Automated Export System: Prospects for Improving Data Collection and Enforcement Are Uncertain
Published: 1997-11-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Pursuant to a congressional request, GAO reviewed the potential impact of the Customs Service's Automated Export System (AES) and the views of the export community regarding AES, focusing on whether AES is likely to achieve its objectives of improving export data, enhancing enforcement efforts, and streamlining export data collection.
section_title: What GAO Found
paragraphs: GAO noted that: (1) it is not yet clear what benefits will result from the use of AES because many critical implementation issues remain unsolved; (2) although AES has the potential to improve export reporting and enhance enforcement efforts, it is unlikely to achieve these objectives unless more exporters are willing to participate and limitations that prevent other agencies from fully using the system are resolved; (3) concerning the trade community's limited participation, GAO found that: (a) only a small fraction of the export community is using AES; (b) most exporting companies responding to GAO's survey are not likely to use AES over the next 3 years; and (c) twenty-five percent of all U.S. ocean freight forwarders had not heard of AES; (4) benefits cited by companies using AES include automated filing, reduced paperwork, personnel, and administrative costs, participating in the initial development of AES, and filing all data at a central filing point; (5) some segments of the trade community contend that the predeparture filing requirement is inconsistent with their business practices and costly; (6) AES is designed to help target illegal shipments, identify high-risk shipments, and compile exporter histories; (7) the system's usefulness as an enforcement tool is limited because: (a) it is not linked with the databases of other law enforcement agencies; (b) a proposal to allow exporters to file data after shipment could undermine efforts to detect export violations; (c) AES allows export data to be transmitted only hours before a shipment departure, which may not provide sufficient time to target possible illegal shipments; and (d) many Customs inspectors anticipate that illegal exporters are unlikely to use AES to file their export data; (8) AES faces limitations in achieving its goal to create a single information collection and processing center for the electronic filing of required export documentation; (9) many export-related agencies are subject to existing regulations requiring them to retain their own licensing procedures and have requirements that will not be satisfied through AES; (10) Customs is attempting to resolve these issues through several means; and (11) a cost-benefit analysis is needed to determine how or whether to proceed with implementation of AES.

section_title: Letter
paragraphs: Since the 1980s, federal agencies responsible for compiling U.S. trade statistics and enforcing U.S. export laws have experienced serious problems in obtaining accurate and timely data on exports. To improve reporting and enhance enforcement efforts, the U.S. Customs Service and the Census Bureau in 1991 initiated the Automated Export System (AES). AES allows exporting companies to electronically enter data on shipments, automatically checks for errors, and provides data to help detect export violations. Although it introduced the system as voluntary, Customs recognized that achieving a high level of participation in AES would be difficult and wanted its use to be mandatory. In 1996, Customs sought to make AES mandatory for some users. However, AES was not made mandatory, in part because companies raised concerns about the impact of AES on their business practices, especially if they are required to enter data before shipments depart.
At your request, we reviewed the potential impact of AES and the views of the export community regarding AES. Specifically, we sought to determine whether AES is likely to achieve its objectives of improving export data, enhancing enforcement efforts, and streamlining export data collection and, in so doing, we obtained the export community’s views on AES. As you requested, we are also providing information on the export procedures of other selected countries. (See app. I for information on selected countries.)
subsections: section_title: Background
paragraphs: Merchandise trade, the exchange of goods with other nations, is an increasingly important component of the U.S. economy. The U.S. Customs Service collects data on imports and exports that the U.S. Census Bureau uses to produce statistics on U.S. trade. While Customs has numerous import responsibilities, its export functions include guarding against the exportation of illegal goods, such as protected technologies, stolen vehicles, and illegal currency.
Customs has broad authority to enforce export laws and regulations. However, it has historically placed more emphasis on imports than on exports. While U.S. import data is recognized as generally reliable, export data is viewed as less accurate. A 1997 Census report notes that the value of U.S. exports has probably been underreported by between 3 and 7 percent but could be understated by as much as 10 percent.Underreporting of exports can significantly affect the accuracy of statistics on the nation’s trade balance. Inaccurate trade statistics can be an impediment in negotiations for bilateral and multilateral trade agreements. Export statistics also are relied on by the government to calculate the gross domestic product (which is used to assess the performance of the U.S. economy) and to determine appropriate promotional programs for expanding exports. Export data is also used to establish controls on sensitive exports.
A primary source of export statistics is information that is recorded on a form called the Shipper’s Export Declaration (SED). The SED contains information such as the nature, value, quantity, and destination of the goods to be exported. Generally, exporters or their agents are required by regulation to file the SED for each export transaction having a value over a certain amount, now set at $2,500 for all shipments without a license.Under current regulations, the SED must be delivered to the exporting carrier prior to exportation. Ocean and air carriers, with a bond on file,are permitted to file the complete manifest (a carriers manifest lists all the cargo it is transporting) with Customs within 4 working days after departure. For overland shipments, the SED must be presented to Customs at the time of export.
The major sources of error in merchandise trade statistics include missing SEDs and incomplete or inaccurate reporting. Since the 1980s, Customs, Census, and other government agencies have conducted numerous studies, which found serious problems with companies properly completing the document and filing it at the required time and place. For example, Customs completed an audit of selected ocean vessel manifests in 1996 that found about 29 percent of shipments listed on the manifest did not have the required SED. In 1997, Customs conducted an audit of airline manifests that determined 40 percent of SEDs were incorrectly completed.  Without a properly completed SED, an export is either not recorded or recorded incorrectly.
Currently, about one-third of all export transactions are recorded on paper SEDs. Census collects another third of the export data on a monthly basis directly from exporting businesses through an electronic filing system known as the Automated Export Reporting Program (AERP). Census is terminating AERP in December 1999 because it believes the system is outdated and that AES will provide more accurate data. (Twenty-five percent of all AERP transmissions contain errors that must be corrected.) Census officials stated that AERP has systems limitations related to the amount of data it can accept. They stated that the system would require a complete redesign in methodology and computer technology in order to be able to accept more participants and improve data quality, resulting in a system similar to AES. Census officials also noted that about one-third of all AERP participants submit their data late via AERP.
subsections: section_title: Context for AES’ Development
paragraphs: Customs and Census initiated AES in 1991 to improve (1) the collection and reporting of export statistics and (2) the enforcement of export regulations. Initially, the system was designed to replace the manual process of handling paper SEDs with a more efficient and less costly automated process that would increase the accuracy, completeness, and timeliness of SED data.
AES is an interactive system that allows exporters or their agents to electronically transmit SED information directly to Customs before a carrier’s departure. In order to improve the quality of export data, data transmitted via AES is subjected to a series of automatic edits. The system in turn sends back to the exporter a message to check the data if it does not fall within statistical parameters developed by Customs and Census. (See app. II for information on how AES works.)
According to Customs, AES was also designed to improve the enforcement of export controls by evaluating the risk of export shipments based on certain criteria, such as the country of destination and the type of cargo;compiling exporter histories; allowing for trend analysis; and providing inspectors with detailed commodity data prior to departure. Customs officials believe that the more export information they have, the more focused their efforts to target illegal shipments will be.
Finally, in 1994, in response to several initiatives including the Vice President’s National Performance Review, Customs decided that AES should be expanded to provide a centralized database for collecting and processing export documentation required by the U.S. government. Customs planned to work with other U.S. government agencies that have export-related responsibilities to help these agencies meet their export information requirements through AES. (See p. 18 for a discussion of the present status of the single electronic filing center.)
Customs installed AES in all U.S. vessel ports in October 1996, and currently it is operational in all ports, including air, rail, and truck transit ports. Customs and Census officials estimate that they spent approximately $12.9 million to develop and implement AES from fiscal  year 1992 to 1997. These costs include, among other things, expenses for contractors, travel, and training. According to Customs’ and Census’ figures, both agencies estimate that together they will spend an additional $32.2 million through fiscal year 2002 on AES implementation and maintenance.
This new system would require companies to make various changes in how they submit their export data to Customs. Companies that submit their export data via AERP will have to undergo modifications in programming the processing of their export data or return to submitting paper SEDs. Companies that submit their data via paper SEDs but want to participate in AES will have to automate their export processing, and/or purchase AES software, or use the facilities of a port authority or service center to transmit their data.
In addition, some segments of the trade community have alleged that AES will require major changes in their current business practices. Because Customs has not strictly enforced the legal requirement that companies submit their SEDs to the carrier prior to departure, many companies have grown accustomed to turning in their SEDs to the carriers late. AES will require that companies file their export data directly to Customs, rather than the carrier, prior to departure.
The trade community has varying views on AES. To obtain these views, we conducted two surveys of potential AES users: (1) a nationally representative sample of 400 U.S. ocean freight forwarders and Non-Vessel Operating Common Carriers (NVOCC) and (2) 80 U.S. exporting companies that file paper SEDs. We also interviewed officials from 12 of the largest U.S. sea and air carrier companies and several trade groups representing various segments of the export community. (See app. III for complete survey results.) (We did not independently verify information provided by U.S. companies and trade groups.) We also interviewed Customs officials at 13 sea, air, and land ports. As of June 1997, we completed the surveys and interviews.
section_title: Factors Hindering AES’ Ability to Meet Its Objectives
paragraphs: Although AES has features to improve export data collection and enforcement efforts and to reduce paperwork, the system’s effectiveness is hindered by low participation of the export community. Unless AES participation increases significantly, AES will not enhance the quality of export data or the enforcement of export regulations. In addition, other factors may limit AES’ ability to achieve its objective of enhancing export control enforcement. For example, Customs’ plans to introduce a post-departure filing program may impede the system’s effectiveness as a tool for targeting illegal exports. Finally, AES will not likely serve as a central point for collecting and processing all export documents because other export-related agencies have information needs that they say cannot be fulfilled through AES.
subsections: section_title: Trade Community Participation Is Low and Likely to Be Limited in the Near Future
paragraphs: Trade community participation in AES is currently very limited, and our work showed most companies do not have immediate plans to participate in AES. As of September 1997, AES participants included 8 exporters, 27 freight forwarders, and 2 sea carriers out of tens of thousands of export-related businesses. Currently, less than 1 percent of all export data is being submitted via AES.
Customs expects participation in AES to increase for several reasons. For example, Customs is planning to introduce the Automated Export System Post-Departure Authorized Special System (AES-PASS), which is a program designed to encourage participation in AES by allowing qualified exporters to submit a minimal amount of information prior to export—generally an exporter identification number and a reference number for the shipment. Further, Census is terminating AERP and hopes current users will switch to AES. Customs also anticipates an increase in participation since AES first came online in July 1997 for exports via air, truck, and rail.
subsections: section_title: Most Companies Surveyed Do Not Have Immediate Plans to Get on AES
paragraphs: Despite Customs’ expectations of increased participation, most companies we surveyed do not have immediate plans to use AES. We surveyed 400 randomly selected freight forwarder companies and 80 exporters that file paper SEDs. As shown in figures 1 and 2, only about 36 percent of freight forwarders and about 32 percent of exporters we spoke with currently plan to use AES to submit their SED information; only 50 percent and 42 percent of those companies, respectively, reported that they plan to get on AES within the next 3 years. Of the companies that plan to use AES, only 4 percent of the freight forwarders and 5 percent of the exporters have filed a notice with Customs that they plan to participate in AES or are testing AES. (See fig. 3.) In addition, more than half the companies we surveyed that plan to use AES do not know when they will use it. Most companies did not know how much it will cost their company to implement AES and were not familiar with the AES-PASS program (see fig. 4).
Companies and industry groups we spoke with cited certain benefits to getting on AES. The primary incentive mentioned was automating their export system. About 50 percent of the companies we surveyed that plan to use AES said that automation was an incentive to use AES. The other benefit voiced by over 15 percent of respondents was the potential for a single filing point for all export data, referred to as “one-stop filing” by Customs. In addition, those companies we interviewed that are already using AES said that they were doing so to reduce paperwork and personnel and associated administrative costs, take advantage of new automated initiatives, and participate in the development of AES.
While the cost of automation and lack of knowledge regarding AES were cited as possible impediments to AES participation by the export community, predeparture filing emerged as a key concern among some segments of this group. Our work indicates that whether or not predeparture filing posed a problem for businesses was related to the type of export or mode of transportation used to export.
According to industry groups and several companies’ officials we interviewed, filing information predeparture is inconsistent with their business practices. These officials told us that they often do not know the precise volume and value of their final shipment until just before departure, which makes it difficult to file their paperwork on time. Predeparture filing was a particular concern for exporters of bulk goods or grain commodities. Some of these companies said that they would have to enter estimates in AES prior to departure and that the estimates would then have to be revised later, thereby resulting in rework. One exporter described this as having to do “twice the work.”
Regarding carriers, all of the eight airlines and air couriers we spoke with said that meeting the predeparture filing requirement would present a problem for their current business operations; six said that they would not participate in AES due to this requirement. While the air couriers we interviewed said that they generally have the SEDs in hand prior to departure, because of the fast-paced nature of the air courier business they are unable to input SED data into AES before the aircraft departs. Representatives from both these industries told us that they anticipate having to input data into AES as a service to exporters and freight forwarders.
Representatives from companies participating in Customs’ evaluation of AES, conducted in two vessel ports in 1996 before AES was expanded to all ports, indicated problems with predeparture filing. Representatives from some companies stated that 80 percent of the time they have all the information needed to complete the SED prior to departure of the vessel. However, for the remaining 20 percent of the time, they have difficulty in obtaining and providing predeparture data. In addition, the evaluation did not include airlines and air couriers, which have significant concerns regarding predeparture filing. It also did not include exporters of bulk commodities that have similar concerns.
Export industry groups also have repeatedly expressed concerns about the AES-PASS program, which allows exporters to file most of their export information postdeparture, but still requires companies to file some data prior to departure. Specifically, they have stated that AES-PASS will be costly and burdensome to exporters without providing much benefit to the government. For example, in a March 1997 letter to the Commissioner of Customs, a group of large exporters stated that AES-PASS requires exporters to bear a predeparture reporting burden for all shipments while doing “nothing to improve data collection or compliance.” They stated that AES-PASS would require two submissions for a single shipment—both pre- and post-departure—resulting in additional programming of automated processes. In June 1997, the Trade Resource Group, the private advisory group to Customs on AES, expressed similar concerns in a letter to the Commissioner of Customs.
In response to the export community’s continued dissatisfaction with AES requirements (particularly filing information predeparture via AES and/or AES-PASS), in June 1997 the Commissioner of Customs proposed that industry groups enter into formal negotiations with Customs to resolve issues of disagreement regarding AES. Customs has used such negotiations, which rely on an outside moderator, to resolve issues with the trade community in the past. According to Customs officials, this approach will provide a forum for the trade community and Customs to discuss, and potentially resolve, the outstanding issues of concern to both parties. Customs officials told us that they are uncertain as to when the negotiations will begin.
section_title: AES’ Ability to Enhance Enforcement Is Currently Limited
paragraphs: AES is designed to provide a “smart targeting system” that would allow inspectors to focus their attention on possible illegal shipments among the thousands of exports leaving the country each day. For example, AES is designed to compile exporter histories, allow for trend analysis, and provide a prioritized list of targets for selective enforcement actions.However, AES’ ability to meet this objective is limited by four major factors. First, AES does not currently link with other law enforcement databases, such as those maintained by the Treasury; the Federal Bureau of Investigation; and the National Insurance Crime Bureau (which maintains a database on stolen vehicles). Customs inspectors told us that AES would be a more effective enforcement tool if it linked with these databases, allowing inspectors to obtain information more quickly on exporters with prior export violations or on stolen vehicles that may be exported. Customs officials told us that they are considering trying to have AES link with other enforcement databases in the future, but that at present they have no definitive plans to do so. They noted that very few enforcement or administrative databases are directly linked to each other because of logistics, funding, and security concerns.
Second, AES-PASS will not provide adequate information to target shipments because it only requires a minimal amount of data prior to departure—the exporter identification number; a reference number for the shipment; and a few additional data elements, such as the license code and number if the export requires a license. It will not provide the detailed commodity data that inspectors told us they need for better enforcement. Because so little predeparture information is provided on AES-PASS, some inspectors we interviewed were concerned that AES-PASS would undermine any advantage that AES would have provided, for example, ready access to more detailed commodity data predeparture.
Third, AES allows SED information to be transmitted only hours before a shipment’s departure (as with the current paper system), and inspectors told us that in most cases this is not sufficient time for targeting possible illegal shipments. While some inspectors told us that they would need SED information about 4 hours in advance of the carrier’s departure in order to target shipments, others said they would need 24 hours. (We did not evaluate the feasibility of companies being able to file data within these time frames.) Finally, since participation in AES is voluntary, an illegal exporter is unlikely to use the system for filing export data. Inspectors at several ports told us that there is no incentive for exporters to get on AES, and others stated that they believe AES would need to be mandatory to be effective.
section_title: Most Other Agencies’ Export Requirements Cannot Be Fully Satisfied by AES
paragraphs: According to both Census and Customs, AES has the potential to provide exporters with “one-stop shopping” by creating a single electronic filing center for all U.S. export data. AES was not designed to replace any agency’s authority to regulate exports. The system was designed to serve as a source of export data for agencies with export requirements and to reduce redundancies in filing and paperwork associated with various export control requirements. However, AES is unlikely to achieve those objectives because most agencies’ export requirements cannot be fully satisfied through AES. For example, 8 of the 13 agencies identified by Customs as having regulatory authority over exports are not using AES to fulfill their export licensing or permit requirements because of existing regulations that require them to retain their own licensing procedures, including collecting information provided by the exporter. As a result, exporters will have to continue to apply to multiple agencies for approval to export certain commodities. (About 30 percent of all U.S. freight forwarders export goods that require export licenses.) For example, exporters seeking to ship products that have both civilian and military applications would still have to apply directly to the Commerce Department’s Bureau of Export Administration for approval. In addition, exporters of chemicals and pharmaceutical drugs are required to apply directly to the Drug Enforcement Administration (DEA) 15 days prior to exportation in order for DEA to conduct an investigation.
Although AES is designed to eliminate the paper SED, it will not substantially reduce or eliminate agency paperwork or the electronic filing associated with the issuance of export licenses, certificates, or permits. For example, the Department of Agriculture’s Food Safety and Inspection Service issues inspection certificates for agricultural exports that must accompany the shipment abroad, precluding the possibility of electronic filing through AES. In addition, DEA officials noted that they are governed by international conventions, to which the United States is a signatory, that mandate their use of internationally standardized paper licenses for exports of certain chemicals and pharmaceutical products.
According to Customs officials, there are several obstacles that prevent them from quickly achieving this goal. For example, many agencies lack sufficient staff or budgetary resources, have outdated regulations that may need to be changed, and/or are reluctant to share data with other agencies even though they may collect the same data. Customs recognizes that these obstacles will need to be overcome in order to have AES fully interface with other export-related agencies.
Despite these limitations, officials at three agencies with export reporting (rather than licensing) requirements—Census, the Maritime Administration, and the Energy Information Administration—indicate that AES has the potential to satisfy their needs. Specifically, it is expected to eliminate their paperwork processing and help them fulfill their reporting requirements. Several other agencies, including the Bureau of Export Administration, the Office of Foreign Assets Control, and the Office of Arms Control and Nonproliferation indicated that as designed, AES would provide a more efficient means to track and monitor cargo shipments against approved licenses. Currently, AES validates cargo against State Department and Bureau of Export Administration licenses.
subsections: section_title: Slow Progress in Developing Interfaces With Other Agencies
paragraphs: Since 1994, Customs has tried to develop an automated interface with other government agencies to maximize opportunities to share export information through AES and streamline data collection. After Customs determines the feasibility of working with a particular agency, Customs seeks to (1) reach commitments to collaborate on their use of AES, (2) define and incorporate the informational requirements of these prospective users, and (3) conclude the process with a memorandum of understanding (MOU) that guides the implementation of the final interface.
Currently, only Census has signed an MOU with Customs legally stipulating each agency’s responsibility for collecting, transmitting, and securing data captured in AES, in addition to cost-sharing arrangements. Customs has obtained written commitments from five other agencies to collaborate on AES. Some of the areas being discussed are data to be included in AES, information sharing and access, and the development of compatible information systems. Of these six agencies, Customs has completed and incorporated into AES the user requirements of Census, the Bureau of Export Administration, and the Office of Defense Trade Controls, specifying each agency’s requirements for collecting and processing data. One reason that progress has been slow is that Customs has assigned only one full-time person to develop interfaces with other government agencies.
Other agencies have not committed to use AES for a variety of reasons. For example, according to officials at the Bureau of Alcohol, Tobacco, and Firearms, the agency lacks sufficient resources to develop a compatible automated system, and DEA has regulations that preclude its use of AES. Officials at the Environmental Protection Agency told us that they cannot use AES, as they do not currently have an agreement with Census to access SED data. Furthermore, although AES does include Nuclear Regulatory Commission license codes in order to validate licensed shipments, agency officials indicated that the agency already has an automated information system that meets its needs. (See fig. 5.)
It has been well documented that successful information systems require the continuing involvement and commitment of senior executives. In this case, where the concept of AES entails integrating the export reporting functions of 14 separate federal agencies, extensive high-level coordination and exchange are not presently in place to explicitly define what export reporting and/or licensing requirements can or cannot be accommodated by AES and what distinct licensing and/or reporting requirements must remain.
section_title: Conclusions
paragraphs: The quality of export data has been a long-term problem. AES represents a major initiative to improve the quality of export data that is used to negotiate trade agreements and enforce export laws and regulations. While the trade community believes export data needs to be automated, the reluctance of U.S. companies to participate and the uncertainty that other agencies will be able to interface with AES raise serious questions about the system’s viability. In addition, Customs’ planned use of AES as an enforcement tool is limited because AES is not currently linked to other law enforcement databases, and AES-PASS allows approved exporters to file almost all of their export data post-departure. We question whether AES will be able to meet its objectives without greater involvement of top management in resolving the operational and implementation problems we have identified. We believe the Commissioner of the U.S. Customs Service and the Director of the U.S. Census Bureau need to devote sustained management attention to AES. Specifically, these officials need to expeditiously assess the extent to which the export community’s concerns can be addressed, the likely amount of participation in AES, the likely usefulness of AES in enhancing enforcement, and the extent to which other agencies will be able to use AES. In making this assessment, attention needs to be given to determining whether predeparture filing of export data is critical to improved export statistics and enforcement of U.S. laws and regulations and, if so, how far in advance inspectors need the information for AES to be an effective enforcement tool; a link between AES and the databases of law enforcement agencies can be allowing some exporters to file SEDs after departure would undermine the objective of achieving improved export data and/or render AES ineffective as an enforcement tool; and the requirements of other agencies can be modified or otherwise accommodated to permit their use of AES.
Once this assessment is done, we believe the agencies need to consider how or whether to proceed with implementing AES. If these problems are not resolved in the near future, we are concerned that Customs will continue to invest significant monies in a system that is likely to be of limited benefit.
section_title: Recommendations
paragraphs: We recommend that the Secretaries of the Treasury and of Commerce direct the Commissioner of the U.S. Customs Service and the Director of the Bureau of the Census to delineate the concrete actions needed to improve AES’ potential, and, after doing so, assess the costs and benefits of continuing to implement AES.
section_title: Agency Comments
paragraphs: A draft of this report was provided to Customs and Census. While Customs agreed that AES should interface with other enforcement and export data bases and that AES-PASS should be reevaluated in light of its potential adverse effect on enforcement efforts, both agencies said that they believed our assessment of the level of participation in AES was premature. They said that early in the system’s development, they decided to use a phased implementation approach. They also noted that participation in AES has increased since it was expanded to all modes of transportation in July 1997 and they expect participation to be greater in the future. However, they did not address our recommendation or specify the actions they plan to take to overcome obstacles to AES’ success.
We disagree with Census and Customs view that our assessment of AES is premature. We believe our work provides important insights into issues that will affect AES’ success and that Customs and Census need to develop a strategy to address these issues. On the critical issue of participation, our survey revealed strong resistance among the export community that has serious implications for future participation. Unless AES achieves high participation and provides an interface among agencies with enforcement and export responsibilities, it is difficult to envision how the system can meet its objectives. We, therefore, continue to believe that Customs and Census should identify the specific actions needed to improve AES’ potential, and, after doing so, assess the cost and benefits of continuing to implement AES.
Census also expressed concern that the results from our surveys and interviews were not presented in such a way that the reader can determine the significance of the responses and that our work does not reflect the views of the entire export trade community. We used a variety of techniques to obtain the export community’s views regarding AES, including a nationally representative sample survey of 400 ocean freight forwarders. Our survey was necessarily limited to ocean freight forwarders because AES had not been extended to other modes of transportation. We believe that the results from this survey when combined with those from our survey of the top 80 exporters that file paper SEDs, as well as in-depth interviews with 30 exporting companies and 14 of the top AERP filers, provides a reasonable basis on which to assess the views of a broad cross section of the export community regarding AES. We did not suggest that our assessment was based on a survey of the entire export community. Moreover, Census did not offer any studies that produced results that were inconsistent with what we found. (See app. IV for specific details on our scope and methodology.)
As agreed with your office, unless you publically announce the contents earlier, we plan no further distribution of this report until 2 days after its issue date. At that time, we will provide copies of the report to appropriate congressional committees and the Commissioner of the U.S. Customs Service and the Director of the Bureau of the Census. We will also make copies available to other interested parties on request.
This review was done under the direction of JayEtta Z. Hecker, Associate Director. If you or your staff have any questions concerning this report, please contact Ms. Hecker at (202) 512-8984. Major contributors to this report are listed in appendix VII.
section_title: Six Other Countries’ Export Data Collection Systems
paragraphs: We obtained information from officials in six countries—Australia, Canada, Japan, South Korea, Mexico, and the United Kingdom—on their export procedures and systems for collecting export data. (The information we collected from these countries was self-reported by these countries—we did not independently verify any information we obtained.) Almost all of these countries reporting having implemented automated systems for collecting export data, and most countries reported that nearly 100 percent of their export data is collected via their automated systems. Most countries’ automated systems are voluntary and were automated within the last 5 years. These countries require that at least some export information be filed prior to departure. Further, almost all of the countries use their automated system in some way as a targeting tool to help with the control and enforcement of the countries’ export laws.
Five of the six countries from which we obtained information have implemented an automated system to collect their export data (Australia, Japan, South Korea, Mexico, and the United Kingdom); Canada is currently piloting an automated system to collect export data (see  table I.1). With the exception of Mexico, all countries’ automated systems are voluntary (including Canada’s new system). As an alternative to electronic filing, exporters in Australia, Canada, Japan, and the United Kingdom can file paper export declarations. Most of these countries’ automated systems were implemented in the 1990s, although Australia and Japan have had at least a partially automated system in place since the mid- to late-1980s.
Most countries require that exporters or their agents file at least some information prior to departure. Japan requires that all export data be submitted prior to departure. Australia, Canada, South Korea, Mexico, and the United Kingdom, however, allow approved exporters to wait to file some of their information after departure. Australia requires that approved exporters file an export report as soon as the information is available; Canada requires that exporters file a report up to 5 days after the month of departure; South Korea requires that a report be filed within a day of departure; Mexico generally requires that a report be filed within a week of departure; and the United Kingdom requires exporters to file a completed report within 14 days of departure.
All of the countries, with the exception of the United Kingdom, use their automated system to help control exports and target goods for inspection (Canada plans to use its system for this purpose). Some countries, such as South Korea and Japan, use pre-set criteria for targeting goods for inspection. Mexico’s automated system, on the other hand, randomly selects shipments for inspection.
Predeparture, with optional post-departure filing for approved exporters (this option generally open only to certain bulk and agricultural shippers, but requires some information be filed predeparture)
Almost 100 percent (export community participation level)
Predeparture, with optional post-departure reporting for bulk cargo and perishable goods (requires some information be provided prior to departure)
Predeparture, with optional post-departure filing program (requires that invoice information still be presented upon export)
Predeparture, with optional post-departure filing for approved exporters (this option is open to both paper and electronic filers but requires some information be filed predeparture)
Deadlines set locally at Customs ports (1996) $130 billion (1996) $96 billion (1996) $113 billion(Table notes on next page) (Australia) Reference number; type of export, establishment code; owner’s name; owner’s phone number; consignee’s name; consignee’s city; country of destination; port of loading; port of discharge; invoice currency; total free-on-board (FOB) value; intended date of export; number of F.C.L. containers, if applicable; mode of export; ship/aircraft identity; number of packages; commodity classification code; origin code; goods description; net quantity; gross weight; container type; coal, thermal use indicator; assay details; container number and seal number, if applicable; permit details, including permit number and encryption code; information on whether goods are subject to certain export concession arrangements, FOB value; and signature. (Canada) Information required for paper filing generally includes exporter name and address; consignee name and address; exporter’s business number; country of final destination; province and country of origin of goods; export permit number; description of goods; harmonized tariff system code of goods; quantity and unit of measure; value; signature of responsible party; mode of transportation; and reason for export. Goods exported by sea can be reported in a predeparture interim report that must include the following information: exporter name, address, and business number; consignee name and address; country/province of origin of goods, country of final destination; number of packages; description of goods; and, if containerized, container number. (Japan) User code; exporter code, name, and address; trading pattern code; airway bill or bill of lading number; description, number, quantity, value, and statistical code numbers of goods; destination and its code number; loading and storage place code; airline code, or name and nationality of vessel; and scheduled departure date. (South Korea) Forty-four items, including declarant; manufacturer; exporter name; buyer; value/quantity of goods; destination; consignee; letter of credit number; and weight. (Mexico) Sixty-two data items, including information on the exporting company and its location; goods’ quantity, value, and classification; transport company name and location; and data of the foreign trade transaction. Invoice information that must be provided upon export in paper form must contain the name of the exporting company; taxpayer identification number; date and number of the invoice; a general description, quantity, and value of the goods; information on the vehicle transporting the merchandise; number of the consolidated entry; name and signature; and number and license of the Customs broker. (United Kingdom) Filing requirements depend on the procedure being used, but a completed declaration via the automated system generally includes consignor/exporter; number of items declared; total packages; reference number; name and address of person or company making the declaration; code for country of ultimate destination; information on shipment container, if appropriate; identify and nationality of active means of transport crossing the border; mode of transport at the border; place of loading; location of goods; packages and description of goods, including marks and numbers, container numbers, and number and kind of goods; item number; tariff classification commodity code; net weight; any additional information, documents produced, certificates and authorizations; and value of goods. Participants in the U.K. automated system post-departure filing program generally must file the following information predeparture: name and address of exporter or agent; brief commercial description of goods; number and kind of packages/goods; marks and numbers on packages; net weight; and any additional information, documents produced, certificates, and authorizations.
section_title: The Automated Export System Process
paragraphs: As currently implemented, the Automated Export System (AES) allows exporters or their agents to electronically transmit Shipper’s Export Declaration (SED) information directly to Customs. The process begins when either the exporter or agent transmits commodity data directly into AES or when the carrier transmits a receipt of goods message. (AES participants can transmit their commodity data either by developing their own software, using software from various AES-certified software vendors, via the Internet, or using facilities of a port authority or service center.) If the carrier transmits data via AES before the exporter, an “I owe you” (IOU) is established noting that the exporter has not yet transmitted commodity data. The commodity data passes through built-in edits that check for accurate and complete information and match it against U.S. agency requirement files. The system also matches commodity data sent by the exporter with transportation data (such as the name and flag of the vessel) sent by the carrier. The carrier is free to load the cargo unless it receives a “hold” message. AES will reject the shipment if core information, such as the commodity code, country name, or exporter name is invalid or incomplete. These “fatal errors” must be corrected before merchandise is exported. (See fig. II.1.)
AES will reject the shipment if core  information is invalid or incomplete.  These errors are "fatal." Fatal errors must  be corrected before merchandise is  exported. AES will also generate warning messages that will not reject the shipment,  but warnings must be corrected within  4 days after departure.
section_title: Results of Freight Forwarder and Exporter Surveys
paragraphs: Provided in the following section are questions and responses for our surveys of 400 U.S. freight forwarders and Non-Vessel Operating Common Carriers (NVOCC) and 80 U.S. exporting companies that file paper SEDs. All results are reported as percentages, and for each question, we present the number of respondents answering the question. (Certain questions were only to be answered by a subset of respondents, that is, those possessing a certain characteristic or giving a particular answer to a previous question.) For questions requesting a numerical answer (such as the number of employees) we present descriptive statistics, such as the median and the range of responses. In addition, for several questions where we report in the letter on the subset of respondents who plan to use AES, we provide results both for this subset group and for all respondents.
Hello, this is , calling from the U.S. General Accounting Office.  Senator Orrin Hatch, Chairman of the Senate Judiciary Committee, has asked us to obtain the views of the export community regarding the Customs Service's new Automated Export System, AES, and to collect information on company export practices which may be affected by AES.
Your company has been chosen as part of a nationally representative sample of freight forwarders and NVOCCs for this study.  The survey should take about 5 to 10 minutes of your time.  We will need to speak with the individual in your company most familiar with your company's current and future export documentation procedures for the survey.
We need some basic company background information in order to describe the kinds of companies we talked with in our survey report for the Congress.  So, before we discuss AES, I'd like to ask some questions about the levels and kinds of export activities your company engages in and the approximate size of your company. 1.
At any time from the beginning of 1996 through the present, did your company provide freight forwarding services to companies exporting products from the U.S.? 91.2 8.8 2.
At any time from the beginning of 1996 through the present, did your company also provide Non-Vessel Operating Common Carrier (NVOCC) services to companies exporting products from the United States?
All respondents who answered "No" to Q.1 must answer "Yes" to Q.2 to proceed with the survey.  Those who answered "No" to both questions 1 and 2 were routed out of the survey and do not appear anywhere in this report.)  3.
About what percentage of your company's export business, if any, would you say currently involves goods exported to Canada?  Your best estimate will suffice.
MEDIAN  RANGE (Minimum and Maximum) INTERQUARTILE RANGE0 0 - 100 1 4.
In addition to exporting products by sea, does your company also provide services to clients exporting by air?
5.
I'd also like some information about the size of your company.  About how many employees (full-time equivalents) does your company have?  Your best estimate will suffice.
MEDIAN RANGE INTERQUARTILE RANGE SUM 6 1 - 60,000 12 86,879 6.
And approximately what would you say your company's gross revenues (or sales) were for 1996?  Your best estimate will suffice.
MEDIAN RANGE INTERQUARTILE RANGE SUM $1.25 million   7,000 - 1.8 billion   4.5 million   4.64 billion 7.
Don't know 0.9 8.
About how many companies (clients) did your company provide export services for during 1996?
MEDIAN RANGE INTERQUARTILE RANGE SUM 1 - 50,000 130 132,033 Since the beginning of 1996, did your company export goods that required an export license? 2Ag Aside from export license and Census Bureau and Customs Service paperwork, did any of your exported goods involve reporting requirements to any other federal agencies since the beginning of 1996? (GO TO Q. Ins) 3Ag Which agencies had reporting requirements?
Other (List below)
During the last 3 years, that is, since 1994, were any of your export shipments inspected by the Customs Service?
Im1 Does your company also act as import broker for companies importing products into the United States? (GO TO Q.9)
Im2 Does your company use the Customs Service's Automated Broker Interface (ABI) system to submit your import data? 84.7 Yes No 13.6 Don't know  1.7 AUTOMATED EXPORT SYSTEM (AES) 9.
The Customs Service is now implementing the Automated Export System (AES) to collect and process data for all parties involved in export trade.  Have you ever heard of this system? (GO TO Q. 22)
All respondents saying that they had not heard of AES and those expressing a desire for more information about AES were given Customs contact information. 11.
Has anyone from the Customs Service or any other federal agency contacted your company regarding AES?
12.
I'd like to know your company's plans, if any, regarding AES.  Does your  company plan to use AES to submit your required export data? 47.6Yes No 18.7 Company hasn't decided 24.8 Don't know  8.9 (GO TO Q. 21) (GO TO Q. 14)
13.
How would you describe the status of your company's involvement with  AES?
Studying AES Planning to file a letter of intent with Customs Have filed a letter of intent with Customs Currently testing AES Other (Specify) Can't say/Don't know 53.8 14.5  3.4  0.9 19.7  7.7 14. What incentives, if any, do you see for going on AES?  (DO NOT read list.  Click all that respondent volunteers)
None One-stop filing Cost savings for company Convenience of automation Better trade statistics Other (Specify)
21.0 15.5  9.0 45.5  7.5 40.0 (GO TO Q. 15)
Those  That  Plan  to  Use  AES (GO TO Q. 15)
One-stop filing Cost savings for company Convenience of automation Better trade statistics Other (Specify)
19.7  9.4 45.3  11.1 46.2 15.
I'd like your views about incentives for using AES mentioned by others.  Do you view  as an incentive for your company to go on AES or not? (Each item was asked of respondents NOT volunteering the item in Q. 14.  Results displayed include those who volunteered the item in question 14.)
Volunteered Yes No Don't know B. Cost savings for company Volunteered Yes No Don't know N = 200 Volunteered Yes No Don't know Volunteered Yes No Don't know 16.
About how much would you estimate it would cost your company to implement AES, if you chose to do so? (Asked of those planning to use AES or whose companies had not yet decided whether to use AES.)
N= 117 17.
About when do you plan to start using AES? (Asked of those planning to use AES.)
Date Given: 7/97 - 1/2000 49.6 18.
And about how long do you think it would take for your company to implement AES? (Asked of those whose companies had not yet decided whether to use AES.)
MONTHS YEARS BY (DATE)
1 - 6 1 - 5 9/97 - Sometime in 1998 Automated Export System Post-Departure Authorized Special System (AES-PASS) 19.
Are you familiar with AES-PASS? (Asked of those planning to use AES or whose companies had not yet decided whether to use AES.)
Those  That  Plan  to  Use  AES (GO TO Q.22) (GO TO Q.22)
20.
Is your company likely to apply for AES-PASS status? (Asked of those who were familiar with AES-PASS and who plan to use AES or whose companies had not yet decided whether to use AES.) (GO TO Q.22) (GO TO Q.22) 21. Why does your company not plan to use AES?(DO NOT read list.  Click all that respondent volunteers) (Asked of those who say they will not use AES.)
Lack of knowledge about AES (GO TO Q. 22) ______________________________________________ (Reasons spontaneously volunteered)
Predeparture filing requirement  Cost of automation Personnel cost  Company hardware or software incompatibility with AES Concerns about the amount of information required by AES Concerns about how the information will be used by Customs Concerns about privacy protection of information Other (Specify)
N = 46 I'd like your views about some concerns mentioned by others in using AES. (Each item was asked of respondents who did not mention lack of knowledge above and who did NOT volunteer the item in Q. 21.  Results displayed include those who volunteered the item in question 21 above.)
Are you concerned or not about the predeparture SED filing requirement of AES?
Volunteered Yes No Don't know Are you concerned or not about the cost of automation necessary for your company to get on AES?
Volunteered Yes No Don't know Are you concerned or not about the amount of information required by AES?
Volunteered Yes No Don't know Are you concerned or not about how the information will be used by Customs?  0 15.4 Are you concerned or not about privacy protection of information?
Volunteered Yes No Don't know Shippers' Export Declaration (SED) Preparation and Filing Next, we'd like to know how your company currently prepares some of its export-related paperwork.  There are a number of ways a company may prepare and file the SED with the Census Bureau.  I'd like to ask you about the methods you used during the past year. 22.
First, about what percentage of your export shipments required the filing of an SED during 1996?  Your best estimate will suffice. 90 0 - 100 28 23.
Did your company submit all of the SEDs for those shipments to Customs or did someone else also submit SEDs for those shipments?
We submitted all SEDs Someone else submitted all or some of the SEDs  13.8   86.2 (GO TO Q. 25)
N = 326 24.
About what percentage of the SEDs for your shipments did YOUR company submit to Customs in 1996? (Results displayed include respondents who answered "We submit all SEDs" to Q.23, scored as submitting 100 percent.)
25.
How did your company submit its SEDs during 1996:  Using paper SEDs,  the Automated Export Reporting Program (AERP),  AES, or an Internet-based company linked to AES? (click all that apply) (Results displayed include only respondents who submit SEDs.)
For AERP Users Only: 26.
The Census Bureau plans on phasing out the AERP system by the end of 1999.  How does your company plan to submit its SEDs once the AERP system is no longer available? (Click all that apply)
Company will use AES Company will use an Internet service No plans yet Submit paper SEDs Have the customer submit SEDs Other (specify)
N = 10 For Paper SED Filers Only: 27.
Does your company use a computer to manage any or all of its export-related record keeping? (Results displayed exclude paper filers who also file SEDs electronically.)
And finally, we'd like to know about the filing of your export paperwork and the timing of your export shipments. 28.
How difficult, if at all, was it for your company last year (1996) to file its paper SEDs with the carrier prior to departure of the goods? (Read each response option and click one)
Of very great difficulty Of great difficulty Of moderate difficulty Of some difficulty Of little or no difficulty  4.6  6.2 11.4 16.6 61.2 29.
During the last year (1996), did your company deliver ANY SEDs to the carrier following departure of the goods?  Do not include any submitted through AERP.
N = 307 30.
About how many of your SEDs were delivered after departure of the goods?
That concludes our interview.  Thank you for your time and your cooperation.  If there is any other aspect of AES you'd like to comment on, please feel free to do so now.
This is , of the U.S. General Accounting Office. Senator Orrin Hatch, Chairman of the Senate Judiciary Committee, has asked us to obtain the views of the export community regarding the Customs Service's new Automated Export System, AES, and to collect information on company export practices which may be affected by AES.
Your company has been chosen as part of a study of exporters who have filed export documentation with the Census Bureau in paper form. The survey should take about 5 to 10 minutes of your time. We need to speak with the individual in your company most familiar with your company's current and future export documentation procedures for the survey.
We need some basic company background information in order to describe the kinds of companies we talked with in our survey report for the Congress.  So, before we discuss AES, I'd like to ask some questions about the kinds of export activities your company engages in and the approximate size of your company. 1.
First, we'd like to know how your company exports products. Does your company export products by air?
2.
Does your company export products by sea? 77.8 22.2 3.
Does your company export products by means other than air or sea, such as truck or rail?
5.
Next, I'd also like some information about the size of your company.  About how many employees (full-time equivalents) does your company have?  Your best estimate will suffice.
MEDIAN RANGE INTERQUARTILE RANGE SUM 2,200 6 - 647,000 7,205 1,610,598 6.
And approximately what would you say your company's gross revenues (or sales) were for 1996?  Your best estimate will suffice.
MEDIAN RANGE INTERQUARTILE RANGE SUM $1.65 billion 100,000 - 164 billion 7.6 billion 424 billion 7.
About what percentage of your company's total business is involved in the EXPORT trade? 51 1 - 100 40 Since the beginning of 1996, did your company export goods that required an export license? 2Ag Aside from export license and Census Bureau and Customs Service paperwork, did any of your exported goods involve reporting requirements to any other federal agencies since the beginning of 1996? (GO TO Q. Ins) 3Ag Which agencies had reporting requirements?
Agriculture Department State Department Commerce Department Nuclear Regulatory Commission  0 Other (List below)
During the last 3 years, that is, since 1994, were any of your export shipments inspected by the Customs Service?
N = 62 Im1 Does your company also import products into the United States? (GO TO Q.9)
Im2 Does your company use the Customs Service's Automated Broker Interface (ABI) system to submit import data? 31.6 Yes No 42.1 Don't know 26.3 9.
The Customs Service is now implementing the Automated Export System (AES) to collect and process data for all parties involved in export trade.  Have you ever heard of this system? (GO TO Q. 22)
All respondents saying that they had not heard of AES and those expressing a desire for more information about AES were given Customs contact information. 11.
Has anyone from the Customs Service or any other federal agency contacted your company regarding AES?
N = 49 12.
I'd like to know your company's plans, if any, regarding AES.  Does your  company plan to use AES to submit your required export data? 40.8 Yes No 22.4 Company hasn't decided 20.4 16.3 Don't know (GO TO Q. 21) (GO TO Q. 14)
13.
How would you describe the status of your company's involvement with  AES?
N = 20 14. What incentives, if any, do you see for going on AES?  (DO NOT read list.  Click all that respondent volunteers)
None One-stop filing Cost savings for company Convenience of automation Better trade statistics Other (Specify)
23.7 18.4  7.9 55.3  0 36.8 (GO TO Q. 15)
Those  That  Plan  to  Use  AES None One-stop filing Cost savings for company Convenience of automation Better trade statistics Other (Specify)
15.0 15.0  5.0 55.0    0 40.0 (GO TO Q. 15)
15.
I'd like your views about incentives for using AES mentioned by others.  Do you view  as an incentive for your company to on go on AES or not? (Each item was asked of respondents NOT volunteering the item in Q. 14.  Results displayed include those who volunteered the item in question 14.)
Volunteered Yes No Don't know N = 38 B. Cost savings for company Volunteered Yes No Don't know Volunteered Yes No Don't know Volunteered Yes No Don't know 16.
About how much would you estimate it would cost your company to implement AES, if you chose to do so? (Asked of those planning to use AES or whose companies had not yet decided whether to use AES.)
Don't know 70.0 17.
About when do you plan to start using AES? (Asked of those planning to use AES.)
Date Given: 7/97 - 1/99 18.
And about how long do you think it would take for your company to implement AES? (Asked of those whose companies had not yet decided whether to use AES.)
MONTHS YEARS BY (DATE)
1 - 11 2 --- 19.
Are you familiar with AES-PASS? (Asked of those planning to use AES or whose companies had not yet decided whether to use AES.)
Those  That  Plan  to  Use  AES 40.0 (GO TO Q.22) (GO TO Q.22)
20.
Is your company likely to apply for AES-PASS status? (Asked of those who were familiar with AES-PASS and who plan to use AES or whose companies had not yet decided whether to use AES.) 100.0 (GO TO Q.22)       0 (GO TO Q.22) 21. Why does your company not plan to use AES?(DO NOT read list.  Click all that respondent volunteers) (Asked of those who say they will not use AES.)
Lack of knowledge about AES (GO TO Q. 22) ______________________________________________ (Reasons spontaneously volunteered)
Predeparture filing requirement  Cost of automation  Personnel cost  Company hardware or software incompatibility with AES Concerns about the amount of information required by AES Concerns about how the information will be used by Customs Concerns about privacy protection of information Other (Specify)
36.4  0  0  0  0  0  0 36.4 I'd like your views about some concerns mentioned by others in using AES. (Each item was asked of respondents who did not mention lack of knowledge above and who did NOT volunteer the item in Q. 21.  Results displayed include those who volunteered the item in question 21 above.)
Are you concerned or not about the predeparture SED filing requirement of AES?
Volunteered Yes No Don't know Are you concerned or not about the cost of automation necessary for your company to get on AES?
Volunteered Yes No Don't know Are you concerned or not about the amount of information required by AES?
Volunteered Yes No Don't know Are you concerned or not about how the information will be used by Customs?
Volunteered Yes No Don't know Are you concerned or not about privacy protection of information?  0 57.1 Next, we'd like to know how your company currently prepares some of its export-related paperwork.  There are a number of ways a company may prepare and file the Shippers Export Declaration form with the Census Bureau.  I'd like to ask you about the methods you used during the past year. 22.
First, about what percentage of your export shipments required the filing of an SED during 1996?  Your best estimate will suffice. 95 50 - 100 15 23.
Did your company submit all of the SEDs for those shipments to Customs or did someone else also submit SEDs for those shipments?
We submitted all SEDs Someone else submitted all or some of the SEDs  (GO TO Q. 25) 71.4 24.
About what percentage of the SEDs for your shipments did YOUR company submit to Customs in 1996? (Results displayed include respondents who answered "We submitted SEDs" to Q.23, scored as submitting 100 percent.) 19.5 0 - 100 100 25.
How did your company submit its SEDs during 1996:  Using paper SEDs,  AERP,  AES, or an Internet-based company linked to AES? (click all that apply)  (Results displayed include only respondents who submit SEDs.)
Paper AERP AES Internet Unknown 92.1  5.3  0  0 5.3 For AERP Users Only: 26.
The Census Bureau plans on phasing out the AERP system by the end of 1999.  How does your company plan to submit its SEDs once the AERP system is no longer available? (Click all that apply)
Company will use AES Company will use an Internet service No plans yet Submit paper SEDs Have an agent or the customer submit SEDs  0 Other (specify)
For Paper SED Filers Only: 27.
Does your company use a computer to manage any or all of its export-related record keeping?  (Results displayed exclude paper filers who also file electronically.) 94.1 And finally, we'd like to know about the filing of your export paperwork and the timing of your export shipments. 28.
How difficult, if at all, was it for your company last year (1996) to file its paper SEDs with the carrier prior to departure of the goods? (Read each response option and click one)
Of very great difficulty Of great difficulty Of moderate difficulty Of some difficulty Of little or no difficulty 11.8  2.9 17.6  5.9 61.8 29.
During the last year (1996), did your company deliver ANY SEDs to the carrier following departure of the goods?  Do not include any submitted through AERP.
30.
N = 35 That concludes our interview.  Thank you for your time and your cooperation.  If there is any other aspect of AES you'd like to comment on, please feel free to do so now.
section_title: Objectives, Scope, and Methodology
paragraphs: To determine whether AES is likely to achieve its objectives of improving export data, enhancing enforcement efforts, and streamlining export data collection, we interviewed Customs and Census headquarters officials and representatives of 12 government agencies with export-related responsibilities. We also visited 13 Customs ports, including air, sea, and land border ports, where we observed export processing and enforcement operations and where we interviewed numerous supervisory and line inspectors involved in these operations. We conducted interviews with over 30 potential users of AES, including 12 ocean and air carriers and all AES participants as of April 1997. We also interviewed over 10 of the top 16 AERP users in terms of value and volume of AERP filers. We also met with several trade groups representing various segments of the export community. In addition, we analyzed Customs’ and Census’ AES planning documents and Customs’ strategic plans regarding its process for checking goods to be exported. We also reviewed data provided by both Customs and Census regarding their actual and projected costs for AES development. We did not independently verify the validity of their cost estimates.
As part of our effort to determine the trade community’s plans for using AES, we conducted two surveys of potential AES users—U.S. ocean freight forwarders and exporters. A detailed summary of our methodology for these two surveys follows.
subsections: section_title: Freight Forwarder Survey Methodology
subsections: section_title: Study Population and Sample
paragraphs: The freight forwarder study population consisted of active licensed ocean freight forwarders and NVOCCs listed in the Federal Maritime Commission’s December 1996 Regulated Persons Index. The 1,939 freight forwarder headquarters and 2,341 NVOCC listings were merged and duplicates were eliminated, resulting in a total population of 3,209. A simple random sample of 400 cases was selected from the combined list.
Twelve cases, although listed in the index, had not or were not currently providing freight forwarding or NVOCC services and therefore were considered ineligible for the survey. An additional six companies were found to be subsidiaries of others on our list. In these instances, a single respondent was chosen to respond on behalf of both companies.
We sent certified letters to companies we were unable to contact by phone. We received confirmation from the Postal Service that three of those cases were not located at the listed address, nor did the Postal Service have forwarding address information for those cases. The bonds and tariffs of two cases were cancelled by the Federal Maritime Commission. The population was adjusted to reflect these inactive cases. Applying the same adjustment to the sample resulted in a final sample size of 376.
section_title: Data Collection
paragraphs: Telephone interviews were completed with 331 freight forwarders and NVOCCs, for a response rate of 88 percent. Forty-five sample members either refused to participate (30), could not be scheduled for an interview during the study’s time frame (4), or could not be contacted to confirm eligibility (11).
section_title: Sampling and Nonsampling Error
paragraphs: Because this study is based on a probability sample, our estimates involve some statistical uncertainty. Percentages and other estimates contained in the report are the midpoints of the 95-percent confidence intervals for the value being estimated. The results present intervals for items quoted in the letter.
To minimize nonsampling sources of error, such as question wording or sequencing effects and interviewer differences, the survey was pretested with 16 active freight forwarders and NVOCCs following intensive interviewer training and practice. The item nonresponse rate (the rate of interviewers not recording an answer to a question that should have been answered) for reported items ranged between 0 and 2 percent for questions asked of all respondents and between 0 and 5 percent for questions asked only of those not planning to use AES.
section_title: Nonresponse Analysis
paragraphs: We examined the Federal Maritime Commission’s database to determine whether systematic differences held between our sample and the parent population as well as whether systematic differences distinguished nonrespondents from our respondents. We examined each group in terms of number of branch offices, as an approximate measure of size, the mixture of cases from the freight forwarder or NVOCC listings, and the region of the country in which they operated. All nonrespondents are listed as having single offices, and about 6 percent of respondents are listed as having two or more offices. Respondents and nonrespondents alike were equally divided between the freight forwarder and NVOCC source listings. No difference was found between respondents and nonrespondents in terms of their geographic location nor between the sample and its parent population.
section_title: Summary of Respondent Characteristics
paragraphs: The freight forwarders we interviewed are predominantly small companies. The great majority (94 percent) have single offices and few employees. Nearly one-half have 5 or fewer full-time employees, and  74 percent have fewer than 15. Collectively, our respondents employ a total of about 87,000 people, and they have a total of 490 office locations. Their home offices are located in 25 states and Puerto Rico. They served an estimated 132,000 clients during 1996 and had gross revenues of about $4.6 billion.
We did not attempt to verify the accuracy of information, such as the cost of implementing AES, supplied by businesses during our interviews and surveys.
section_title: Exporter Survey Methodology
subsections: section_title: Study Population
paragraphs: The study population for the exporter survey consisted of the companies responsible for the greatest number of paper SEDs and/or those of the highest value filed with the Census Bureau in September 1996. Collectively, these companies filed or had their agents file 34,340 SEDs for exports worth $3.9 billion. The number of SEDs filed by individual filers ranged from 2 to 2,293, and the value of goods exported ranged from about $2.4 million to about $492 million.
We obtained from the Census Bureau the names of the top 49 filers in terms of volume of SEDs filed and the top 49 filers in terms of the value of SEDs filed in September 1996. The two lists were combined and purged of duplicates. In addition, foreign embassies and U.S. foreign military sales units were removed from the list. The resulting list contained 80 filers located in 22 states. During the course of the study, we learned that for some companies, a single individual was responsible for one or more additional filers. Multiple cases for a single respondent were combined into a single case, leaving a final study population of 72 filers. Sixty-three of these companies responded to the survey, a response rate of 88 percent. Responding companies accounted for 92 percent of the SEDs filed by the total study population and 88 percent of their total value.
section_title: Nonresponse Analysis
paragraphs: To determine whether systematic differences distinguished nonrespondents from respondents, the two groups were compared in terms of the value and number of SEDs filed as well as their geographic location. Independent sample t-tests of the means of SED value and volume revealed no difference between the groups on either dimension.
Because the distributions of these variables were nonnormal, a second test, which grouped cases according to whether they fell in the top or bottom half of each distribution, was performed. The comparison revealed no difference between the two groups. The geographic distribution of nonrespondents also paralleled that of respondents. Item nonresponse for reported items ranged from 0 percent to 2 percent for questions asked of all respondents in this survey and from 0 to 5 percent for questions asked only of those planning to use AES.
We did our work between November 1996 and August 1997 in Washington, D.C., and in various Customs port locations across the United States, 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 October 30, 1997.
subsections: section_title: GAO Comments
paragraphs: 1. Our draft report stated that predeparture filing is a major concern for some segments of the export community, including certain industry groups, airlines and air couriers, and companies that export bulk goods or grain commodities. However, we do not state that most companies we interviewed cited the requirement for predeparture filing as the main reason for not participating in AES.
We note that nearly 40 percent of both the freight forwarders and exporters we surveyed reported that they have at least “some” to “very great” difficulty filing SEDs predeparture. In addition, about 40 percent of both groups said they filed SEDs late in 1996. Among companies that reported little or no difficulty filing SEDs predeparture, 28 percent of all ocean freight forwarders and 19 percent of exporters we surveyed said they filed SEDs late in 1996. 2. In commenting on the percent of companies that report only to Census and Customs, Census did not take into account those companies that reported having licensing requirements. Therefore, the statistics they cite are inaccurate. About 61 percent of all ocean freight forwarders, and, of the exporters we surveyed, 32 percent have no license or other agency reporting requirements. 3. We note in our report that AES was designed to serve as a source of export data for agencies with export requirements and reduce redundancies in filing and paperwork associated with various export control requirements. This paperwork includes license application data. We revised the text to make clear that AES was not designed to replace an agency’s authority to regulate exports. 4. We do not suggest that paper filers need to automate their procedures in order to file via AES. Rather, our report lists various options available to companies that want to convert from filing paper SEDs to filing via AES  (see p. 4).
section_title: Comments From the U.S. Customs Service
paragraphs: The following are GAO’s comments on the U.S. Customs Service’s letter dated October 27, 1997.
subsections: section_title: GAO Comments
paragraphs: 1. Our report does not state that the majority of the trade community supports full automation or that a majority recognizes the benefit of one-stop filing. Instead, our survey shows that 45 percent of all ocean freight forwarders and 55 percent of the exporters we surveyed cited the convenience of automation as an incentive to use AES. Only 16 percent of ocean freight forwarders and 18 percent of the exporters we surveyed cited one-stop filing as an incentive to use AES. Similarly, our work does not validate that 80 percent of the information required predeparture is in fact available predeparture. We note in our report that representatives from some companies participating in Customs’ 1996 evaluation of AES stated that they believe that 80 percent of the time they have information needed to complete the SED prior to predeparture of the vessel. We did not attempt to determine whether this was an universal view among companies in the exporting community. Conversely, our surveys show that nearly 40 percent of both the freight forwarders and exporters we surveyed reported that they have at least some to very great difficulty filing SEDs predeparture. About 40 percent of both groups said they filed SEDs late in 1996. 2. We note in our report that AES was designed to serve as a source of export data for agencies with various export control requirements and to reduce redundancies in filing and paperwork. This paperwork includes license application data. However, we also state that AES is unlikely to achieve its objective of providing exporters with “one-stop shopping” because most agencies’ export requirements cannot be fully satisfied through AES. We also note that AES will not reduce or eliminate agency paperwork or the electronic filing associated with the issuance of export licenses, certificates, or permits. However, we have revised the text to make clear that AES was not designed to replace an agency’s authority to regulate exports.
section_title: Major Contributors to This Report
subsections: section_title: National Security and International Affairs Division, Washington, D.C.
section_title: Office of the General Counsel
section_title: Los Angeles Regional Office
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