Export Controls: Challenges Exist in Enforcement of an Inherently Complex System
Published: 2006-12-20T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Each year, billions of dollars in dual-use items--items that have both commercial and military applications--as well as defense items are exported from the United States. To protect U.S. interests, the U.S. government controls the export of these items. A key function in the U.S. export control system is enforcement, which aims to prevent or deter the illegal export of controlled items. This report describes the roles, responsibilities, and authorities of export control enforcement agencies, identifies the challenges these agencies face, and determines if information on enforcement outcomes is provided to the export control agencies. GAO's findings are based on an examination of statutes, interagency agreements, and procedures; interviews with enforcement officials at selected field locations and headquarters; and an assessment of enforcement information.
section_title: What GAO Found
paragraphs: The enforcement of export control laws and regulations is inherently complex, involving multiple agencies with varying roles, responsibilities, and authorities. The agencies within the Departments of Commerce, Homeland Security, Justice, and State that are responsible for export control enforcement conduct a variety of activities, including inspecting items to be exported, investigating potential export control violations, and pursuing and imposing appropriate penalties and fines against violators. These agencies' enforcement authorities are granted through a complex set of laws and regulations, which give concurrent jurisdiction to multiple agencies to conduct investigations. Enforcement agencies face several challenges in enforcing export control laws and regulations. For example, agencies have had difficulty coordinating investigations and agreeing on how to proceed on cases. Coordination and cooperation often hinge on the relationships individual investigators across agencies have developed. Other challenges include obtaining timely and complete information to determine whether violations have occurred and enforcement actions should be pursued, and the difficulty in balancing multiple priorities and leveraging finite human resources. Each enforcement agency has a database to capture information on its enforcement activities. However, outcomes of criminal cases are not systematically shared with State and Commerce, the principal export control agencies. State and Commerce may deny license applications or export privileges of indicted or convicted export violators. Without information on the outcomes of criminal cases, export control agencies cannot gain a complete picture of an individual or a company seeking export licenses or discover trends in illegal export activities. This report is a publicly releasable version of a law enforcement sensitive report we issued on November 15, 2006. Therefore, some examples that involved law enforcement techniques or methods and that support our findings have been removed from this version.

section_title: Letter
paragraphs: Each year, billions of dollars in “dual-use” items—which have both  commercial and military applications—and defense items are exported  from more than 300 U.S. sea, air, and land ports. To protect national  security, foreign policy, and economic interests, the U.S. government  controls the export of these items. The Departments of Commerce and  State are principally responsible for regulating the export of dual-use and  defense items, respectively.
A key function in the U.S. export control system is enforcement, which  consists of various activities that aim to prevent or deter the illegal export  of controlled defense and dual-use items and can result in apprehending  violators and pursuing and imposing appropriate criminal and  administrative penalties, such as imprisonment, fines, denials of export  privileges, or debarment. Enforcement activities—which include  inspections, investigations, and punitive actions against violators of export  control laws—are largely carried out by the Departments of Commerce,  Homeland Security, Justice, and State. Enforcement activities can result in  various outcomes. One recent case resulted in four business owners  pleading guilty to illegally exporting defense items, including radars and  smart weapons, to Chinese government-owned entities. Three were  sentenced to prison, and all had to collectively forfeit almost $400,000,  which represents their revenue from the illegal exports.
Attempts continue to be made by individuals, companies, terrorist  organizations, and countries of concern to illegally obtain defense and  dual-use items. In light of this, you asked us to review export control  enforcement activities. In response, we (1) described the roles,  responsibilities, and authorities of the agencies responsible for export  control enforcement; (2) identified any challenges the agencies face in  enforcing export control laws and regulations; and (3) assessed whether  information on enforcement outcomes is provided to the export control  agencies to inform the export control process and licensing decisions. This  report is a publicly releasable version of a law enforcement sensitive  report we issued on November 15, 2006. Therefore, some examples that  involved law enforcement techniques or methods and that support our  findings have been removed from this version.
To conduct our work, we identified enforcement roles, responsibilities,  and authorities through an examination of export control statutes,  regulations, formal interagency agreements, policies, procedures, and  operating manuals. We interviewed agency officials at headquarters and  selected field locations responsible for export enforcement—including  inspectors and investigators from the Department of Homeland Security,  investigators from the Department of Commerce, investigators and  criminal prosecutors from the Department of Justice, and compliance  officers from the Department of State—about enforcement activities and  challenges. We also identified export control enforcement information  maintained at the various agencies and spoke with State licensing and  policy officials and Commerce officials to assess whether they obtain this  information for decision making. We performed our review from  September 2005 through August 2006 in accordance with generally  accepted government auditing standards. For more on our scope and  methodology, see appendix I.
subsections: section_title: Background
paragraphs: The U.S. government’s control over the export of defense and dual-use  items is intended to ensure that U.S. interests are protected in accordance  with the Arms Export Control Act and the Export Administration Act. The  U.S. government’s control over the export of defense and dual-use items is  primarily divided between two departments—State and Commerce,  respectively (see table 1)—with support for enforcement activities  primarily from Commerce, through its Bureau of Industry and Security’s  Office of Export Enforcement (OEE); Department of Homeland Security,  through its Customs and Border Protection (CBP) and Immigration and  Customs Enforcement (ICE); and Justice, through the FBI and the U.S.  Attorneys Office.
State and Commerce require exporters to identify items that are on the  departments’ control lists and to obtain license authorization from the  appropriate department to export these items, unless an exemption  applies. Exemptions are permitted under various circumstances, such as  allowing for the export of certain items to Canada without a license. Many  dual-use items are exempt from licensing requirements. While items can  be exempt from licensing requirements, they are still subject to U.S. export  control laws. Because exporters are responsible for complying with export  control laws and regulations, regulatory and investigative enforcement  agencies conduct outreach to educate exporters on these laws and  regulations. When shipping controlled items, exporters are required to  electronically notify CBP officials at the port where the item will be  exported, including information on the quantity and value of the shipment,  the issued export license number, or an indication that the item is exempt  from licensing requirements.
Export enforcement aims to ensure U.S.-controlled items do not fall into  the wrong hands and to limit the possibility that illegal exports will erode  U.S. military advantage. Export enforcement involves inspecting items to  be shipped, investigating potential violations of export control laws, and  punishing export control violators. When inspectors, investigators, and  prosecutors have questions about whether an item is controlled and  requires a license, they request a license determination. CBP and ICE  request license determinations through ICE’s Exodus Command Center,  which refers the request to State and Commerce; OEE requests  determinations directly from Commerce licensing officers. Some FBI  agents request license determinations through the Exodus Command  Center, while others make such requests directly to State or Commerce.
In fiscal year 2005, Department of Justice data showed that there were  more than 40 individuals or companies convicted of over 100 criminal  violations of export control laws. State reported over $35 million and  Commerce reported $6.8 million in administrative fines and penalties for  fiscal year 2005. See appendix II for a list of selected export control cases.
For more than a decade, we have reported on a number of weaknesses  and vulnerabilities in the U.S. export control system and made numerous  recommendations, several of which have not been implemented. For  example, in September 2002, we reported that Commerce improperly  classified some State-controlled items as Commerce-controlled, increasing  the risk that defense items would be exported without the proper level of  review and control to protect national interests. In June 2006, we  reported that this condition remains unchanged and that Commerce has  not taken the corrective actions that we recommended in 2002. We have  also reported on long-standing problems in enforcement, including poor  cooperation among the investigative agencies.
section_title: Export Control Enforcement Is Complex, Involving Varying Roles, Responsibilities, and Authorities among Multiple Agencies
paragraphs: Enforcing U.S. export control laws and regulations is inherently complex.  Multiple agencies are involved in enforcement and carry out various  activities, including inspecting shipments, investigating potential export  control violations, and taking punitive actions that can be criminal or  administrative against violators of export control laws and regulations.  Authorities for export control enforcement are provided through a  complex set of laws and regulations. These authorities and some  overlapping jurisdiction for conducting enforcement activities add to the  complexity.
subsections: section_title: Multiple Agencies Are Responsible for Export Enforcement
paragraphs: Enforcement—which includes inspections, investigations, and punitive  actions against violators of export control laws—is largely conducted by  various agencies within Commerce, Homeland Security, Justice, and State  depending on the facts and circumstances of the case. These agencies’ key  enforcement responsibilities are shown in table 2.
Inspections of items scheduled for export are largely the responsibility of  CBP officers at U.S. air, sea, and land ports, as part of their border  enforcement responsibilities. To help ensure that these items comply with  U.S. export control laws and regulations, CBP officers check items against  applicable licenses prior to shipment, selectively conduct physical  examinations of cargo at the port and in warehouses, review shipping  documents, detain questionable shipments, and seize items being exported  illegally. As part of their responsibilities, CBP officers are required by  State to decrement (reduce) the shipment’s quantity and dollar value from  the total quantity and dollar value authorized by the exporter’s license.  This process helps to ensure that the shipment does not exceed what is  authorized and that the license has not expired. However, Commerce does  not require CBP officers to decrement Commerce licenses. Commerce  officials said they have shipping tolerances that allow exporters to ship  controlled items exceeding the quantity and value approved in a license,  but this varies based on the controlled item. CBP officers do not currently  have a formal means for determining if exporters have exceeded  authorized license quantities and values for dual-use items within any  shipment tolerances permitted for that controlled item. As a result, they  cannot ensure accountability on the part of exporters or that Commerce  regulations have been properly followed. CBP has an automated export  system, which is used for decrementing State licenses. This system has  built-in tolerances to allow the shipment to exceed the total value of a  State license by 10 percent, as permitted by regulations.
Investigations of potential violations of export control laws for dual-use  items are conducted by agents from OEE, ICE, and FBI. Investigations of  potential export violations involving defense items are conducted by ICE  and FBI agents. FBI has authority to investigate any criminal violations of  law in certain foreign counterintelligence areas. The investigative  agencies have varying tools such as undercover operations and overseas  investigations for investigating potential violations and establishing cases  for potential criminal or administrative punitive actions.
Punitive actions, which are either criminal or administrative, are taken  against violators of export control laws and regulations. Criminal  violations are those cases where the evidence shows that the exporter  willfully and knowingly violated export control laws. U.S. Attorneys  Offices prosecute criminal cases in consultation with Justice’s National  Security Division. These cases can result in imprisonment, fines,  forfeitures, and other penalties. Punitive actions for administrative  violations can include fines, suspension of an export license, or denial or  debarment from exporting, and are imposed primarily by State or  Commerce, depending on whether the violation involves the export of a  defense or a dual-use item. In some cases, both criminal and  administrative penalties can be levied against an export control violator.
The export control and investigative enforcement agencies also conduct  outreach activities, primarily educating exporters on U.S. export control  laws and regulations. For example, in fiscal year 2005, ICE agents  conducted more than 1,500 industry outreach visits around the country.  Outreach activities can include seminars and programs, specialized  training, publications, advice lines, Web sites, and individual meetings with  industry, academia, and other government agencies. These activities can  result in companies self-disclosing violations, tips and reports of potential  violations by others, and cooperation in investigations and intelligence  gathering.
section_title: Enforcement Authorities Are Granted through Various Laws and Regulations
paragraphs: Authorities for export control enforcement are provided through a  complex set of laws and regulations. For defense items, authorities are  granted under the Arms Export Control Act, the Department of Justice  Appropriations Act of 1965, the USA Patriot Improvement and  Reauthorization Act, and the Foreign Wars, War Materials and Neutrality  Act. These statutes and the regulations stemming from them give  concurrent jurisdiction for investigations to ICE and FBI (see fig. 1).
For dual-use items, authorities are granted under the Export  Administration Act, the International Emergency Economic Powers Act,  the Department of Justice Appropriations Act of 1965, the USA Patriot  Improvement and Reauthorization Act, and the Foreign Wars, War  Materials and Neutrality Act. These laws and their implementing  regulations give investigative authority for dual-use items to OEE as well  as to ICE and FBI, which also have investigative authority for defense  items (see fig. 2).
section_title: Agencies Face Several Challenges in Enforcing Export Control Laws
paragraphs: Several key challenges exist in enforcing export control laws—challenges  that potentially reduce the effectiveness of enforcement activities. First,  overlapping jurisdiction for investigating potential export control  violations and instances where coordination among the investigative  agencies has not been effective have had an impact on some cases.  Second, license determinations—which confirm whether an item is  controlled by State or Commerce, and thereby help confirm whether a  violation has occurred—are key to ensuring the pursuit of enforcement  activities and are dependent on complete and specific information  available at the time. Third, prosecuting export control cases can be  difficult, since securing sufficient evidence to prove the exporter  intentionally violated export control laws can represent unique challenges  in some cases. Finally, multiple and sometimes competing priorities have  made it difficult for enforcement agencies to maximize finite resources in  carrying out export control enforcement responsibilities.
subsections: section_title: Coordination on Investigative Cases Has Been Limited in Some Instances
paragraphs: While ICE, OEE, and FBI have jointly coordinated on investigations,  coordination can be challenging, particularly in terms of agreeing on how  to proceed with a case. Formal agreements for coordinating investigations  do not exist among all the investigative agencies. The extent to which  agencies coordinate and cooperate on investigations is largely dependent  on individual work relationships.
Agencies have sometimes not agreed on how to proceed on cases,  particularly those involving foreign counterintelligence. For example, FBI  and OEE agents disagreed as to whether certain dual-use items planned  for export warranted an investigation. Specifically, without coordinating  with OEE and ICE, FBI pursued the investigation, arrested the exporter,  and held the shipment of items, valued at $500,000. Ultimately, criminal  charges were not pursued because the items did not require a license. With  respect to foreign counterintelligence cases involving export controls,  investigators have not always been certain about their respective roles on  these cases.
Formal agreements for coordination do not exist among all the  investigative agencies. Specifically, ICE and FBI do not have a formal  agreement to coordinate cases involving export control violations. Formal  agreements that exist have not been updated in recent years. In 1983,  Commerce entered into an agreement with the FBI dealing with certain  headquarters-level coordination functions. In addition, a 1993 agreement  between Customs and Commerce outlines the investigative  responsibilities of each agency, but it does not reflect departmental  changes that occurred as a result of the establishment of Homeland  Security in March 2003. This agreement also directs these agencies to  enter a joint investigation when it is determined that more than one  agency is working on the same target for the same or related violations.  However, it can be difficult to determine whether these conditions exist  because these agencies do not always have full access to information on  ongoing investigations. According to several agents we spoke with, sharing  information on ongoing investigations in general can be challenging  because of the agencies’ varying and incompatible databases, the  sensitivity of certain case information, and the agencies’ varying protocols  for classifying information.
The extent to which agencies coordinate their investigative efforts in the  field can depend on individual work relationships and informal  mechanisms that facilitate communication. Some field locations have  established joint task forces to discuss investigative cases. For example,  OEE, ICE, and FBI agents in one field location told us that they routinely  collaborate on investigations as part of a joint task force that meets  monthly. Agents in another location recently established a task force to  locally coordinate export control investigations. In addition, some  agencies have agents on detail to other investigative agencies. For  example, in one field location, an ICE agent is detailed to FBI to  coordinate cases and share export control information. FBI officials told  us the detail has been useful because the ICE agent can readily provide  FBI access to certain Homeland Security data, which saves critical  investigative time for the FBI agents. At another field location, an OEE  agent has been on detail at ICE for 7 years, which has facilitated  information sharing and joint cases between the two agencies. According  to several agents with whom we spoke, personalities can be a key factor in  how well agents from different agencies work together on investigations.
For example, an OEE agent in charge of one field location told us that the  field agents work effectively on cases with ICE agents in one field  location, but not with ICE agents in another field location because of  disagreements stemming from 15 years ago about how to proceed with  investigations.
section_title: Confirming Whether Items Are Controlled and Need a License Is Key to Pursuing Enforcement Activities
paragraphs: Confirming whether a defense or dual-use item is controlled and requires a  license, known as a license determination, is integral to enforcement  agencies’ ability to seize items, pursue investigations, or seek  prosecutions. However, confirmation can sometimes be difficult. Many  inspectors and investigators told us that the time it takes to make  determinations or sometimes changes to previously made determinations  can affect some of their enforcement activities. According to Commerce  and State officials, they depend on complete, specific, and pertinent  information from the inspectors and investigators to make timely and  correct determinations so that appropriate enforcement actions can be  pursued. Moreover, new or additional information may become available  as an investigation proceeds, which can affect a license determination.
Some inspectors and investigators—including OEE field agents who  request license determinations directly from Commerce—stated that  obtaining license determination decisions can be time consuming and has  taken as much as several months. In several instances, State and  Commerce licensing officers needed more information about the item  before making a license determination, which added to the time it took to  respond. In addition, State officials said they often request technical  support from the Department of Defense when making determinations for  defense items, which can add to the time it takes to make a license  determination. We found that responses to requests for license  determinations ranged from 1 day to 8 months during fiscal year 2005.  While State established in September 2004 a goal of 30 days for processing  license determinations, it revised this time frame to 60 days in April 2005  because of resource limitations. Commerce recently established a 35-day  time frame to make a license determination requested by OEE agents.  However, Commerce, in conjunction with the Exodus Command Center,  has not established goals or a targeted time frame for responding to  license determination requests. Goals help establish transparency and  accountability in the process.
While some inspectors and investigators told us that their enforcement  actions have been affected by unclear determinations or changes to  previously made license determinations, Commerce and State officials  said that determinations are dependent on such factors as the  completeness and specificity of the information presented to them at the  time of the request. In one instance, CBP officers were not given a clear  determination as to whether the item was controlled, leaving officers to  decide how to proceed. In other instances, investigators dropped their  cases or pursued other charges based on changes made to the  determination or inconsistent information provided to the exporter. For  example, OEE agents executed search warrants based on a license  determination that the equipment was controlled for missile technology  and antiterrorism purposes. Subsequently, Commerce determined that no  license was required for this equipment, and thereby the case was closed.  In another example, licensing officers provided OEE agents with a license  determination that differed from the commodity classification provided  to the exporter. As a result of the inconsistency between the license  determination and classification, Commerce pursued a lesser charge  against the exporter. In addition, in June 2005, ICE led a joint investigation  of a Chinese national for allegedly exporting critical U.S. technology to  China, and on the basis of an initial license determination review by State  that the item was controlled, ICE obtained search and arrest warrants.  However, 9 months later, ICE agents requested a subsequent license  determination to confirm that the item was controlled. It was determined  that the item was not subject to State or Commerce export control, and  therefore the case was dropped. Both State and Commerce headquarters  officials stated that their ability to make license determinations is  dependent upon several factors, including the completeness and accuracy  of the information provided by the inspectors and investigators at the time  of the request. These determinations can be subject to change as new or  additional pertinent information becomes available as the case proceeds.
Commerce and ICE have recently taken actions to address problems in the  license determination process. In June 2006, Commerce established new  procedures on how to request and process license determinations  internally and is currently revising and providing training for its licensing  officers and OEE agents. In August 2006, ICE’s Exodus Command Center  implemented a new system, known as the Exodus Accountability Referral  System, to track license determination requests, provide enforcement  agencies access to the status of their requests, and provide performance  statistics to field agents, inspectors, and regulatory agencies. These  actions recognize some of the problems with license determinations.  However, it is too early to determine their impact on export enforcement  activities.
section_title: Challenges Exist in Taking Criminal and Administrative Punitive Actions against Alleged Export Violators
paragraphs: When developing a case for criminal prosecution, Assistant U.S. Attorneys  (AUSA) must obtain sufficient evidence of the exporter’s intent to violate  export control laws. Gathering evidence of intent is particularly difficult in  export control cases, especially when the item being exported is exempted  from licensing or the case requires foreign cooperation. For dual-use  violations, Commerce officials said that the lapsed status of the Export  Administration Act has made it cumbersome for prosecuting cases. When  pursuing administrative cases, State, unlike Commerce, has limited access  to attorneys and an Administrative Law Judge, making it challenging to  pursue the full range of administrative actions against export control  violators.
Several AUSAs who prosecute many different types of cases, told us that it  can be challenging to secure sufficient evidence that an exporter  intentionally violated export control laws. In particular, securing such  evidence can be especially difficult when the items to be exported are  exempted from licensing requirements. We previously reported similar  concerns of officials from Customs (now within Homeland Security) and  Justice about investigating and prosecuting violations when exemptions  apply, noting that it is particularly difficult to obtain evidence of criminal  intent since the government does not have license applications and related  documents that can be used as proof that the violation was committed  intentionally.
Investigations and prosecutions that involve items and individuals in  foreign locations can further complicate evidence-gathering efforts.  According to ICE officials, a foreign government may or may not  cooperate in an overseas export control investigation or arrest, and  foreign and U.S. laws on export controls may differ as to what constitutes  a violation. One OEE field office estimated that over half of its cases  involve foreign persons or entities.
According to Commerce officials, enforcement of dual-use export controls  under the expired Export Administration Act is a key challenge for them  because it adds an element of complexity to cases and can encumber  prosecutions. These officials said they have encountered difficulties  convincing AUSAs to accept cases to prosecute under a set of regulations,  promulgated under a lapsed statute and kept in force by emergency  legislation. To counter these difficulties, Commerce, Homeland Security,  and Justice officials said they support the renewal of the Export  Administration Act.  Commerce stated that renewal of this act would  provide enforcement tools to OEE for conducting investigations and  increase penalty provisions for violators.
For administrative actions, export control regulations allow both State and  Commerce to pursue administrative cases before an Administrative Law  Judge, but State has never exercised this authority. Commerce officials  stated that they bring cases before an Administrative Law Judge when an  alleged export violator disputes the charges or objects to the  administrative settlement actions proposed by Commerce. Commerce has  a formal agreement with the Coast Guard Office of Administrative Law  Judges, which is renewed annually, to hear its cases, and Commerce’s  attorneys bring about one to three administrative cases before an  Administrative Law Judge each year.
State has never brought a case to an Administrative Law Judge and does  not have attorneys with the experience needed to pursue such export  control cases or a standing agreement with any agency to provide an  Administrative Law Judge. In cases where an agreed settlement with the  violating company appears unlikely and a formal hearing is needed, State  would have to seek services from attorneys in the private sector or from  other departments to help represent the government’s interests. To obtain  access to an Administrative Law Judge to hear a case, State officials told  us they would need to first request the Office of Personnel Management to  appoint a judge on a temporary basis.  State would then need to establish  an interagency memorandum of understanding with that agency to  establish payment and other arrangements. Without a formal agreement  to access an Administrative Law Judge and ready access to attorneys to  pursue such cases, State officials told us that it is challenging to proceed  with administrative cases. State officials indicated that they are exploring  various options on how to get access to attorneys with relevant experience  to handle such cases, including seeking assistance from other departments  on a temporary basis. However, State’s options appear to rely on ad hoc  interagency arrangements and would not build any internal expertise for  handling such cases in the future.
section_title: Agencies Faced with Balancing Multiple Priorities and Leveraging Finite Human Resources
paragraphs: Each enforcement agency’s priorities—and the resources allocated to  those priorities—are influenced by the mission of the department in which  the agency resides. At times, agencies have competing priorities, making it  difficult to effectively leverage finite enforcement personnel. Limited  training on export controls has further challenged agencies to use their  enforcement personnel effectively. Some agencies have recently taken  actions to target more resources to export enforcement activities.  However, it may be too early to determine the impact these actions will  have in the long term. In addition, priorities could shift and necessitate the  reassignment of staff.
The investigative agencies have been particularly challenged to effectively  leverage their resources.
Commerce’s overall mission is to promote U.S. economic development  and technological advancements. OEE resides within Commerce’s  export control agency, and its priorities emphasize investigating  potential violations of dual-use exports related to weapons of mass  destruction, terrorism, and unauthorized military end use. In carrying  out these priorities, some of OEE’s nine field offices—which are  responsible for conducting investigations in multiple states, ranging  from 3 to 11 states—have had difficulty pursuing investigative leads  outside their home state. Some OEE field agents told us that not having  a physical presence in the other states adversely affects their ability to  generate investigative leads, and that their caseload is largely within  their home state.
Homeland Security’s mission is to create a unified national effort to  secure the country while permitting the lawful flow of immigrants,  visitors, and trade. ICE is the largest investigative branch within  Homeland Security. In addition to investigating potential defense and  dual-use export violations, ICE investigates drug smuggling, human  trafficking and smuggling, financial crimes, commercial fraud,  document fraud, money laundering, child exploitation, and immigration  fraud. ICE has recently taken action to expand its existing investigation  workforce devoted to export control. As of September 2006, ICE data  showed that total arrests, indictments, and convictions had surpassed  the totals in each fiscal year since ICE’s creation in 2003.
Justice’s overall mission is to enforce U.S. laws, and FBI’s mission is to  protect the United States against terrorist and foreign intelligence  threats and to enforce criminal laws. As the lead counterintelligence  agency in the United States, FBI investigates potential dual-use and  defense export violations that have a nexus with foreign  counterintelligence. FBI has over 456 domestic offices. Fifty-six offices  are required to have at least one team of agents devoted to  counterintelligence. These teams cover all 50 states, and some agents  are located within the 456 domestic offices. FBI agents are also  responsible for conducting other investigations involving espionage  and counterproliferation.
CBP, the sole border inspection agency, has also been challenged to  leverage its resources. One of CBP’s primary responsibilities is to detect  and prevent terrorists and terrorist weapons from entering U.S. ports, and  it devotes most of its resources to inspecting items and persons entering  the country. For items leaving the United States, CBP uses an automated  targeting system to identify exports for examination by its officers. The  workload and the number of officers assigned to inspect exported cargo  can fluctuate daily. For example, at one of the nation’s busiest seaports,  the CBP Port Director stated that there can be five officers assigned to  inspecting exports one day and none the next. Export enforcement efforts  are further challenged by the limited time officers have to review shipment  documentation. State regulations require 24 hours’ advance notification  before shipment for ship or rail and 8 hours’ advance notification for plane  or truck. However, Commerce regulations do not have time frames  specified other than Census Bureau requirements of notification prior to  departure. Moreover, some officers also spend some of their limited time  hunting down items on planes or in shipping containers because  documents, such as air waybills, cannot be located or information on  items to be exported is incomplete. CBP officials stated that they have  internal initiatives under way to address resources devoted to export  control inspections.
U.S. Attorneys offices have many competing priorities, including  prosecuting cases involving terrorism, counterterrorism, and government  contractor fraud. Each of the U.S. Attorneys offices has attorneys who can  work on cases involving potential export control violations. However,  several investigators noted that the level of interest in and knowledge of  export control laws varies among AUSAs.
According to several enforcement agency officials, they would like more  advanced training on export controls that could help them use their time  more efficiently—and thereby better leverage finite resources—but such  training is limited. While some specialized training has been provided to  officers in the field, CBP has reduced the number of training courses  directly relating to export controls for the last quarter of fiscal year 2006  primarily because of budget constraints. CBP officials said they are  considering restructuring the training curriculum. ICE and FBI  investigators also said that they would like more opportunities for  advanced training on export controls. While ICE headquarters has not  funded its advanced strategic export controls course at the Federal Law  Enforcement Training Center for the past 2 years, it reinstated this course  in May 2006 and has subsequently trained over 100 agents. ICE officials  also noted that training on weapons of mass destruction was provided to  over 2,000 agents and analysts during fiscal years 2005 and 2006.  Commerce plans additional training for OEE agents in fiscal year 2007.  Justice, recognizing a need for training on export controls for its attorneys,  provided a training conference in May 2006 for AUSAs, with presentations  from Justice, Commerce, State, and the intelligence community.  Commerce, State, and Justice have also recently sponsored training  conferences for enforcement agencies covering topics such as export  control laws and regulations, license determinations, and proving criminal  intent.
section_title: Criminal Outcomes Are Not Systematically Provided to Export Control Agencies
paragraphs: Criminal indictments and convictions are key to informing the export  control process and licensing decisions. While Justice and the other  enforcement agencies have databases to capture information relating to  their own export enforcement activities (see table 3), outcomes of  criminal cases are not systematically shared with State and Commerce.
State and Commerce officials stated that information on the outcomes of  criminal cases, including indictments and convictions, is important to the  export licensing process, particularly since indicted or convicted  exporters may be denied from participating in the process. The Arms  Export Control Act requires that appropriate mechanisms be developed to  identify persons who are the subject of an indictment or have been  convicted of an export control violation. Specifically, if an exporter is the  subject of an indictment or has been convicted under various statutes,  including the Export Administration Act, State may deny the license  application. Further, Commerce can deny export privileges to an exporter  who has been criminally convicted of violating the Export Administration  Act or Arms Export Control Act. According to both State and Commerce  officials, information on indictments and convictions is gathered through  an informal process. For example, an ICE agent, who serves as a liaison  with State and is colocated with State’s export control officials, compiles  criminal statistics from ICE field offices in a monthly report that is shared  with State compliance officials. Information on criminal export control  prosecution outcomes could help inform the export control process by  providing a complete picture of the individual or company seeking an  export license or trends in illegal export activities.
section_title: Conclusions
paragraphs: Agencies responsible for enforcement have to operate within the construct  of a complex export control system, which offers its own set of challenges  from the outset. Further compounding this situation is the failure to  coordinate some investigations and address a host of other challenges that  can lead to a range of unintended outcomes, such as the termination of  investigative cases. At a minimum, limited resources available for  enforcement efforts may not be used effectively. Consequently, there is a  need to ensure that enforcement agencies maximize finite resources and  efforts to apprehend and punish individuals and companies who illegally  export sensitive items that may be used to subvert U.S. interests.
section_title: Recommendations for Executive Action
paragraphs: To enhance coordination in the current system, we recommend that the  Secretary of Commerce direct the Under Secretary for Industry and  Security, the Secretary of Homeland Security direct the Assistant  Secretary of Homeland Security for U.S. Immigration and Customs  Enforcement, and the Attorney General direct the Director of the FBI in  conjunction with the Assistant Attorney General in charge of the National  Security Division to take the following two actions:    establish a task force to evaluate options to improve coordination and  cooperation among export enforcement investigative agencies, such as  creating new or updating existing operating agreements between and  among these agencies, identifying and replicating best practices for  routinely collaborating on or leading investigations, and establishing a  mechanism for clarifying roles and responsibilities for individual  export control cases involving foreign counterintelligence, and   report the status of task force actions to Congress.
To ensure discipline and improve information needed for license  determinations, we recommend that the Secretary of Homeland Security  direct the Assistant Secretary of Homeland Security for U.S. Immigration  and Customs Enforcement and the Secretary of Commerce direct the  Under Secretary for Industry and Security to establish goals for processing  license determinations.  We also recommend that that Secretary of  Homeland Security direct the Assistant Secretary of Homeland Security  for U.S. Immigration and Customs Enforcement, the Secretary of  Commerce direct the Under Secretary for Industry and Security, and the  Secretary of State direct the Deputy Assistant Secretary for Defense Trade  Controls to coordinate with licensing officers, inspectors, investigators,  and prosecutors to determine what additional training or guidance is  needed on license determinations, including the type of information  needed to make license determinations.
To ensure systematic reconciliation of shipments with Commerce licenses,  we recommend that the Secretary of Commerce direct the Under  Secretary for Industry and Security, in consultation with the  Commissioner of Homeland Security’s U.S. Customs and Border  Protection, to determine the feasibility of establishing a requirement for  CBP to decrement Commerce licenses and an action plan for doing so.
To ensure that State and Commerce have complete information on  enforcement actions, we recommend that the Attorney General direct the  Director of the Executive Office for U.S. Attorneys, in consultation with  the Assistant Attorney General in charge of the National Security Division,  to establish formal procedures for conveying criminal export enforcement  results to State’s Directorate of Defense Trade Controls and Commerce’s  Bureau of Industry and Security.
section_title: Agency Comments and Our Evaluation
paragraphs: The Departments of Commerce, Homeland Security, and State provided  comments on a draft of this report. Justice and Defense did not provide  formal comments. Commerce, Homeland Security, Justice, and State also  provided technical comments, which we incorporated in this report as  appropriate. Overall, the departments providing comments agreed with the  need for coordination, but in some instances, noted some differences in  possible approaches.  They also indicated that certain actions were  already under way to address some of our recommendations. We modified  one recommendation accordingly.
In commenting on our first recommendation—to establish a task force to  improve coordination and cooperation among export enforcement  investigative agencies and report the status of task force actions to the  Congress—Commerce stated that it was already taking action to improve  coordination through various work groups and acknowledged that it will  continue to seek ways to improve coordination. Commerce also  commented that the draft report does not provide the data and analysis to  support that there is a lack of coordination. We disagree. We spoke with  numerous agents in the field who cited coordination as a challenge. The  examples we provided were illustrations of some of the types of  coordination challenges that existed. Our evidence indicates that  coordination is a challenge given that three agencies with differing  approaches have concurrent jurisdiction to investigate potential violations  of export control laws. At times, these agencies have competing priorities,  making it difficult to leverage finite enforcement personnel for oftentimes  complex cases.
Homeland Security agrees in principle with our first recommendation, but  believes the establishment of an Export Enforcement Coordination Center  within ICE would address coordination concerns in the most immediate  and comprehensive manner. Homeland Security’s solution is one option  for improved coordination. However, it would need to work with the other  enforcement agencies to determine the viability of this option. Our  recommendation for a joint task force is the means by which to do so. In  its technical comments related to coordination, Justice commented that  FBI looks forward to working closely with other export enforcement  agencies.
In its comments on our second recommendation—to establish goals for  the processing of license determinations and coordinate with other  enforcement officials to determine what additional training or guidance is  needed on license determinations—Commerce noted it was already taking  action to improve license determination efforts through developing  procedures and leading and participating in training conferences on export  enforcement. However, these actions do not fully address our  recommendation on establishing goals. Specifically, Commerce has not  established formal license determination response times in conjunction  with the Exodus Command Center, which is a key means by which license  determination requests are processed. Homeland Security agreed to  support goal setting by providing input from a law enforcement  perspective. In its comments on our draft report, State indicated that it had  already established goals for processing license determinations in  conjunction with the Exodus Command Center. As a result, we revised our  recommendation to direct that Commerce and Homeland Security  establish goals for processing license determinations.  State concurred  with our recommendation to determine what additional training or  guidance is needed on license determinations. Specifically, State has  agreed with Homeland Security to update and clarify its guidance on  license determinations. State further noted that consulting with FBI and  ICE regarding additional training for coordinating State’s support to their  criminal investigations would build upon its past and ongoing work in this  area.
Regarding our third recommendation—to determine the feasibility of  having Homeland Security’s Customs and Border Protection officers  decrement Commerce export licenses—Commerce expressed some  reservation. Specifically, Commerce stated that it has seen no data to  indicate that the underlying issue is of sufficient enforcement concern and  that automated systems would need to be developed within CBP to  support this effort. We do not believe that Commerce should dismiss this  recommendation without further analysis. We previously reported that  Commerce has not conducted comprehensive analyses of items that have  been exported; therefore it is not in a position to know whether it is an  enforcement concern. In addition, while resources devoted to outbound  enforcement are limited within CBP, it has an automated export system,  which is used for decrementing State licenses. This allows CBP officers to  ensure accountability on the part of exporters and that State regulations  have been properly followed. Homeland Security commented that CBP  officials are prepared to act when contacted by Commerce regarding our  recommendation.
With respect to our last recommendation—that Justice establish formal  procedures for conveying export enforcement results to State and  Commerce—Commerce agreed, citing that it supports efforts to improve  coordination and communication. Justice indicated support for sharing  such information. State also supports this recommendation and noted that  it welcomed any additional information that Justice can provide regarding  the outcomes of criminal cases involving export control and related  violations to help State carry out its regulatory responsibilities.
Formal written comments provided by Commerce, Homeland Security,  and State are reprinted in appendixes III, IV and V, respectively.
We are sending copies of this report to interested congressional  committees, as well as the Secretaries of Commerce, Defense, Homeland  Security, and State; the Attorney General; the Director, Office of  Management and Budget; and the Assistant to the President for National  Security Affairs. In addition, this report will be made available at no  charge on the GAO Web site at http://www.gao.gov.
Please contact me at (202) 512-4841 or calvaresibarra@gao.gov if you or  your staff have any questions concerning this report. Contact points for  our Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Others making key contributions to this report  are listed in appendix VI.
section_title: Appendix I: Scope and Methodology
paragraphs: To describe the roles, responsibilities, and authorities of the agencies  responsible for export control enforcement of defense and dual-use items,  we interviewed cognizant officials, examined relevant documents, and  analyzed export control statutes. We interviewed officials about their  enforcement roles and responsibilities at the headquarters of the  Departments of Commerce, Homeland Security, Justice, and State. We  also discussed with Department of Defense officials their role in providing  investigative support to agencies responsible for export control  enforcement. We developed and used a set of structured questions to  interview over 115 inspectors, investigators, and prosecutors in selected  locations and observed export enforcement operations at those locations  that had air, land, or seaports. We selected sites to visit based on various  factors including geographic areas where all enforcement agencies were  represented and areas with a mix of defense and high-tech companies  represented; field offices with a range of investigative tools available to  agents; and experience levels inspectors, agents, and prosecutors had in  enforcing export control laws and regulations. On the basis of these  factors, we visited Irvine, Long Beach, Los Angeles, Oakland, Otay Mesa,  San Diego, San Francisco, and San Jose, California; Fort Lauderdale and  Miami, Florida; Boston, Massachusetts; Newark and Trenton, New Jersey;  and New York, New York. Additionally, we examined agent operating  manuals, inspector handbooks, and a Federal Register notice, which  further define the roles and responsibilities of enforcement agencies. To  describe export enforcement authorities, we analyzed various statutes and  identified the varying enforcement requirements promulgated through  implementing regulations.
Our structured interviews with officials also enabled us to identify  challenges agencies faced in enforcing export control laws and  regulations. We documented examples of coordination challenges among  the investigative agencies and obtained and summarized information on  significant export control cases identified by these agencies. We also  examined existing memorandums of understanding and agency guidance  on coordinating investigations. To document the impact that license  determinations have on enforcement activities, we obtained examples of  license determinations through Commerce’s Office of Export Enforcement  and conducted a case file review of license determinations for fiscal year  2005 at Homeland Security’s Exodus Command Center based on available  information on-site. We selected a cross-section of license determination  files to review that included requests for defense and dual-use items and  that varied in response times. We discussed with Commerce and  Homeland Security officials efforts to improve the license determination  process. Through our interviews, we also identified challenges with  criminal prosecutions and confirmed with headquarters the difficulties in  obtaining sufficient evidence. Finally, we identified challenges with  agencies’ priorities and human resources and obtained information on  staffing levels and priorities for assigning resources. We also reviewed  agency training materials to identify export control training available to  enforcement personnel.
To assess whether information on criminal enforcement outcomes is  provided to export control agencies, we identified export control  enforcement information maintained at the various agencies, such as  criminal convictions and indictments for violations of export control laws.  We also spoke with State licensing and policy officials and Commerce  officials to assess whether they received and used this information for  informing licensing or other decisions for defense or dual-use items. We  also spoke with Justice officials to determine whether the department  systematically provided criminal export control prosecution outcome  information to State and Commerce export control agencies.
section_title: Appendix II: Summary of Selected Export Control Enforcement Cases
paragraphs: For fiscal year 2005, investigative agencies identified several examples of  export control enforcement cases, as shown in table 4.
section_title: Appendix III: Comments from the Department of Commerce
paragraphs: The following are GAO’s comments from the Department of Commerce  letter dated October 3, 2006.
subsections: section_title: GAO Comments
paragraphs: 1.  While OEE and ICE had prior contact with FBI before it pursued this  case, the agencies did not act together in a concerted way to determine  the best way to proceed with this case.  2.  Commerce believed that its actions prevented the commission of an  export violation. However, its lack of coordination in taking this action  undermined enforcement activities.
section_title: Appendix IV: Comments from the Department of Homeland Security
section_title: Appendix V: Comments from the Department of State
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: Acknowledgments:
paragraphs: In addition to the contact name above, Anne-Marie Lasowski, Assistant  Director; Matthew Cook; Lisa Gardner; Arthur James, Jr.; Karen Sloan;  Lillian Slodkowski; Suzanne Sterling; and Karen Thornton made key  contributions to this report.
section_title: Related GAO Products
paragraphs: Defense Technologies: DOD’s Critical Technologies List Rarely Informs  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 Security Environment. GAO-05-468R. Washington, D.C.:  April 7, 2005.
Defense Trade: Arms Export Control System in the Post-9/11  Environment. GAO-05-234. Washington, D.C.: February 16, 2005.
Foreign Military Sales: DOD Needs to Take Additional Actions to  Prevent Unauthorized Shipments of Spare Parts. GAO-05-17. Washington,  D.C.: November 9, 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.
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 Defense- Related 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.
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: Actions Needed to Improve Enforcement.   GAO/NSIAD-94-28. Washington, D.C.: December 30, 1993.