referred and

Not Referred to Other Agencies, FY 2000

Referred Not referred

Referred

Days to reach a decision

ï 91 days average

ï 69 days median

34 Percent

15,512 cases

66 Percent

30,536 cases

Not referred

Days to reach a decision

ï 23 days average

ï 15 days median

Source: GAO analysis of State Department data.

State Department Cases, Referred and Not

Referred to Other Agencies, Review Time, FY 2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Not referred

(66 percent of total cases)

0-30 days 31-60 days 61-90 days 91+ days

Referred

(34 percent of total cases)

Source: GAO analysis of State Department data.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 15 GAO-01-528 Export Controls

In fiscal year 2000, the State Department referred about one-third of the

license applications to other organizations such as the Defense

Department or other State Department bureaus for in-depth technical or

policy reviews. Licensing officers rely on a State Department country

policy handbook, their own experience, and certain “rules of thumb” to

help determine which applications need an outside review. Under these

“rules of thumb,” applications for license agreements and applications

involving new weapon systems are always sent for review.

The processing time for applications not referred to other organizations

averages 23 days with a median time of 15 days. The processing time for

licenses referred to other organizations averages 91 days with a median

time of 69 days. Applications not referred to other organizations are

generally completed within 30 days. In contrast, only 4 percent of

applications referred to other organizations are completed within 30 days.

In fiscal year 2000, 695 of 30,536 applications not referred to other

organizations, or 2 percent, took over 90 days. In contrast, 4,550 of a total

15,512 application sent to other organizations, or 29 percent, took over

90 days.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 16 GAO-01-528 Export Controls

State Department Cases,

Review Time by Commodity, FY 2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Percent of total cases

Firearms

(10 percent)

Ammunition

(5 percent)

Launch 

vehicles and

missiles

(4 percent)

Tanks and

vehicles

(4 percent)

Aircraft

spares and

engines

(16 percent)

Military and

space

electronics

(15 percent)

Fire control

guidance and

night vision

(6 percent)

0-30 days 31-60 days 61-90 days 91+ days

Space

systems and

technology

(4 percent)

Other

commodities

(7 percent)

Agreements

(10 percent)

Not

categorized

(19 percent)

Source: GAO analysis of State Department data.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 17 GAO-01-528 Export Controls

The United States Munitions List has 19 categories of items. The eight

largest categories are listed in this chart and account for 64 percent of

applications. In addition, 10 percent of all license applications in fiscal

year 2000 were for license agreements and 19 percent of license

applications were not categorized. The other 11 categories, which

represent 7 percent of license applications, include artillery projectors;

concealment and deception equipment; classified articles, technical data,

and defense services; explosives and propellants; military training

equipment; miscellaneous articles; nuclear weapons design and test

equipment; protective personnel equipment; submersible vessels;

toxicologist agents; and vessels of war.

Seventy-seven percent of firearm applications, 69 percent of ammunition

applications, 82 percent of tank and vehicle applications, and 60 percent of

aircraft, spare parts and engine applications were completed within

30 days. The categories that took the longest to review were launch

vehicles and missiles; military and space electronics; fire control systems,

guidance systems, and night vision equipment; and space systems and

technology.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 18 GAO-01-528 Export Controls

State Department Cases by License

Type, Review Time, FY 2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Percent of total cases1

Permanent

licenses

(64 percent)

License

amendment

(14 percent)

Temporary

import

license

(3 percent)

Temporary

export

license

(6 percent)

General 

correspondence

(2 percent)

0-30 days 31-60 days 61-90 days 91+ days

Agreements

(10 percent)

Other

(2 percent)

Source: GAO analysis of State Department data.

1Due to rounding, the total number of cases does not equal 100 percent.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 19 GAO-01-528 Export Controls

The State Department issues a variety of license types. These include

permanent licenses for munitions items, temporary licenses for both

munitions imports and exports, and license agreements between U.S.

industry and foreign entities to provide technical assistance or

manufacturing capability.

Fifty-eight percent of permanent license applications took less than

30 days, 84 percent of amendments to existing licenses took less than

30 days, and 75 percent of temporary import licenses took less than

30 days. On the other hand, only 29 percent of temporary export license

applications and 23 percent of license agreements took less than 30 days.

A State Department official explained that license agreements are

complex, require substantial work by the licensing officers, and often

require an interagency review. The official also said that temporary

exports require review because they are related to marketing efforts for

defense articles to a country that does not already have these articles. The

number of agreements has risen from 2,681 in fiscal year 1997, to 4,604 in

fiscal year 2000. In fiscal year 2000, agreements were 10 percent of all

license applications and 57 percent of agreement reviews took over

60 days.

General correspondence cases, which accounted for 2 percent of the fiscal

year 2000 license applications, mirrored the review times experienced

with agreements. State Department data shows that 52 percent of these

cases took over 60 days. State Department officials told us that general

correspondence submissions are difficult for the licensing staff, because

correspondence seeks clarification on licenses, advisory opinions prior to

license applications, or permission for an item transfer from one country

to another.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 20 GAO-01-528 Export Controls

State Department Cases,

NATO/Non-NATO Review Time, FY 2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

NATO

(42 percent of total cases)

0-30 days 31-60 days 61-90 days 91+ days

Non-NATO

(58 percent of total cases)

Source: GAO analysis of State Department data.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 21 GAO-01-528 Export Controls

The processing time for North Atlantic Treaty Organization (NATO)

member countries is similar to the time for non-NATO members. In

discussing the similarity of times for items exported to NATO versus nonNATO countries, State Department officials explained that the lack of

variation in processing time for applications to export to NATO versus

non-NATO countries can be explained by the fact that non-NATO

countries to which we export munitions list items are generally our allies,

for example, Japan or Australia. Therefore, as a group these countries

have a relationship to the United States that is similar to that of our NATO

allies. As a result, the type of item or whether an agreement is involved

has a more significant effect on the time needed to process a license

application than the country of destination.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 22 GAO-01-528 Export Controls

State Department Cases, Recipient Countries with

Over 1,000 License Cases, Review Time, FY 2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Australia Canada France Germany Israel Italy Japan South

Korea

Taiwan Turkey United

Kingdom

0-30 days 31-60 days 61-90 days 91+ days

Source: GAO analysis of State Department data.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 23 GAO-01-528 Export Controls

State received over 1,000 license applications for each of eleven countries.

These countries represented 58 percent of all applications processed in

fiscal year 2000.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 24 GAO-01-528 Export Controls

State Department Cases, Average

Agency Review Time for FY 1997-2000

0

10

20

30

40

50

60

70

80

90

100

1997 1998 1999 2000

DOD STATE

Number of Days

(other than the Office of

Defense Trade Controls)

Source: GAO analysis of State Department data.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 25 GAO-01-528 Export Controls

Referrals to other agencies account for significant additional time. The

length of interagency reviews has varied from fiscal years 1997 through

2000.

• In fiscal year 2000, the Defense Department’s average review time was

32 days and the median was 29 days. Defense Department annual

license reviews for fiscal years 1997 through 2000 ranged from a low of

11,235 to a high of 14,295.

• In fiscal year 2000, the State Department’s average review time was

36 days and the median was 24 days. State Department bureaus and

offices annual license reviews for fiscal years 1997 through 2000

ranged from a low of 11,097 to a high of 13,628. This does not include

reviews within the Office of Defense Trade Controls since that Office

is the licensing authority.

Beginning in fiscal year 2000, the Defense Department began tracking the

time needed to review license applications and has established deadlines

for completing their reviews. The Defense Department’s average

processing time dropped from 50 days in fiscal year 1999 to 32 days in

fiscal year 2000.

Other agencies that review State Department license applications include

the Departments of Commerce and Energy, the National Aeronautics and

Space Administration, the Missile Technology Export Control Group, the

National Security Council, and the U.S. Customs Service.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 26 GAO-01-528 Export Controls

State Department Cases,

Final Action, FY 2000

86 percent Approved

12 percent Returned Without Action

1 percent Denied

< 1 percent Other

Source: GAO analysis of State Department data.

State Department Cases by Final Action,

Review Time, FY 2000

0%

20%

40%

60%

80%

100%

Percent of total cases

Approved

(55 percent)

Approved with

conditions

(31 percent)

Returned

without action

(12 percent)

Denied

(1 percent)

Other

(<1 percent )

0-30 days 31-60 days 61-90 days 91+ days

Source: GAO analysis of State Department data.
Briefing Section I: State Department Export

Licensing Process and Timing

Page 27 GAO-01-528 Export Controls

In fiscal year 2000, the Office of Defense Trade Controls approved

86 percent of license applications. Fifty-five percent of the applications

were approved with no conditions; 31 percent were approved with

conditions that limit the use of the exported items; 12 percent were

returned without action; and 1 percent were denied. The remainder of

these applications were withdrawn, lost, or were requests to determine

whether State or Commerce had jurisdiction. Returning the application

without action allows the applicant to re-apply when certain conditions

are met or when circumstances change.

Nearly three-quarters of approvals without conditions were completed

within 30 days, and about half of the approvals with conditions took over

60 days. Further, while denied, lost, withdrawn, and commodity

jurisdiction applications are 2 percent of total license applications, they

represent 9 percent of the applications that took over 90 days.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 28 GAO-01-528 Export Controls

Briefing Section II: Commerce Department

Export Licensing Process and Timing

Commerce Department License Process

Exporter

 files license

 application

Pre-

 screened

Upload

to data

system

Licensing

 officer

 review

 Interagency

 review

 (83 percent)*

Return to

licensing

officer

Final

action

Enforcement

review and

screening

Dispute

resolution

Timeline (days) 1 9 30 85 90

*During FY 2000, 17 percent of license applications reached final action without interagency review.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 29 GAO-01-528 Export Controls

The Commerce Department process for reviewing license applications to

export Commerce Control List commodities is governed by Executive

Order 12981 dated December 5, 1995. The Executive Order established

clear process deadlines. For example, agencies have 30 days to review

license applications and the entire license review process must be

complete in 90 days. Exporters use the Export Administration Regulations

and the Commerce Control List to determine whether a license application

is needed, and if they are unsure, consult with the Commerce Department.

Exporters submit license applications either in hard copy or in electronic

form. About 60 percent of applications are submitted electronically.

Hardcopy submissions are manually screened for completeness and

scanned into the Export Control Automated Support System. Supporting

documentation is submitted and distributed in hardcopy. In most cases,

the system automatically assigns the application to a licensing officer.

Once an application is entered into the data system, it is considered

“registered” and the timing mechanism mandated by the executive order is

activated. Within 9 days of the registration date, the licensing officer

determines a Commerce position. The application is either referred for

interagency review (83 percent) or sent for final Commerce Department

review. The 17 percent decided without referral to other agencies are

approved, denied, or returned to the applicant without action either for

additional information or because a license was not required.

The Commerce Department data system sends license applications

electronically to referral agencies. If agencies do not provide the

Commerce Department with a recommendation within 30 days, the

Commerce Department proceeds as if the agency agreed with the initial

Commerce Department position. Following the agencies’ review, the

licensing officer takes final action on the application. However, a single

agency disagreement with the Commerce position will escalate the review

to a higher level multi-agency dispute committee for resolution.

Although the Executive Order requires that the entire process be

completed in 90 days, it allows the review “clock” to be stopped at certain

points. For instance, the “clock” can be stopped when the Commerce

Department or other agencies need additional information from the

applicant. Our analysis of Commerce Department data reflects calendar

days, which includes the time during which the Department stops the

clock.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 30 GAO-01-528 Export Controls

Commerce Department Cases,

Average Review Times, FY 1997-2000

0

10

20

30

40

50

60

1997 1998 1999 2000

Number of days

Source: GAO analysis of Commerce Department data.

43 days 44 days

56 days

50 days

Fiscal year
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 31 GAO-01-528 Export Controls

The average Commerce Control List license application review time

increased from 43 days in fiscal year 1997 to 56 days in fiscal year 1999.

The median processing time for fiscal year 2000 was 36 days. Fiscal year

1999 was a year that included embargoes against India and Pakistan as

well as controversy over satellite exports to China. According to

Commerce officials, these events delayed license reviews and explain, at

least in part, the increased average review time. Average review time

improved to 50 days in fiscal year 2000.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 32 GAO-01-528 Export Controls

Commerce Department Cases,

Review Time, FY 2000

41 percent 0 to 30 days

34 percent 31 to 60 days

12 percent 61 to 90 days

13 percent 91 days and over

Commerce Department Cases

11,041

Source: GAO analysis of Commerce Department data.

Commerce Department Cases,

Review Time, FY 1997-2000

0 to 30 days 31 to 60 days 61 to 90 days 91 plus days Total

FY 1997 4,421 4,458 926 738 10,543

FY 1998 4,550 4,377 1,165 912 11,004

FY 1999 4,364 4,836 1,455 1,913 12,568

FY 2000 4,575 3,754 1,312 1,400 11,041

Source: GAO analysis of Commerce Department data.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 33 GAO-01-528 Export Controls

License applications that took over 60 days to review have increased from

about 16 percent of the total in fiscal year 1997 to about 25 percent of the

total in fiscal year 2000. The number of applications over 60 days

increased by 1,048 from 1,664 applications in fiscal year 1997 to 2,712

applications in fiscal year 2000.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 34 GAO-01-528 Export Controls

Commerce Department Cases, Referred and

Not Referred to Other Agencies, FY 2000

Referred Not referred

Referred

Days to reach a decision

ï 54 days average

ï 40 days median

83 percent

9,210 cases

17 percent

1,831 cases

Not Referred

Days to reach a decision

ï 28 days average

ï 13 days median

Source: GAO analysis of Commerce Department data.

Commerce Department Cases, Referred and Not

Referred to Other Agencies, Review Time, FY 2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Not referred

(17 percent of total cases)

0-30 days 31-60 days 61-90 days 91+ days

Referred

(83 percent of total cases)

Source: GAO analysis of Commerce Department data.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 35 GAO-01-528 Export Controls

Executive Order 12981 grants authority for the Departments of State,

Defense, and Energy to review all license applications submitted to the

Department of Commerce. These agencies are concerned with

applications involving national security, missile technology, and nuclear,

chemical and biological weapons proliferation. The order, however, allows

these agencies to indicate to the Commerce Department that they do not

wish to review certain types of licenses. Eighty-three percent of license

applications were referred to other agencies in fiscal year 2000.

The review time for applications not referred to other agencies averaged

28 days with a median time of 13 days. Review time for license

applications referred to other agencies averaged 54 days with a median

time of 40 days.

Seventy-six percent of Commerce Control List license applications that

were not referred to other agencies for review were completed within

30 days. However, nearly half of those licenses were returned to the

applicant without action. During the nine days in which the Commerce

Department licensing officer initially reviews the application, the officer

may request additional information from the exporter. According to

Commerce Department officials, exporters have up to 20 days to provide

the additional information. If the exporter does not respond within the

20-day timeframe, the licensing officer returns the license to the exporter

without action. Commerce Department officials told us that most returned

applications were sent back because exporters failed to provide additional

information. In addition, officials told us that applications may also be

returned to exporters without action because licensing officers discover

during their initial analysis that an export license is not required.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 36 GAO-01-528 Export Controls

Commerce Department Cases,

Review Time by Commodity, FY 2000

0%

20%

40%

60%

80%

100%

Percent of total cases

Miscellaneous,

facilities, 

equipment and 

nuclear

(19 percent)

Chemicals

and

toxins

(15 percent)

Materials

(4 percent)

0-30 days 31-60 days 61-90 days 91+ days

Electronics

(9 percent)

Computers

(5 percent)

Telecommunications

(13 percent)

Lasers and

sensors

(4 percent)

Navigation

and

avionics

(2 percent)

Marine

(<1 percent)

Propulsion

and

space

vehicles

(5 percent)

Other

(23 percent)

Source: GAO analysis of Commerce Department data.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 37 GAO-01-528 Export Controls

The Export Administration Regulations classify Commerce Control List

commodities according to 10 categories. In addition, there is a generic

commodity classification for items that do not fall under one of the 10

categories but are subject to Export Administration Regulations controls

for other reasons. Those items with the generic classification are

identified in the chart as “other.”

 1

Eighty-three percent of nuclear materials, facilities, equipment and

miscellaneous; 68 percent of materials, chemicals microorganisms and

toxins; 60 percent of propulsion systems, space vehicles, and related

equipment; and 41 percent of marine applications were completed within

30 days. The categories that took the longest to review were materials

processing; computers; electronics; telecommunications/information

security; lasers; navigation/avionics; and “other.”

 1

 License applications may include multiple, usually related, commodities. Applications

with disparate commodities may be referred for review to more than one Commerce

Department commodity control office.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 38 GAO-01-528 Export Controls

Commerce Department Cases,

NATO/Non-NATO Review Time, FY 2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

NATO

(17 percent of total cases)

0-30 days 31-60 days 61-90 days 91+ days

Non-NATO

(83 percent of total cases)

Source: GAO analysis of Commerce Department data.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 39 GAO-01-528 Export Controls

License applications for exports to NATO countries tend to be reviewed

faster than applications for exports to non-NATO countries. Sixty-one

percent of applications for exports to NATO countries were completed

within 30 days and nearly 90 percent were completed within 60 days.

Thirty-eight percent of applications for exports to non-NATO countries

were completed in 30 days and 73 percent were completed within 60 days.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 40 GAO-01-528 Export Controls

Commerce Department Cases, Recipient Countries

With Over 300 license Cases, Review Time, FY 2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Canada China Cuba India Israel Japan Mexico Russia Taiwan

0-30 days 31-60 days 61-90 days 91+ days

Source: GAO analysis of Commerce Department data.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 41 GAO-01-528 Export Controls

Commerce received over 300 license applications for each of nine

countries. These countries represented 52 percent of all applications

processed in fiscal year 2000. License applications for exports to Canada

had the shortest review times. About 98 percent of all license applications

for exports to Canada were reviewed and completed within 30 days.

India and China accounted for nearly half of the Commerce Control List

export licenses that took more than 90 days to review. India was

sanctioned during fiscal year 1999 for its nuclear weapons activities. As a

result, the Commerce Department adopted a policy of denying exports and

reexports of items controlled for nuclear and missile technology reasons

to India. Those sanctions continued through fiscal year 2000 and may have

contributed to the lengthy review times for exports to India.

On the other hand, the majority of licenses for exports to Cuba are

reviewed within 60 days. Cuba is an embargoed destination as defined by

Export Administration Regulations. This means that all items on the

Commerce Control List require a license for export to Cuba. In addition,

most other items subject to the Export Administration Regulations but not

on the Commerce Control List also require a license for export to Cuba.

During fiscal year 2000, 95 percent of commodities licensed for export to

Cuba were items that were not on the Commerce Control List but were

subject to the Export Administration Regulations. A great many of those

items were medical supplies. During fiscal year 2000, the Commerce

Department reviewed 340 license applications for exports to Cuba.

Commerce completed 87 percent of these reviews in less than 60 days.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 42 GAO-01-528 Export Controls

Commerce Department Cases,

Final Action, FY 2000

80 percent Approved

16 percent Returned Without Action

4 percent Denied

Source: GAO analysis of Commerce Department data.

Commerce Department Cases,

Review Time by Final Action, Review Time, FY 2000

0%

20%

40%

60%

80%

100%

Approved

(80 percent of total cases)

0-30 days 31-60 days 61-90 days 91+ days

Returned Without Action

(16 percent of total cases)

Denied

(4 percent of total cases)

Source: GAO analysis of Commerce Department data.
Briefing Section II: Commerce Department

Export Licensing Process and Timing

Page 43 GAO-01-528 Export Controls

The majority of Commerce Control List license applications are approved.

As the chart shows, 80 percent of licenses were approved during fiscal

year 2000. Of the licenses that were approved, all but three carried

conditions to be met for approval. The Commerce Department system has

48 standard conditions that may be applied to each license as warranted

and has a provision for additional conditions that licensing officers may

apply. For example, 1 of these 48 standard conditions states that resale,

transfer, or reexport of items listed on a license is not authorized without

prior authorization by the U.S. government. Another standard condition

requires that items be made available for periodic on-site inspection.

While most approvals and returns without action were completed in

60 days or less, two-thirds of denials, about 4 percent of all Commerce

Control List license applications, took over 90 days to complete. Only five

applications that had not been referred to other agencies were denied and

two of them took over 90 days to complete.
Appendix I: Scope and Methodology

Page 44 GAO-01-528 Export Controls

To determine how long it takes to process State and Commerce

Department licenses, we obtained and analyzed the State and Commerce

Department’s license data for fiscal years 1997 through 2000. The data

was extracted based on the date of final action on each license. We

analyzed the data to determine what types and categories of licenses took

the longest to review. For Commerce Department processing, Executive

Order 12981 allows for certain actions not to be counted in calculating

time; however, our analyses included the actual elapsed time. We

calculated time for both the State and Commerce Departments license

reviews based on the receipt date and final action date of license

applications. Further, our analysis of both databases is dependent on the

reliability of the data provided by the State and Commerce Departments.

The State Department does not have a data dictionary that explains its

data. As a substitute, we discussed key elements of the database with a

State Department representative to ensure that we accurately interpreted

the data. In a recent review of the Office of the Defense Trade Controls,

the State Department Inspector General sampled selected elements of the

database and found data entry errors. While conducting our analysis, we

also found data entry inaccuracies. We worked with a State Department

representative to correct some of these inaccuracies. However, some data

fields did not have entries resulting in incomplete data. Because of the

lack of a data dictionary and the inaccurate and incomplete data, we are

not certain of the reliability of the State Department’s data.

The Commerce Department has a data dictionary and built-in data edit

protocols for identifying and correcting major discrepancies. Since cases

are transmitted to reviewing offices and agencies via the data system, most

of the data is recorded automatically. The licensing officer records all

other data. During our analysis, we found some minor inaccuracies that

did not adversely impact the overall reliability of the data. The Commerce

Department Inspector General has reported that this data is sufficiently

reliable. However, there is separate ongoing GAO work concerning the

Commerce Department’s Information Security Management program that

may comment on the reliability of the Department’s Export Control

Automated Support System. As a result, we are not commenting on the

reliability of the data at this time.

In both cases, however, our analysis is based on the best available data.

To understand the State and Commerce Department’s process, we

reviewed regulations and discussed the processes with State, Commerce,

and Defense Department officials. We also held discussions with

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 45 GAO-01-528 Export Controls

representatives from seven companies and industry representatives to

obtain their views on the State and Commerce Department processes.

We conducted our work from June 2000 through May 2001 in accordance

with generally accepted government auditing standards.
Appendix II:Comments From the Department of State

Page 46 GAO-01-528 Export Controls

Appendix II:Comments From the Department

of State
Appendix II:Comments From the Department of State

Page 47 GAO-01-528 Export Controls
Appendix III: Comments From the

Department of Commerce

Page 48 GAO-01-528 Export Controls

Appendix III: Comments From the

Department of Commerce

Note: GAO comments

supplementing those in

the report text appear at

the end of this appendix.
Appendix III: Comments From the

Department of Commerce

Page 49 GAO-01-528 Export Controls

See comment 1.
Appendix III: Comments From the

Department of Commerce

Page 50 GAO-01-528 Export Controls
Appendix III: Comments From the

Department of Commerce

Page 51 GAO-01-528 Export Controls

See comment 1.

Now on p. 3.

Now on pp. 3 and 4.

See comment 3.

Now on p. 3.

See comment 2.
Appendix III: Comments From the

Department of Commerce

Page 52 GAO-01-528 Export Controls

See comment 3.

Now on p. 29.

See comment 4.

Now on p. 28.

Now on p. 4.
Appendix III: Comments From the

Department of Commerce

Page 53 GAO-01-528 Export Controls

See comment 6.

See comment 5.

See comment 3.
Appendix III: Comments From the

Department of Commerce

Page 54 GAO-01-528 Export Controls

See comment 7.

Now on p. 33.

Now on p. 31.
Appendix III: Comments From the

Department of Commerce

Page 55 GAO-01-528 Export Controls

Now on p. 35.
Appendix III: Comments From the

Department of Commerce

Page 56 GAO-01-528 Export Controls

See comment 3.

Now on p. 41.

Now on p. 39.

See comment 8.

Now on p. 37.
Appendix III: Comments From the

Department of Commerce

Page 57 GAO-01-528 Export Controls

See comment 3.

Now on p. 43.
Appendix III: Comments From the

Department of Commerce

Page 58 GAO-01-528 Export Controls

The following are GAO’s comments on the Department of Commerce’s

letter dated May 17, 2001.

1. Defense Department officials told us that their engineers perform

similar technical analysis on both State and Commerce license

applications.

2. This information is already included in the report.

3. Text revised.

4. A footnote was added for clarification.

5. Obtaining intelligence information is an important part of the licensing

process and adds time.

6. Commerce is not correct. State and Defense Department officials told

us that both State licensing officers and Defense license reviewers

hold munitions license applications while awaiting additional

information from the applicant.

7. The Executive Order and Export Administration Regulations state that

agencies that fail to make a recommendation within the required

30-day period are “...deemed to have no objection to the...” Commerce

Department’s final decision regarding the license application in

question. Additional time occurs when agencies disagree on the final

disposition for a license application and not when they fail to make a

recommendation.

8. We defined “EAR99” items as “other” because readers of this report

may not be familiar with the Export Control Classification Number or

Commerce Control List classification systems.

GAO Comments

(707516)
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