	Background

In regulating dual-use exports, the Commerce Department’s BIS faces the  challenge of weighing various U.S. interests, which can be divergent or  even competing, so U.S. companies can compete globally while minimizing  the risk of controlled dual-use items falling into the wrong hands. 1). BIS Has Not Systematically Evaluated the Dual- Use Export Control System to Ensure Its Effectiveness and Efficiency

BIS has not systematically evaluated the overall effectiveness and  efficiency of the system to determine whether its stated goal of protecting  U.S. national security and economic interests is being achieved. Further, contrary to what is called for  under government management standards, BIS has not established  performance measures to assess how effectively the system is protecting  U.S. interests in the existing security and economic environment. According to BIS officials, no  fundamental changes to the system were needed, but they cited the review  as the basis for some adjustments—primarily related to controls on  chemical and biological agents. However, because BIS did not document  its review, we could not assess the sufficiency of the review and the  resulting changes. Instead, BIS officials informed us that they  regularly review intelligence reports and meet with industry officials to  gauge how well the system is working. Absent systematic evaluations, BIS conducted an ad hoc review after the  September 2001 attacks to determine what changes, if any, needed to be  made to the system in light of the new security environment. According to BIS officials, their review did not result in changes to the  license application review process after the events of September 2001. As a result, the  watchlist’s utility in the license application review process is undermined,  which increases the risk of dual-use items falling into the wrong hands. Based on our comparison of  the watchlist to publicly available U.S. government documents, including  ones available through BIS’s Web site, we identified 147 parties that had  either violated U.S. export control requirements, been determined to be  suspicious end users, or committed acts of terror but were not on BIS’s  watchlist. To screen parties on applications  against the watchlist, BIS relies on a computerized process. Among the weaknesses identified in prior GAO reports is the lack of  clarity as to which items are controlled and whether they are controlled by  the Commerce Department or the State Department. Recommendations for Executive Action

To ensure that the dual-use export control system is effective as well as  efficient in protecting U.S. interests, we recommend that the Secretary of  Commerce direct the Under Secretary for Industry and Security to take the  following four actions  identify and obtain data needed to evaluate the system;  review existing measures of efficiency to determine their  appropriateness and develop measures that address commodity  classifications;    develop, in consultation with other agencies that participate in the  system, measures of effectiveness that provide an objective basis  for assessing whether progress is being made in achieving the goal  of protecting U.S. interests; and  implement a plan for conducting regular assessments of the dual- use export control system to identify weaknesses in the system and  corrective actions. While the Commerce Department cites some measures BIS has  taken recently to refine the watchlist, these measures do not address the  weaknesses created by the lack of criteria and reviews of who should be  on the watchlist or the technical limitations that result in some parties not  being screened against the watchlist. Specifically, BIS’s failure to implement  recommendations that would provide for clear, transparent decisions  about export control jurisdiction increases the risk that sensitive defense- related items will be improperly exported and that some exporters will be  placed at a competitive disadvantage—undermining BIS’s goal of  protecting national security and economic interests. We reviewed BIS’s regulatory notices to determine  whether BIS made regulatory changes in response to GAO’s  recommendations. Appendix I: Trends in Dual-Use Export Licensing

The number of dual-use export license applications processed by the  Department of Commerce’s Bureau of Industry and Security (BIS) has  increased over the last several years. Not applicable. Not applicable. 2. 3.
Why GAO Did This Study

In regulating exports of dual-use items, which have both commercial and military applications, the Department of Commerce's Bureau of Industry and Security (BIS) seeks to allow U.S. companies to compete globally while minimizing the risk of items falling into the wrong hands. In so doing, BIS faces the challenge of weighing U.S. national security and economic interests, which at times can be divergent or even competing. In light of the September 2001 terror attacks, GAO was asked to examine BIS's dual-use export control system. In response, GAO is reporting on BIS's (1) evaluations of and changes to the system, (2) screening of export license applications against its watchlist, and (3) actions to correct weaknesses previously identified by GAO.

What GAO Found

Lack of systematic evaluations. Although BIS made some regulatory and operational changes to the dual-use export control system, it has not systematically evaluated the system to determine whether it is meeting its stated goal of protecting U.S. national security and economic interests. Specifically, BIS has not comprehensively analyzed available data to determine what dual-use items have actually been exported. Further, contrary to government management standards, BIS has not established performance measures that would provide an objective basis for assessing how well the system is protecting U.S. interests. Instead, BIS relies on limited measures of efficiency that focus only on narrow aspects of the license application review process to assess the system's performance. BIS officials use intelligence reports and meetings with industry to gauge how the system is operating. Absent systematic evaluations, BIS conducted an ad hoc review of the system to determine if changes were needed after the events of September 2001. BIS officials determined that no fundamental changes were needed but opted to make some adjustments primarily related to controls on chemical and biological agents. GAO was unable to assess the sufficiency of the review and resulting changes because BIS officials did not document their review. Omissions in BIS's watchlist. GAO found omissions in the watchlist BIS uses to screen export license applications. This screening, which is part of the license application review process, is intended to identify ineligible parties or parties warranting more scrutiny. The omissions undermine the list's utility, which increases the risk of dual-use exports falling into the wrong hands. GAO identified 147 parties that had violated U.S. export control requirements, had been determined by BIS to be suspicious end users, or had been reported by the State Department as committing acts of terror, but these parties were not on the watchlist of approximately 50,000 names. Reasons for the omissions include a lack of specific criteria as to who should be on the watchlist and BIS's failure to regularly review the list. In addition, a technical limitation in BIS's computerized screening system results in some parties on license applications not being automatically screened against the watchlist. Some prior GAO recommendations left unaddressed. BIS has implemented several but not all of GAO's recommendations for ensuring that export controls on sensitive items protect U.S. interests. Among weaknesses identified in prior GAO reports is the lack of clarity on whether certain items are under BIS's control, which increases the risk of defense-related items being improperly exported. BIS has yet to take corrective action on this matter.