Export Controls: Department of Commerce Controls over Transfers of Technology to Foreign Nationals Need Improvement
Published: 2002-09-06T00:00:00

Fast Facts:

Highlights:
section_title: What GAO Found
paragraphs: To protect its national security and foreign policy interests, the United States controls exports of civilian technologies that have military uses. U.S. firms may be required to obtain a license from the Department of Commerce before exporting these "dual-use" technologies from the United States to many other countries, including countries of concern. Since Commerce regulations also deem domestic transfers of controlled dual-use technologies to citizens of these countries to be exports, Commerce may require firms that employ foreign nationals working with these technologies in this country to obtain "deemed" export licenses. The firms should, in many cases, hold a deemed export license, and the foreign nationals should have an appropriate visa classification, such as an H-1B specialized employment classification. Commerce issues deemed export licenses to firms that employ or sponsor foreign nationals after consulting the Departments of Defense, State, and Energy. Deemed export licenses are generally valid for 2 years and comprise almost 10 percent of all export licenses approved by Commerce. In fiscal year 2001, Commerce approved 822 deemed export license applications and rejected 3. Most of the approved licenses allowed foreign nationals from countries of concern to work with advanced computer, electronic, or telecommunication and information security technologies in the United States. To better direct its efforts to detect possible unlicensed deemed exports, in fiscal year 2001 Commerce screened thousands of applications for H-1B and other types of visas submitted by foreign nationals overseas. From these applications, it developed 160 potential cases for follow-up by enforcement staff in the field. However, Commerce did not screen thousands of H-1B change-of-status applications submitted domestically to the Immigration and Naturalization Service for foreign nationals already in the United States. In addition, Commerce could not readily track the disposition of the 160 cases referred to field offices for follow-up because it lacks a system for doing so. Commerce attaches security conditions to almost all licenses to mitigate the risk of providing foreign nationals with controlled dual-use technologies. However, according to senior Commerce officials, Commerce staff do not regularly visit forms to determine whether these conditions are being implemented because of competing priorities, resource constraints, and inherent difficulties in enforcing several conditions.

section_title: Letter
paragraphs: To protect its national security and foreign policy interests, the United  States controls exports of certain civilian technologies that have military  uses. U.S. firms may be required to obtain a license from the Department of  Commerce before exporting these “dual-use” technologies from the United  States to many other countries, including countries of concern.   Commerce regulations also deem domestic transfers of controlled dual-use  technologies to citizens of these countries to be exports. As a result,  Commerce may require firms that employ foreign nationals working with  these technologies in this country to obtain “deemed” export licenses.  Foreign nationals in the United States must also conform to U.S. visa and  immigration regulations.
In response to your request that we examine controls over deemed exports,  we (1) identified the licensing and visa requirements that should be met for  a foreign national to work with controlled technology in the United States,  (2) determined the number and nature of licenses approved by Commerce  in fiscal year 2001, (3) assessed Commerce’s efforts to ensure that firms are  applying for deemed export licenses as required, and (4) evaluated  Commerce’s efforts to ensure that firms comply with the deemed export  licenses they receive. To address these objectives, we reviewed laws and  procedures governing deemed export licensing and visa issuance, analyzed  deemed export licensing records contained in Commerce’s export licensing  database, and compared data obtained from the Immigration and  Naturalization Service to that used by Commerce to detect unlicensed  deemed exports. We also interviewed Commerce officials in Washington,  D.C. and at its enforcement field offices; the Immigration and  Naturalization Service; the Department of State; the Department of  Defense, including the Defense Intelligence Agency; and selected private  firms that have received deemed export licenses or that employ foreign  nationals. Our scope and methodology are described in greater detail in  appendix I.
subsections: section_title: Background
paragraphs: Under the Export Administration Act of 1979 as amended and the  implementing Export Administration Regulations, Commerce is authorized  to require firms to seek licenses for exports of dual-use technologies that  pose national security or foreign policy concerns. Such technologies could  be used by countries of concern to upgrade their military capabilities. The  Commerce Control List identifies technologies that must be licensed before  they can be exported to specific countries, including technologies  associated with certain nuclear materials, facilities, and equipment;  chemicals, “microorganisms” and toxins; materials processing; electronics;  computers; telecommunications and information security; lasers and  sensors; navigation and avionics; marine systems; and propulsion systems  and space vehicles. Violators may face administrative or criminal penalties, including fines, denial of export privileges, and imprisonment.  The act defines exports to include transfers of technology within the  United States to (1) affiliates of controlled countries or (2) persons with the  knowledge or intent to transfer the technology to unauthorized parties.   According to Commerce regulations, a transfer of technology within the  United States to a foreign national who is not a permanent resident of the  United States is deemed to be an export.   Such a “deemed export” may  occur when a foreign national visits or works in the United States and  accesses controlled dual-use technology. Access can include opportunities  to review written materials or discussions about controlled technologies.
In 2000, Commerce’s Inspector General concluded that compliance with  deemed export licensing regulations appeared lax.  The Inspector General  pointed out that the number of foreign workers authorized to enter the  United States using certain specialty employment visas was far larger than  the number of deemed export license applications received by Commerce  in fiscal year 1999.
Export Administration Regulations, part 734.2(b)(1). Part 772 of the Export Administration  Regulations defines “technology” as specific information necessary for the “development,”  “production,” or “use” of a product. Congress is currently considering legislation that would,  among other things, (1) define an export to be the release of an item—i.e., any good,  technology, or service--to a foreign national within or outside the United States and (2)  require the Secretary of Commerce, in concurrence with the Secretaries of State and  Defense to issue regulations governing such exports (H.R. 2581, section 2(9)(iii) and  601(c)(3)).
section_title: Export Licensing and Visa Regulations Impose Requirements on Foreign Nationals Working in the United States
paragraphs: To work with controlled dual-use technology in the United States, foreign  nationals and the firms that employ or sponsor them must comply with U.S.  export control and visa regulations. Commerce, in consultation with other  departments, is responsible for issuing deemed export licenses to firms  that employ or host foreign nationals. While the Department of State is  responsible for issuing visas to foreign nationals outside the United States,  INS is responsible for approving requests from foreign nationals in the  United States seeking to change their immigration status.
subsections: section_title: Deemed Export Licensing Regulations Govern a Foreign National’s Access to Controlled Technology
paragraphs: The review process for a deemed export license application parallels the  review process for an application for a license to export commodities or  technologies overseas. Under U.S. export control regulations, a firm is  required to seek a deemed export license if the export of the technology to  the foreign national’s country of citizenship would require a license. If a  license is required, the exporter must submit a license application to  Commerce identifying the technology, the reason it is controlled, the  proposed destination, and the intended end user. In the case of deemed  export license applications, firms must also provide the foreign national’s  resume, visa type, and a list of his or her publications. An application for a  deemed export license may list more than one foreign national.
Under Executive Order 12981, the departments of State, Defense, and  Energy have the authority to review license applications (unless they  decline) to help Commerce determine whether a license would be in the  best interests of the United States. Based on their review, an application  may be rejected, approved, approved with conditions, or returned without  action. Commerce officials stated that they consider evidence of the  foreign national’s intent to remain in the United States in assessing deemed  export license applications. For example, they asserted that they consider  the presence of family members in the United States or a stated intention to  apply for permanent residency in the United States as a factor in granting a  license. Deemed export licenses are generally valid for 2 years. Almost 10  percent of all export licenses approved by Commerce authorize deemed  exports.
section_title: Visa and Immigration Process Managed by the Department of State and the Immigration and Naturalization Service
paragraphs: The U.S. government requires foreign nationals from most countries to  obtain visas before entering the country. Requirements for obtaining a visa  vary, depending on the purpose of the trip and the nationality of the person  seeking the visa. Typically, a foreign national begins the process by  submitting a visa application to the Department of State, generally through  a U.S. overseas post. The application requires, among other items,  information regarding his or her nationality, education, employment  history, purpose of visit, and if seeking employment, the sponsor. The  Department of State is responsible for determining the applicant’s  eligibility and issuing the visa. State personnel at U.S. embassies and  consulates overseas may interview applicants to determine their eligibility  to enter the United States. According to the Department of State, in fiscal  year 2001, it adjudicated 10.6 million nonimmigrant visa applications at 196  posts and issued 7.6 million visas.
Many foreign nationals seeking to work in the United States apply for H-1B  specialty employment visas. An H-1B visa allows a U.S. employer to  temporarily fill specialty occupations (such as those requiring electrical or  software engineers) with foreign workers. A foreign national overseas may  obtain an H-1B visa from the Department of State, if INS determines that an  employer may import the foreign national as a temporary worker (see fig.  1). A foreign national already in the United States may have his or her  immigration status changed to H-1B by INS. For example, an employer  seeking to hire a foreign student who has graduated from a U.S. college or  university could petition INS to change the foreign national’s immigration  status from student to H-1B. INS is solely responsible for approving and  issuing such changes in status.
section_title: Commerce Approves Most Deemed Export License Applications
paragraphs: In fiscal year 2001, Commerce approved 822 deemed export license  applications and rejected 3.  Each license authorized one or more foreign  nationals to access controlled dual-use technology.  Our analysis of  Commerce’s licensing data found that most licenses approved in fiscal year  2001 involved countries of concern. As shown in figure 2, China  accounted for 73 percent of licenses approved in fiscal year 2001. Seven  other countries of concern--Russia, Iran, India, Syria, Israel, Iraq, and  Pakistan—accounted for another 14 percent. The remaining 13 percent  involved 29 other countries, including the United Kingdom, Germany,  Bulgaria, Romania, and Ukraine.
About 90 percent of the licenses approved in fiscal year 2001 authorized  foreign nationals to work with advanced electronics, computer, or  telecommunications and information security technologies (see fig. 3).   Electronics technologies constituted the largest single share at 46 percent.  Telecommunications and information security technologies accounted for  another 24 percent. Computer technologies were included in 20 percent of  the licenses approved.
The most common country-technology combination for deemed export  licenses involved China and electronics technologies. About 44 percent of  all licenses approved in fiscal year 2001 authorized citizens of China to  work with electronics technologies, including semiconductor technology.
Not all domestic transfers of technology to foreign nationals require a  deemed export license. For example, one exception allows technology and  software controlled only for national security purposes to be accessed  without a license by foreign nationals from countries of concern such as  India, Pakistan, and Israel. Under this exception, a firm employing an  Indian software engineer would not need a deemed export license to allow  him or her access to controlled dual-use technology. The exception does  not apply to technology and software that are also controlled for other  reasons, such as antiterrorism or nuclear nonproliferation. Also, foreign  nationals who engage in research that is or will be publicly available are  exempted from export controls. For example, a U.S. university would not  need a deemed export license to allow a Chinese graduate student to  engage in technological research if the results of that research are to be  published in a professional journal.  A U.S. firm that hired the same Chinese  national to engage in proprietary research to develop a new commercial  product would not qualify for this exception.
section_title: Commerce’s Efforts to Detect Unlicensed Deemed Exports Do Not Use All Available Sources of Data
paragraphs: To better direct its efforts to detect possible unlicensed deemed exports,  Commerce screens applications for H-1B and other types of visas  submitted overseas and develops potential cases for enforcement staff in  the field. However, it does not screen H-1B change-of-status applications  submitted domestically to INS for foreign nationals already in the United  States. Also, Commerce cannot readily track the disposition of potential  cases referred to the field.
subsections: section_title: Commerce Screens Visa Data from the Department of State but Does Not Screen Potentially Useful INS Data
paragraphs: To identify potential unlicensed deemed exports and opportunities to  educate firms about deemed export licensing requirements, Commerce  screens visa applications it receives from U.S. posts overseas. In fiscal  year 2001, Commerce analysts reviewed about 54,000 such applications for  various visa types. According to Commerce guidance, the analysts  consulted Commerce’s enforcement database, DOD comments on rejected  license applications, and other sources of information to detect linkages  between foreign entities of concern and visa applicants.
Commerce does not screen data on foreign nationals already in the United  States who change their immigration status to H-1B specialty employment.  Commerce and INS officials stated that Commerce does not obtain  information on foreign nationals who seek a change in immigration status.
INS has data available on foreign nationals who change their status to H- 1B. Our analysis of INS’s H-1B data indicates that during fiscal year 2001 at  least 15,000 foreign nationals from countries of concern potentially subject  to deemed export licensing requirements changed their immigration status  to H-1B specialty employment. Our estimation of 15,000 individuals only  includes foreign nationals who sought H-1B status for employment related  to science and technology. It does not include other nonsensitive H-1B  fields, such as fashion modeling, architecture, and accounting.
section_title: Commerce Analysts Cannot Assess the Impact of Their Screening Efforts
paragraphs: In fiscal year 2001, Commerce analysts screened about 54,000 visa  applications received from overseas posts. Their efforts resulted in the  referral of 160 potential cases to Commerce’s eight enforcement field  offices. Commerce staff stated that field offices conduct some limited  follow-up enforcement and outreach activities in response to such  referrals. These activities include meetings with firms and individuals to  determine if the firms should have applied for a deemed export license.  Commerce enforcement officials could not provide us with complete  information regarding the disposition of these 160 potential cases.  Commerce does not have a mechanism for its field enforcement staff to  report the results of their reviews of these cases back to headquarters. As a  result, its analysts in headquarters cannot determine if their screening  methods are effective in targeting potential deemed export cases.  Commerce plans to install a new computerized database by the end of 2002  that would correct this problem by allowing headquarters staff to track the  disposition of cases referred to field enforcement staff.
section_title: Commerce Does Not Ensure Compliance with License Conditions
paragraphs: Commerce does not determine whether firms comply with license  conditions intended to limit transfers of controlled dual-use technology to  foreign nationals. Commerce officials stated that ensuring such compliance  is a low priority and that they cannot readily enforce conditions included in  licenses.
subsections: section_title: Deemed Export Licenses Are Generally Approved with Security Conditions
paragraphs: Almost all deemed export licenses include security conditions. According  to DOD officials, these conditions are needed to mitigate the risk to U.S.  national security posed by providing controlled dual-use technology to a  foreign national. These officials stated that the conditions are crucial to  DOD’s willingness to agree to many deemed export license applications.  Without these conditions, DOD would recommend that Commerce reject  many deemed export license applications.
Commerce uses several of these conditions to limit the level of technology  to which foreign nationals may be exposed. For example, standard  conditions bar foreign nationals from   unmonitored use of high-performance computers,  involvement in the design of computers that exceed a specified   accessing technical data on advanced microprocessors or certain  types of  lithography equipment, or  accessing classified data or munitions data licensed by the Department  of State.
The licensing conditions were first formulated in 1997 by an interagency  group that included representatives of the departments of Commerce,  Defense, State, and Energy. The departments of Commerce and Defense  currently maintain updated lists of 12 standard conditions for deemed  exports involving (1) semiconductors (electronics) and computers and (2)  telecommunications. According to Commerce officials, the departments  may add conditions or adjust the standard conditions to accommodate  specific circumstances.
A firm may also be required to monitor the immigration status of the  foreign employee and to document whether the foreign national leaves the  firm before becoming a permanent resident of the United States. The firm  is also required to develop security procedures for ensuring compliance  with conditions in the approved license and to provide copies of these  procedures to Commerce.
Other executive branch agencies rely on Commerce to ensure that firms  comply with these conditions. DOD’s copy of the standard license  conditions specifies that Commerce “will monitor  to  ensure that the applicant’s compliance is effective.”  Identical language is  included in many deemed export licenses. Officials from the departments  of Defense and State stated that they presumed that Commerce is acting to  ensure compliance with the security conditions.
section_title: Commerce Does Not Monitor Compliance with License Conditions
paragraphs: Commerce does not have an effective monitoring system in place to ensure  compliance with key deemed export license conditions, such as a program  of regular visits to firms. Staff at the department’s enforcement field  offices stated that they rarely visit firms to ensure compliance with deemed  export license conditions. In addition, officials at the private sector firms  we visited confirmed that Commerce officials rarely conduct on-site  verifications of their compliance with licensing conditions. Commerce  officials agreed that they do not have an effective monitoring system in  place and that their compliance efforts are limited to checking if firms have  submitted their security procedures to the department.
Commerce officials stated that they consider ensuring compliance with  deemed licensing conditions to be a relatively low priority for their  resources compared to other demands, including activities to combat  terrorism. They stated that the export licensing system is based on the  assumption that firms are honest. These officials also asserted that almost  all of the foreign nationals covered by deemed export licenses have  indicated that they plan to remain in the United States, although they could  not provide us with data on repatriations to support this assertion.  Commerce officials also stated that prosecutors are reluctant to pursue  criminal cases based on technical violations of license conditions.  However, they acknowledged that Commerce could use the results of on- site visits as the basis for imposing administrative sanctions and denying  future license applications.
Commerce officials also asserted that some conditions are not readily  enforceable. They maintained that some involve highly technical matters  that do not fall within the training provided to Commerce enforcement  personnel. For example, Commerce officials stated that enforcement staff  would be unable to determine whether the feature size of a semiconductor  is smaller than the micron limit specified in one license condition.  Similarly, Commerce officials asserted that enforcement personnel would  be unable to verify compliance with conditions that proscribe intangible  transfers of technology, such as conversations between foreign nationals  and their coworkers.
section_title: Conclusions
paragraphs: Commerce’s deemed export licensing system does not provide adequate  assurance that U.S. national security interests are properly protected. Key  vulnerabilities in the licensing process could help countries of concern  advance their military capabilities by obtaining sensitive dual-use  technology. Because Commerce does not review all relevant visa and  immigration data, it may overlook foreign nationals potentially subject to  deemed export licensing requirements. Because Commerce rejects very  few deemed export license applications, executive branch agencies must  therefore rely on security conditions to help ensure that the licenses  approved—more than 90 percent of which involve China and other  countries of concern—do not allow foreign nationals unauthorized access  to controlled technologies. However, Commerce does not have a  monitoring process in place to ensure compliance, thus undermining the  value of the conditions. These weaknesses call for a reexamination of the  current approach to limiting foreign national access to controlled  technology in the United States.
section_title: Recommendations
paragraphs: We recommend that the Secretary of Commerce work with INS to use all  existing U.S. government data in its efforts to identify all foreign nationals  potentially subject to deemed export licensing requirements. We also  recommend that the Secretary of Commerce—in consultation with the  Secretaries of Defense, State, and Energy—establish a risk-based program  to monitor compliance with deemed export license conditions. In doing so,  the Secretary of Commerce should draw upon the full range of technical  expertise available to him, including that within the department or  elsewhere in the federal government. If the secretaries of these agencies  conclude that certain security conditions are impractical to enforce, we  recommend that they jointly develop enforceable conditions or alternative  methods to ensure that deemed exports do not place U.S. national security  interests at risk while promoting U.S. commercial interests.
section_title: Agency Comments
paragraphs: We provided a draft of this report to the Secretaries of Commerce, Defense,  and State, and to the INS Commissioner for their review and comment. We  received written comments from the departments of Commerce and  Defense that are reprinted in appendixes II and III.
DOD concurred with our recommendations, and Commerce said it would  consult with other relevant departments on the practicality of  implementing our recommendations. More specifically, Commerce stated  that it would contact INS to discuss the possibility of establishing a  procedure for referring to Commerce H-1B change-of-status applications  involving employment that might result in access to sensitive technology. It  also stated that it is in the process of developing a more extensive  monitoring program for firms that have been issued deemed export  licenses. Commerce said it is currently impossible to fully monitor all of the  conditions placed on these licenses and agreed that more realistic  conditions need to be developed. It also said that it has initiated an  interagency dialogue to develop a new set of standard conditions for  deemed export licenses. In response to a recommendation in the draft  report, Commerce stated that its new Investigation Management System  would establish a system for tracking referrals to its enforcement field  offices once it becomes operational at the end of calendar year 2002. It  subsequently provided us with documentation on the new tracking system.
However, Commerce disagreed with our assessment that it lacks an  effective monitoring process. It stated that Commerce staff monitor the  submission of required internal control plans by firms and contact firms  who fail to submit these documents. Commerce also stated that it would  continue to visit select firms to monitor compliance with license  conditions. In addition, it stated that the vast majority of individuals  applying for H-1B visas would not be employed in jobs that would give  them access to technology controlled under U.S. export control laws.  Commerce stated that INS regulations permit the issuance of H-1B visas to  foreign nationals seeking employment in such fields as fashion modeling,  architecture, and accounting. It said that the likelihood of foreign nationals  working in such fields requiring deemed export licenses is remote. Given  Commerce’s limited resources, and the large number of H-1B applications  filed annually, it questioned whether it was feasible for Commerce analysts  to perform a second comprehensive review (in addition to INS’s own  review) of each such INS file.
We disagree with Commerce’s assertions regarding the effectiveness of its  monitoring process. As noted in our report, Commerce’s monitoring  process is essentially limited to administrative checks by headquarters staff  to determine whether firms have submitted required paperwork. We found  no evidence that it selects and visits certain firms to verify compliance with  deemed export license conditions. As a result, our recommendation that  Commerce develop a risk-based program to monitor compliance is still  appropriate.
We agree with Commerce’s concern that it should not review immigration  change-of-status applications of foreign nationals who are seeking  employment in fields that are unlikely to involve controlled technology.  Anticipating such concerns, we had specifically targeted technology- related occupations—and excluded nonsensitive fields, such as modeling,  architecture, and accounting—in developing our estimate of 15,000 foreign  nationals. We have included language in this report describing how we  developed this estimate.
We are sending copies of this report to appropriate congressional  committees and to the Secretary of Commerce, the Secretary of Defense,  the Secretary of State, and the Commissioner of the Immigration and  Naturalization Service. Copies will be made available to others upon  request. In addition, this report will be available at no charge on the GAO  Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  on (202) 512-8979.  Another GAO contact and staff acknowledgments are  listed in appendix IV.
section_title: Scope and Methodology
paragraphs: To describe the deemed export license process, we reviewed laws and  procedures governing export controls; attended Department of Commerce  export licensing workshops in Boise, Idaho and Los Angeles, California;  and interviewed Commerce officials. To learn about the process for  reviewing and approving visa applications overseas, we reviewed  Department of State documents that describe the process for issuing visas  and provide guidance for referring applications. We also interviewed State  officials. To understand the specialty employment (H-1B) and change-of-  status processes, we met with officials from the Immigration and  Naturalization Service (INS). They described the process and procedures  for obtaining an H-1B petition and for changing immigration status while in  the United States.
To determine the number and nature of deemed export license applications  approved by Commerce, we obtained and analyzed information included in  Commerce’s licensing database for fiscal year 2001. The data were  extracted based on the date of final action on each license. We analyzed the  data to determine the number of applications that Commerce approved,  rejected, or returned without action. We also determined which countries  and technologies were included in the approved applications. All of our  analyses were dependent on the reliability of Commerce’s licensing  database. We did not attempt to independently verify the accuracy of the  database or the data that it contains.
To review Commerce’s efforts to detect unlicensed deemed exports, we  relied on INS data on H-1B applications granted in fiscal year 2001. We  developed this data by asking INS to determine the number of changes-of-  status to H-1B that involved (1) occupational codes related to science and  technology and (2) countries of concern. We did not independently confirm  the accuracy of INS data. Although we recognize that foreign nationals with  immigration classifications other than H-1B may be subject to the deemed  export licensing requirements, we did not attempt to incorporate other  classifications into our analysis. We also identified and interviewed 15  firms that employed foreign nationals but did not have a deemed export  license. To better understand the Commerce program for detecting  unlicensed deemed exports, we reviewed Commerce program guidance.  We also interviewed Commerce officials associated with the review effort.
To evaluate Commerce’s efforts to ensure compliance with approved  licenses, we obtained copies of the standard conditions from both  Commerce and the Department of Defense (DOD) and reviewed license  conditions as recorded in Commerce’s licensing database. We also  interviewed officials of 11 firms that have received deemed export licenses  and met with Commerce licensing and enforcement officials. To obtain  detailed information on enforcement activities, we interviewed special  agents of all eight Commerce enforcement field offices. To better  understand the rationale for the conditions, we spoke with officials at DOD  and the Department of State, including analysts at the Defense Intelligence  Agency and policy officials from the Defense Technology Security Agency.
We conducted our review from November 2001 through August 2002 in  accordance with generally accepted government auditing standards.
section_title: Comments from the Department of Commerce
paragraphs: The following are GAO’s comments on the Department of Commerce’s  letter dated August 19, 2002.
subsections: section_title: GAO Comments
paragraphs: 1. We have modified our report to reflect Commerce’s comment. Our draft  report’s statement that a deemed export license typically covers one to five  individuals was based on an estimate provided to us by the head of  Commerce’s deemed export licensing unit. As noted in our draft report,  Commerce could not readily determine the total number of individuals  included in all deemed export licenses due to limitations in its automated  database. 2. We agree that the countries depicted in the chart may represent different  levels of concern from a foreign policy and national security standpoint.  However, we used the Department of State’s guidance for screening  technology-related visa applications to develop a list of countries of  concern. According to guidance sent to all diplomatic and consular posts,  particular attention is given to cases involving nationals of countries  designated as state sponsors of terrorism—Cuba, Libya, Iran, Iraq, North  Korea, Sudan, and Syria—or a region subject to the Nonproliferation  Export Control regulations—China, India, Israel, Pakistan, and Russia.
We have added information in this report to note Commerce’s observation  that most deemed export licenses involve countries of concern, given that  U.S. export controls focus on such countries. 3. We do not agree that Commerce has an effective process in place to  monitor compliance with license conditions. We found Commerce’s current  process to be inadequate for two reasons:  (1) it is essentially limited to  administrative checks by headquarters staff to determine whether firms  have submitted the required paperwork; and (2) it does not include a  program for conducting on-site visits to confirm that firms are complying  with license conditions. Accordingly, we have maintained our draft  recommendation that Commerce develop a risk-based monitoring  program. 4. Our estimate of 15,000 H-1B change-of-status applications only  represents individuals seeking employment in technology-related  occupations. It does not include nonsensitive fields, such as modeling,  architecture, and accounting, as Commerce notes in its comments. We  therefore targeted our analysis to applications involving employment that  might result in access to sensitive technology that Commerce should  control through its deemed export process. We have modified the language  of our report to clarify how we developed this estimate. 5. In response to our recommendation in the draft report that Commerce  establish a system for tracking visa cases referred to the field offices,  Commerce provided us with documentation of the new case management  system’s capabilities. Based on our review of documents describing the  case-tracking capability of the new system, we have not included this  recommendation in our final report.
section_title: Comments from the Department of Defense
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: GAO Acknowledgments
paragraphs: In addition to the individual named above, Pierre Toureille, Lynn Cothern,  Julie Hirshen, Richard Slade, and Jennifer Li Wong made key contributions  to this report.
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