United States Government Accountability Office

GAO Testimony Before the Subcommittee on 

Oversight of Government Management, the 

Federal Workforce, and the District of

Columbia, Committee on Homeland Security 

and Governmental Affairs, U.S. Senate 

EXPORT CONTROLS

State and Commerce Have 

Not Taken Basic Steps to 

Better Ensure U.S. Interests 

Are Protected 

Statement of Ann Calvaresi Barr, Director 

Acquisition and Sourcing Management 

For Release on Delivery

Expected at 2:00 p.m. EDT

Thursday, April 24, 2008

 

GAO-08-710T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 24, 2008

EXPORT CONTROLS

State and Commerce Have Not Taken Basic Steps to 

Better Ensure U.S. Interests Are Protected

Highlights of GAO-08-710T, a testimony 

before the Subcommittee on Oversight of 

Government Management, the Federal 

Workforce, and the District of Columbia, 

Committee on Homeland Security and 

Governmental Affairs, U.S. Senate 

In controlling the transfer of 

weapons and related technologies

overseas, the U.S. government

must limit the possibility of 

sensitive items falling into the

wrong hands while allowing

legitimate trade to occur. Achieving 

this balance has become more

challenging due to redefined

security threats and a globalized 

economy. The export control

system is a key component of the 

safety net of programs intended to 

balance multiple U.S. interests. 

The export control system is 

managed primarily by the State 

Department, which regulates arms 

exports, and the Commerce

Department, which regulates dualuse exports that have military and 

civilian applications. Unless an

exemption applies, arms exports

require licenses, while many dualuse exports do not require licenses. 

Based on GAO’s extensive body of

work on the export control system,

this testimony focuses on export 

licensing inefficiencies, poor

interagency coordination, and 

limits in State’s and Commerce’s 

ability to provide a sound basis for 

changes to the system. 

In prior work, GAO made

recommendations to address 

vulnerabilities in the export control 

system, but many have not been 

implemented. Because of these 

vulnerabilities and others identified 

in the larger safety net of programs,

GAO has designated the effective 

protection of technologies critical

to U.S. national security interests 

as a high risk area warranting 

strategic reexamination.

State and Commerce have not managed their respective export licensing 

processes to ensure their effective operations. In November 2007, GAO 

reported that procedural and automation weaknesses, along with workforce 

challenges, created inefficiencies in State’s arms export licensing process. In 

less than 4 years, median processing times for license applications nearly 

doubled, with State’s backlog of open cases peaking at 10,000. According to 

State officials, the department has begun analyzing its licensing data and 

implementing actions that will allow it to better manage its workload and 

determine the most effective workforce structure. While Commerce’s license

application processing times for dual-use exports have remained relatively 

stable, the overall efficiency of its process is unknown. This is due in part to 

Commerce’s lack of performance measures for all steps in its process and 

analyses that would allow it to identify opportunities for improvement. 

Poor coordination among State, Commerce, and the other departments 

involved in the export control system has created vulnerabilities. State and 

Commerce have disagreed on which department has jurisdiction over the 

export of certain items. In one case, Commerce determined that an item was 

subject to its less restrictive export requirements when, in fact, it was Statecontrolled. Such improper determinations and unclear jurisdiction not only 

create an unlevel playing field—because some companies may gain access to 

markets that others will not—it also increases the risk that sensitive items, 

such as missile-related technologies, will be exported without the appropriate 

review and resulting protections. Further, State and Defense took almost 

4 years to reach agreement regarding when certain arms export licensing 

exemptions could be used by exporters in support of Defense-certified 

programs. This lack of agreement could have resulted in export requirements 

being applied inconsistently. Also, in response to a GAO recommendation, 

State and Commerce only recently began regularly receiving information on 

criminal enforcement actions—information that is important to consider 

upfront when reviewing license applications for approval. 

Despite dramatic changes in the security and economic environment, State 

and Commerce have not undertaken basic management steps to ensure their 

controls and processes are sufficient and appropriate for protecting U.S. 

interests. Notably, neither department has assessed its controls in recent 

years. Nevertheless, State and Commerce maintained that no fundamental 

changes to their export control system were needed. Earlier this year, the 

White House announced that the President signed directives intended to 

ensure that the export control system focuses on meeting security and 

economic challenges. Similarly, legislation to make changes to the export 

control system has been introduced. However, few details about the basis for 

these initiatives are known. In the past, GAO has found that export control 

initiatives not grounded in analyses have generally not resulted in the desired 

improvements to the system. To view the full product, including the scope 

and methodology, click on GAO-08-710T. 

For more information, contact Ann Calvaresi 

Barr at (202) 512-4841 or

calvaresibarra@gao.gov. 
Mr. Chairman and Members of the Subcommittee: 

It is my pleasure to be here today to discuss the U.S. export control 

system—one component of the government’s safety net of programs 

designed to protect critical technologies while allowing legitimate defense 

trade. In controlling the transfer of weapons and related technologies to 

other countries and foreign companies, the U.S. government must 

consider and strike a balance among multiple and sometimes conflicting 

national security, foreign policy, and economic interests. Achieving this 

balance has become increasingly difficult given the evolving security 

threats we face, the quickening pace of technological innovation, and the 

increasing globalization of the economy. GAO has examined not only the 

export control system but also other components of the safety net, such as 

the foreign military sales program, reviews of foreign investments in 

U.S. companies, and a program for identifying militarily critical 

technologies. Within each component and across the safety net, we 

identified significant vulnerabilities and threats that prompted us in 2007 

to designate the effective protection of technologies critical to U.S. 

national security interests as a new high-risk area warranting strategic 

reexamination.1

 I believe that today’s hearing contributes to that 

reexamination. 

The export control system is a particularly complex component of the 

government’s safety net. The system is managed primarily by the 

Departments of State and Commerce, though other departments such as 

Defense, Homeland Security, and Justice play active roles in the system. 

State regulates arms exports,2

 while Commerce regulates exports of dualuse items, which have both military and civilian applications. Exports 

subject to State’s regulations generally require a license, unless an 

exemption applies. Many Commerce-controlled items do not require a 

license for export to most destinations. However, in managing their 

respective systems, both departments are responsible for limiting the 

possibility of export-controlled items and technologies falling into the 

wrong hands while allowing legitimate trade to occur. 

Over the last decade and most recently in November 2007, we have 

reported on various aspects of the U.S. export control system and the 

 1

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

2

 “Arms” refers to defense articles and services as specified in 22 U.S.C. § 2778. 

Page 1 GAO-08-710T 
weaknesses and challenges that affect the system’s overall effectiveness.3

My statement today focuses on: (1) inefficiencies in the export licensing 

processes, (2) poor interagency coordination, and (3) limits in State’s and

Commerce’s ability to identify problems and provide a sound basis for 

making changes to the system. 

My statement is based on GAO’s extensive body of work on the export 

control system. We have made a number of recommendations to address 

the weaknesses and challenges we identified, but many of them have yet

to be implemented. We conducted these performance audits in accordance 

with generally accepted government auditing standards. Those standards 

require that we plan and perform audits to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our 

audit objectives. 

State and Commerce have not managed their export licensing processes to 

ensure their effective operation. In 2007, we found that State’s export 

licensing process was hindered by procedural weaknesses, problems with

a key electronic processing system, and human capital challenges. These 

inefficiencies contributed to State’s median processing times nearly 

doubling from 14 days in fiscal year 2003 to 26 days in 2006 and a 

significant increase in State’s backlog of open cases. According to State

officials, the department has begun analyzing its licensing data and 

implementing measures that will allow it to better manage its workload 

and determine the most effective workforce structure. For the small 

percentage of dual-use exports that require licenses, Commerce’s median 

processing times have remained relatively stable at about 40 days. 

However, the overall efficiency of Commerce’s application review process 

is unknown. This is due in part to Commerce’s lack of performance 

measures for all steps in its review process. 

Summary 

Our prior work has also found that poor coordination among State, 

Commerce, and other departments involved in export controls has further 

weakened the system. For example, State and Commerce have disagreed 

on which department controls the export of certain items. In one case,

Commerce determined that an item was subject to its less restrictive 

 3

 See list of related GAO products at the end of this statement. 

Page 2 GAO-08-710T 
export requirements when it was, in fact, State-controlled. Such improper 

determinations and unclear jurisdiction not only create an unlevel playing

field because some companies may gain access to markets that others will 

not, it also increases the risk that sensitive items, such as explosive 

detection devices, will be exported without the appropriate review and 

resulting protections. Further, State and Defense took almost 4 years to 

reach agreement regarding when certain licensing exemptions could be 

used by exporters in support of Defense-certified programs. This lack of 

agreement could have resulted in export requirements being inconsistently 

applied. Finally, in response to our prior recommendation, State and 

Commerce only recently began regularly receiving information on criminal 

enforcement actions from Justice—information that is important to 

consider upfront as part of the license application review process. 

State and Commerce have not undertaken basic steps to ensure their 

controls and processes are sufficient and appropriate to protect U.S. 

interests. Notably, neither department has systematically assessed its 

controls in recent years—despite dramatic changes in the security and 

economic environment. Nevertheless, State and Commerce have 

maintained that no fundamental changes to the export control system 

were needed. Earlier this year, the White House announced the President 

signed directives intended to ensure that the export control system 

focuses on meeting security and economic challenges. Legislation has also 

been introduced to make changes to the export control system. However, 

few details about the basis for these initiatives are known. In the past, we 

have reported that export control initiatives not grounded in analyses have 

generally not resulted in the desired improvements to the system. 

The U.S. government has a myriad of laws, regulations, policies, and 

processes intended to identify and protect critical technologies so they 

can be transferred to foreign parties in a manner consistent with U.S. 

national security, foreign policy, and economic interests. Advanced

weapons and militarily useful technologies are sold by U.S. companies for 

economic reasons and by the U.S. government for foreign policy, security,

and economic reasons. Yet, the technologies that underpin U.S. military 

and economic strength continue to be targets for theft, espionage, reverse 

engineering, and illegal exports. As a result, the safety net of programs, 

many which were put in place decades ago, not only has to protect critical

technologies but it also has to do so in a manner that allows legitimate 

trade with allies and other friendly nations. 

Background 

Page 3 GAO-08-710T 
The U.S. export control system for defense-related items involves multiple 

federal agencies and is divided between two regulatory bodies—one 

managed by State for arms and another managed by Commerce for dualuse items (see table 1). 

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

Principal regulatory 

agency Mission Statutory authority

Implementing 

regulations

State Department’s 

Directorate of Defense 

Trade Controls

Regulates export of arms by giving primacy to national 

security and foreign policy concerns 

Arms Export Control 

Act of 1976a

International Traffic in 

Arms Regulations 

Commerce Department’s 

Bureau of Industry and 

Security 

Regulates export of dual-use items by weighing 

economic, national security, and foreign policy interests 

Export Administration 

Act of 1979b

Export Administration 

Regulations 

Other federal agencies

Department of Defense Provides input on which items should be controlled by 

either State or Commerce and conducts technical and 

national security reviews of export license applications 

submitted by exporters to either State or Commerce 

Department of Homeland

Security 

Enforces arms and dual-use export control laws and 

regulations through border inspections and 

investigationsc

Department of Justice Investigates any criminal violations in certain 

counterintelligence areas, including potential export 

control violations, and prosecutes suspected violators of 

arms and dual-use export control laws 

Source: Cited laws and regulations. 

a

22 U.S.C. 2751 et seq. 

b

50 U.S.C. App. 2401 et seq. Authority granted by the act terminated on August 20, 2001. Executive 

Order 13222, Continuation of Export Control Regulations, issued August 2001, continues the export 

controls established under the Act and the implementing Export Administration Regulations. 

Executive Order 13222 requires an annual extension and was recently renewed by Presidential 

Notice on August 15, 2007. 

c

Homeland Security, Justice, and Commerce investigate potential dual-use export control violations. 

Homeland Security and Justice investigate potential arms export control violations. 

State’s and Commerce’s implementing regulations contain lists that 

identify the items and related technologies each department controls and 

establish requirements for exporting those items. Exporters are 

responsible for determining which department controls the items they 

seek to export and what the regulatory requirements are for export. The 

two departments’ controls differ in several key areas. In most cases, 

Commerce’s controls over dual-use items are less restrictive than State’s 

controls over arms. Many items controlled by Commerce do not require 

licenses for export to most destinations, while State-controlled items 

Page 4 GAO-08-710T 
generally require licenses for most destinations. Also, some sanctions and 

embargoes only apply to items on State’s U.S. Munitions List and not to 

those on the Commerce Control List. For example, Commerce-controlled 

items may be exported to China while arms exports to China are generally

prohibited. 

Even when items are exempt from licensing requirements, they are still 

subject to U.S. export control laws. Responsibility for enforcing those laws 

and their associated regulations largely rests with various agencies within 

Commerce, Homeland Security, Justice, and State. These enforcement 

agencies conduct a variety of activities, including inspecting items to be 

exported, investigating potential export control violations, and pursuing 

and imposing the appropriate penalties. Punitive actions, which are either

criminal or administrative, can be taken against violators of export control 

laws and regulations. Justice can prosecute criminal cases, where the 

evidence shows that the exporter willfully and knowingly violated export 

control laws. Prosecutions can result in imprisonment, fines, and other 

penalties. State or Commerce can impose fines, suspend export licenses, 

or deny export privileges for administrative violations. 

Reviews of export license applications require time to deliberate and 

ensure that license decisions are appropriate. Such reviews, though, 

should not be unnecessarily delayed due to inefficiencies or be eliminated

for efficiency’s sake—both of which could have unintended consequences 

for U.S. security, foreign policy, and economic interests. However, State 

and Commerce have not managed their respective export licensing 

processes to ensure their efficient operation. 

Inefficiencies in the 

Processing of License 

Applications Hinder 

the Export Control 

System

As we have previously reported, inefficiencies have contributed to 

increases in State’s processing times for license applications and related 

cases and its inability to keep pace with a growing workload.4

 State’s 

processing times for arms export cases began increasing in fiscal year 

2003—with median processing times nearly doubling from 14 days to 

26 days by fiscal year 2006 (see fig. 1). During this period, State’s workload 

increased by 20 percent, from about 55,000 to 65,000 cases. State was 

unable to keep pace with this growing number of cases, which resulted in 

 4

 GAO, Defense Trade: State Department Needs to Conduct Assessments to Identify and

Address Inefficiencies and Challenges in the Arms Export Process, GAO-08-89 

(Washington, D.C.: Nov. 30, 2007). 

Page 5 GAO-08-710T 
a significant number of open cases awaiting review and final action. At the 

end of fiscal year 2006, this so called “backlog” reached its peak at over 

10,000 open cases, prompting State to undertake extraordinary 

measures—such as extending work hours and canceling training and 

industry outreach—to reduce the number of open cases. However, such 

measures were not sustainable and did not address underlying 

inefficiencies. Concerns were also raised that these measures could have 

the unanticipated effect of shifting the focus from the mission of 

protecting U.S. interests to simply closing cases to reduce the number of 

open cases.

Figure 1: Median Processing Times for Arms Export Cases, Fiscal Year 1999 

through April 2007 (in days) 

0

5

10

15

20

25

30

1999 2000 2001 2002 2003 2004 2005 2006 2007

Days

Source: GAO analysis of State data.

Fiscal year

At the time of our 2007 review, we found that State had not analyzed 

licensing data to identify inefficiencies and develop sustainable solutions 

to manage its review process and more effectively structure its workforce. 

Through our extensive analysis of State’s data, we determined that the 

overall trend of increased processing times and open cases was 

attributable to several factors, including procedural weaknesses, problems 

with its new electronic processing system, and human capital challenges,

many of which had gone unnoticed and unaddressed by State.

Page 6 GAO-08-710T 
• Procedural Weaknesses: State lacked screening procedures to 

promptly identify those cases needing interagency review. As a result, 

cases often languished for weeks in a queue awaiting assignment or 

initial review before being referred to another agency, such as Defense, 

for further review. State also lacked procedures to expedite certain 

cases. We found that processing times in fiscal year 2006 for exports to 

the United Kingdom and Australia, which by law were to be expedited, 

did not differ significantly from processing times for other allied 

countries.5

 Similarly, processing time goals for applications in support 

of Operations Iraqi Freedom and Enduring Freedom were not being 

met. 

• Electronic Processing Problems: State officials have cited DTrade—its new automated system for processing cases—as the most 

significant effort to improve efficiency. However, State’s 

implementation of D-Trade has been problematic and has not been the 

promised panacea for improving processing times. Our analysis 

showed that there was no significant difference in processing times for 

similar cases whether they were submitted via D-Trade or the 

traditional paper-based system. State relied on this automated solution 

without reengineering the underlying processes or developing tools to 

facilitate the licensing officer’s job. For example, D-Trade has limited 

capabilities to reference precedent cases that would allow licensing 

officers to leverage work previously done on similar cases, which could 

not only help to expedite the processing of a case but could also ensure 

greater consistency among similar cases. Further, D-Trade experienced 

performance problems that State officials attributed to poorly defined

requirements and a rush to production. For example, because of a 

glitch in January 2007, 1,300 cases received during a 3-day period had 

to be resubmitted by exporters, which resulted in rework. 

• Human Capital Challenges: State has also faced human capital 

challenges in establishing and retaining a sufficient workforce with the 

experience and skills needed to efficiently and effectively process arms 

export cases. For example, the number of licensing officers on board 

was at the same level in fiscal years 2003 and 2006, despite an almost 

20 percent increase in cases over that period. As a point of comparison, 

in fiscal year 2005, State had 31 licensing officers who closed 

approximately 63,000 cases while Commerce had 48 licensing officers 

who closed approximately 22,000 cases. Additionally, Defense had not 

 5

 Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, Pub. L. No. 

108-375, § 1225 (2004). 

Page 7 GAO-08-710T 
been providing State with its full complement of detailed military 

officers, who are generally assigned to review complex agreements.6

State officials have acknowledged that more work was falling on fewer 

experienced staff. According to these officials, in the summer of 2006, 

about half of State’s licensing officers had less than a year of 

experience, and many lacked the authority needed to take final action

on cases. 

These findings prompted us to recommend that State conduct analyses of 

its licensing data to assess root causes of inefficiencies and then identify

and implement actions that would allow it to better manage its workload, 

reexamine its processes, and determine the most effective workforce 

structure. We are encouraged to learn that, under the direction of new 

leadership responsible for managing the arms export control system, State 

has recently committed to implementing these recommendations and 

taking actions to address the issues we identified. Specifically, State has 

informed us that it (1) has implemented procedures to more quickly 

determine whether cases should be referred to other agencies or State 

bureaus for review and instituted senior level reviews of cases that are 

over 60 days old, (2) is planning future D-Trade upgrades that are expected

to facilitate case reviews by licensing officers and allow managers to 

better oversee the processes, and (3) has restructured its licensing 

divisions to ensure a more equitable distribution in the workload and skill

level of licensing officers based on our analysis. While these recently 

reported actions are encouraging, we have not yet examined them to 

determine their effects. 

Concerns about efficiency have largely focused on State’s processing of 

applications for arms exports, in part, because few dual-use exports 

subject to Commerce’s controls require licenses. In 2005, for example, 

98.5 percent of dual-use exports, by dollar value, were not licensed.7

 While 

few dual-use exports are licensed, the number of license applications 

processed by Commerce has increased in recent years—increasing by over

 6

 The Foreign Relations Authorization Act, Fiscal Year 2003 (Pub. L. No. 107-228, § 1401(c) 

(2002)) states that the Secretary of Defense should ensure that 10 military officers are 

continuously detailed to State’s Directorate of Defense Trade Controls. 

7

 This amount reflects only the export of items specifically identified on Commerce’s

control list. If an item is not listed on the control list but is subject to Commerce’s 

regulations, it falls into the category know as EAR 99. In 2005, 99.98 percent of EAR99

items were exported without licenses. Amounts do not include data for exports to Canada. 

Page 8 GAO-08-710T 
50 percent from fiscal years 1998 through 2005.8

 During that time period, 

Commerce’s overall median processing times have remained stable, 

around 40 days, and are consistent with time frames established by a 1995 

executive order.9

 However, the overall efficiency of Commerce’s licensing 

process is unknown in part because Commerce lacks efficiency-related

measures and analyses that would allow it to identify opportunities for 

improvement. For example, to determine the efficiency of its license 

application review process, Commerce only measures its performance in 

terms of how long it takes to refer an application to another agency for 

review. Commerce does not have efficiency-related measures for other 

steps in its review process, such as how quickly a license should be issued

once other agencies provide their input, or for the entire process. During 

the course of our prior reviews, Commerce did not provide us with 

evidence that would indicate it has undertaken analyses of licensing data

to determine if previously established time frames are still appropriate or 

to identify the drivers of its workload or the bottlenecks in its processes 

that would allow it to implement actions to improve efficiency.

Since multiple departments have a role to play in the export control 

system, its effective operation depends on those departments working 

together. However, we have identified instances related to export control 

jurisdiction, the use of license exemptions, and the dissemination of 

enforcement information when poor coordination among the departments 

has created vulnerabilities in the system’s ability to protect U.S. interests. 

The departments have taken action to address some—but not all—of these 

vulnerabilities. 

Poor Interagency 

Coordination Creates 

Vulnerabilities 

Given the different restrictions State and Commerce have on the items 

subject to their controls, the determination of which items fall under 

State’s export jurisdiction and which fall under Commerce’s is 

fundamental to the U.S. export control system. However, we have 

 8

 GAO, Export Controls: Improvements to Commerce’s Dual-Use System Needed to Ensure

Protection of U.S. Interests in the Post-9/11 Environment, GAO-06-638 (Washington, D.C.: 

June 26, 2006). 

9

 Under Executive Order No. 12981 and 15 C.F.R. §750.4, the entire dual-use license 

application process—including an interagency escalation process if agencies cannot reach 

agreement—is to be completed within 90 days, unless an agency appeals the decision to the

President who is given no time limit. However, few applications are escalated through the 

interagency dispute resolution process, which means that reviews of most applications are

completed within 40 days. 

Page 9 GAO-08-710T 
previously reported that State and Commerce have disagreed on which 

department has jurisdiction over certain items. In some cases, both 

departments have claimed jurisdiction over the same items, which was the 

case for certain missile-related technologies.10 In another case, for 

example, Commerce improperly determined that explosive detection 

devices were subject to Commerce’s less restrictive export control 

requirements when they were, in fact, State-controlled.11 Such 

jurisdictional disagreements and problems are often the result of minimal 

or ineffective coordination between the two departments and the 

departments’ differing interpretations of the regulations. Despite our 

recommendations to do so, the two departments have not yet come 

together to resolve these jurisdictional disputes or develop new processes 

to improve coordination. Until these disagreements and coordination 

problems are resolved, exporters—not the government—will continue to 

determine which restrictions apply and, therefore, the type of

governmental review that will occur. Not only does this create an unlevel

playing field and competitive disadvantage—because some companies 

may gain access to markets that others will not—but it also increases the 

risk that critical items will be exported without the appropriate review and 

resulting protections. 

Even when jurisdiction over an export-controlled item is clearly 

established, there is not always agreement among the departments on 

when an export license is required. While State generally requires a license

for most arms exports, its regulations exempt exports that meet specific 

criteria from licensing requirements. For a limited number of licensing 

exemptions, Defense may confirm that the export qualifies for the use of 

an exemption in support of Defense activities, such as sharing of technical 

data related to defense acquisition programs and defense cooperative 

agreements with allies and friendly nations. However, our work revealed

that State and Defense had different interpretations of the exemptions and 

what exports could be certified by Defense.12 For example, State officials 

maintained that one exemption was only for use by U.S. government 

 10 GAO, Export Controls: Clarification of Jurisdiction for Missile Technology Items 

Needed, GAO-02-120 (Washington, D.C.: Oct. 9, 2001). 

11 GAO, Export Controls: Processes for Determining Proper Control of Defense-Related

Items Need Improvement, GAO-02-996 (Washington, D.C.: Sept. 20, 2002). 

12 GAO, Defense Trade: Clarification and More Comprehensive Oversight of Export 

Exemptions Certified by DOD are Needed, GAO-07-1103 (Washington, D.C.: Sept. 19,

2007). 

Page 10 GAO-08-710T 
personnel, while Defense officials stated it was available for use by 

contractors working in direct support of Defense activities. For 

approximately 4 years, the lack of a common understanding of the 

exemption created a vulnerability as regulations and licensing 

requirements could have been inconsistently applied. Further, we found 

that State and Defense lacked comprehensive data to oversee the use of 

these exemptions. Such data would allow the departments to identify and

assess the magnitude of transfers certified for exemption use. Specifically, 

Defense’s 2006 annual report to State on the use of the exemptions 

provided data on 161 certifications, but we identified 271 additional 

certifications that were not included in Defense’s report because they 

were not entered into a centralized Defense database. We understand that,

in response to our recommendation, State and Defense established a 

working group and recently reached agreement to resolve the issues 

identified in our report. 

When an exporter applies for a license, both State and Commerce are to

consider whether the parties to the proposed export are eligible to sell or 

receive controlled items and technologies. Individuals or companies 

indicted or convicted of violating various laws may be denied from 

participating in proposed exports. Therefore, information on criminal 

export control prosecution outcomes should help inform the export 

control process by providing State and Commerce with a complete picture 

of the individual or company seeking an export license. Prosecuting 

export cases can be difficult, since securing sufficient evidence to prove 

the exporter intentionally violated export control laws can represent 

unique challenges, especially when the item being exported is exempted 

from licensing or the case requires foreign cooperation. We reported in 

2006 that while Justice and the other enforcement agencies have databases 

that capture information on their enforcement activities, the outcomes of 

criminal cases were not consistently shared with State and Commerce.13

Instead State and Commerce relied on informal processes to obtain 

information on indictments and convictions, which created gaps in their 

knowledge. For example, we found that the watchlist used by Commerce 

to screen applications was incomplete as it did not contain 117 companies 

and individuals that had committed export control violations. Prompted by 

our recommendation, Justice began providing State and Commerce with 

quarterly reports on criminal enforcement actions so that such 

 13 GAO, Export Controls: Challenges Exist in Enforcement of an Inherently Complex 

System, GAO-07-265 (Washington, D.C.: Dec. 20, 2006).

Page 11 GAO-08-710T 
information can be considered upfront during the license application 

review process. 

To adapt to the accelerating pace of change in the global security, 

economic, and technological environment, federal programs need to 

systematically reassess priorities and approaches and determine what 

corrective actions may be needed to fulfill their missions.14 For example, to

meet the challenges of the 21st century, agency leaders need to reexamine 

their programs, asking questions related to their program’s relevance and 

purpose, how success should be measured, and whether they are 

employing best practices. Given the two departments’ missions of 

controlling defense-related exports while allowing legitimate trade, State 

and Commerce should not be exceptions to this basic management tenet.

Although dramatic changes have occurred in the security and economic 

environment since the start of the 21st century, State and Commerce have 

not conducted systematic assessments to determine whether their 

controls and processes are sufficient and appropriate or whether changes 

are needed to better protect U.S. interests. Despite providing us with no 

basis for their positions and the existence of known vulnerabilities, both 

departments informed us that no fundamental changes to their respective 

systems were needed. 

Absence of 

Assessments Limits 

Ability to Identify 

Problems and Make 

Improvements to the 

System

Earlier this year, the President signed a package of directives that, 

according to the White House, will ensure that U.S. export control policies 

and practices support national security while facilitating economic and 

technological leadership. Relatively few details about the directives or the 

basis for particular initiatives have been publicly released, though they 

reportedly incorporate recommendations provided by industry. We have 

not had an opportunity to review the specifics of the directives, how they 

were formulated, or how they will be implemented. Legislation has also 

been introduced to make changes to the export control system.15 

While we have not had an opportunity to evaluate the new directives, a 

note of caution may be drawn from our work regarding a prior set of 

 14 GAO, 21st Century Challenges: Reexamining the Base of the Federal Government, 

GAO-05-325SP (Washington, D.C.: February 2005) and 21st Century Challenges:

Transforming Government to Meet Current and Emerging Challenges, GAO-05-830T 

(Washington, D.C.: July 13, 2005). 

15 S. 2000, the Export Enforcement Act of 2007, was introduced in August 2007 and

H.R. 4246, the Defense Trade Controls Performance Improvement Act of 2007, was 

introduced in November 2007. 

Page 12 GAO-08-710T 
initiatives that were also designed to improve the export control system. In 

2000, the Defense Trade Security Initiatives (DTSI), which was 

characterized as the first major post-Cold War revision to the U.S. export 

control system, was unveiled. DTSI was comprised of 17 different 

initiatives developed by State and Defense to expedite and reform the U.S. 

export control system. At the time, we determined that no analysis of the 

problems that the initiatives were intended to remedy or demonstration of 

how they would achieve identified goals had been conducted.

16 It turned 

out that the justifications for the initiatives was, in part, based on 

anecdotes that were factually incorrect or only told part of the story. In 

one example cited by Defense, the lengthy processing time for an export

license caused a foreign firm to cancel its contract with a U.S. aerospace

company, but upon closer examination, we learned that U.S. government 

had denied the license because of concerns regarding the foreign firm’s 

ties with the Chinese military. Because there was little assurance that 

DTSI would result in improvements to the system, we were not surprised 

during our subsequent work when we found that the initiatives had 

generally not been successful. For example, D-Trade was one of the 

initiatives, but as already discussed, its anticipated efficiencies have not 

yet been realized. Additionally, processing time goals established in DTSI 

for applications to assist allies in increasing their military capabilities have 

not been met. Other initiatives have not been widely used by exporters. 

For example, we reported that between 2000 and 2005, State had only 

received three applications for comprehensive export authorizations for a 

range of exports associated with multinational defense efforts, including 

the Joint Strike Fighter.17 According to Defense and contractor officials, 

while such authorizations were intended to lessen the administrative 

burden and improve processing times for routine export authorizations, 

companies have opted not to use them because of the extra costs 

associated with their compliance requirements. 

The government’s safety net of programs is intended to protect critical 

technologies while still allowing legitimate trade. Therefore, the 

components of that system must address known vulnerabilities and be 

able to adapt to a changing global environment if they are to individually

Conclusions 

 16 GAO, Defense Trade: Analysis of Support for Recent Initiatives, GAO/NSIAD-00-191 

(Washington, D.C.: Aug. 31, 2000). 

17 GAO, Defense Trade: Arms Export Control System in the Post-9/11 Environment, GAO05-234 (Washington, D.C.: Feb. 16, 2005). 

Page 13 GAO-08-710T 
and collectively protect and promote U.S. national security, foreign policy, 

and economic interests. Our past work demonstrates that State and 

Commerce have not managed the export control system to better ensure 

its overall effectiveness in protecting U.S. interests. Recent actions taken 

by the departments to begin addressing some of the management issues 

and vulnerabilities identified in our prior reports are encouraging. 

However, other recommendations, most notably those related to export

control jurisdiction, remain unimplemented. While the implementation of 

our recommendations is an important first step for improving the 

efficiency and effectiveness of the export control system, a sustained 

commitment on the part of the departments to engage in a continuous 

process of evaluation, analysis, and coordination is needed. It is only then

that meaningful and sustainable improvements to the export control 

system can be developed and implemented to ensure the efficiency and 

effectiveness of the system in protecting U.S. interests. 

Mr. Chairman this concludes my statement. I would be happy to answer 

any questions you or other members of the subcommittee may have. 

For questions regarding this testimony, please contact me at (202) 512-

4841 or calvaresibarra@gao.gov. Johana R. Ayers, Assistant Director; 

Marie Ahearn, Jennifer Dougherty, Karen Sloan, and Anthony Wysocki 

made key contributions to this statement. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this statement. 

GAO Contacts and 

Acknowledgments 

Page 14 GAO-08-710T 
Page 15 GAO-08-710T 

Related GAO Products 

Defense Trade: State Department Needs to Conduct Assessments to 

Identify and Address Inefficiencies and Challenges in the Arms Export

Process. GAO-08-89. Washington, D.C.: November 30, 2007. 

Defense Trade: Clarification and More Comprehensive Oversight of 

Export Exemptions Certified by DOD Are Needed. GAO-07-1103. 

Washington, D.C.: September 19, 2007. 

Export Controls: Vulnerabilities and Inefficiencies Undermine System’s 

Ability to Protect U.S. Interests. GAO-07-1135T. Washington, D.C.: July 26,

2007. 

High Risk Series: An Update. GAO-07-310. Washington, D.C.: January 

2007. 

Export Controls: Challenges Exist in Enforcement of an Inherently 

Complex System. GAO-07-265. Washington, D.C.: December 20, 2006. 

Analysis of Data for Exports Regulated by the Department of Commerce.

GAO-07-197R. Washington, D.C.: November 13, 2006. 

Export Controls: Agencies Should Assess Vulnerabilities and Improve 

Guidance for Protecting Export-Controlled Information at Universities. 

GAO-07-70. Washington, D.C.: December 5, 2006.

Export Controls: Agencies Should Assess Vulnerabilities and Improve 

Guidance for Protecting Export-Controlled information at Companies. 

GAO-07-69. Washington, D.C.: December 5, 2006.

Defense Technologies: DOD’s Critical Technologies Lists Rarely Inform 

Export Control and Other Policy Decisions. GAO-06-793. Washington, 

D.C.: July 28, 2006. 

Export Controls: Improvements to Commerce’s Dual-Use System Needed

to Ensure Protection of U.S. Interests in the Post-9/11 Environment. 

GAO-06-638. Washington, D.C.: June 26, 2006. 

Defense Trade: Arms Export Control Vulnerabilities and Inefficiencies 

in the Post-9/11 Environment. GAO-05-468R. Washington, D.C.: April 7, 

2005. 

21st Century Challenges, Reexamining the Base of the Federal 

Government. GAO-05-325SP. Washington, D.C.: February 2005. 
Defense Trade: Arms Export Control System in the Post-9/11 

Environment. GAO-05-234. Washington, D.C.: February 16, 2005. 

Nonproliferation: Further Improvements Needed in U.S. Efforts to 

Counter Threats from Man-Portable Air Defense Systems. GAO-04-519. 

Washington, D.C.: May 13, 2004. 

Nonproliferation: Improvements Needed to Better Control Technology 

Exports for Cruise Missiles and Unmanned Aerial Vehicles. GAO-04-175. 

Washington, D.C.: January 23, 2004. 

Export Controls: Post-Shipment Verification Provides Limited 

Assurance That Dual-Use Items Are Being Properly Used. GAO-04-357. 

Washington, D.C.: January 12, 2004. 

Joint Strike Fighter Acquisition: Cooperative Program Needs Greater 

Oversight to Ensure Goals Are Met. GAO-03-775. Washington, D.C.: July 

21, 2003. 

Defense Trade: Better Information Needed to Support Decisions 

Affecting Proposed Weapons Transfers. GAO-03-694. Washington, D.C.: 

July 11, 2003.

Nonproliferation: Strategy Needed to Strengthen Multilateral Export 

Control Regimes. GAO-03-43. Washington, D.C.: October 25, 2002. 

Export Controls: Processes for Determining Proper Control of DefenseRelated Items Need Improvement. GAO-02-996. Washington, D.C.: 

September 20, 2002. 

Export Controls: Department of Commerce Controls over Transfers of

Technology to Foreign Nationals Need Improvement. GAO-02-972. 

Washington, D.C.: September 6, 2002. 

Export Controls: More Thorough Analysis Needed to Justify Changes in 

High Performance Computer Controls. GAO-02-892. Washington, D.C.: 

August 2, 2002. 

Export Controls: Rapid Advances in China’s Semiconductor Industry 

Underscore Need for Fundamental U.S. Policy Review. GAO-02-620. 

Washington, D.C.: April 19, 2002. 

Page 16 GAO-08-710T 
Defense Trade: Lessons to Be Learned from the Country Export 

Exemption. GAO-02-63. Washington, D.C.: March 29, 2002. 

Export Controls: Issues to Consider in Authorizing a New Export 

Administration Act. GAO-02-468T. Washington, D.C.: February 28, 2002.

Export Controls: Reengineering Business Processes Can Improve 

Efficiency of State Department License Reviews. GAO-02-203. 

Washington, D.C.: December 31, 2001. 

Export Controls: Clarification of Jurisdiction for Missile Technology 

Items Needed. GAO-02-120. Washington, D.C.: October 9, 2001.

Export Controls: State and Commerce Department License Review Times 

are Similar. GAO-01-528. Washington, D.C.: June 1, 2001. 

Export Controls: Regulatory Change Needed to Comply with Missile 

Technology Licensing Requirements. GAO-01-530. Washington, D.C.: 

May 31, 2001. 

Defense Trade: Analysis of Support for Recent Initiatives. 

GAO/NSIAD-00-191. Washington, D.C.: August 31, 2000. 

Defense Trade: Status of the Department of Defense’s Initiatives on 

Defense Cooperation. GAO/NSIAD-00-190R. Washington, D.C.: July 19, 

2000. 

Export Controls: Better Interagency Coordination Needed on Satellite 

Exports. GAO/NSIAD-99-182. Washington, D.C.: September 17, 1999. 

Export Controls: Change in Export Licensing Jurisdiction for Two 

Sensitive Dual-Use Items. GAO/NSIAD-97-24. Washington, D.C.: 

January 14, 1997. 

Page 17 GAO-08-710T (120743) 
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