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. 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. 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. 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. 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.)