As a result, the safety net of programs,  many which were put in place decades ago, not only has to protect critical  technologies but it also has to do so in a manner that allows legitimate  trade with allies and other friendly nations. Inefficiencies in the Processing of License Applications Hinder the Export Control System

Reviews of export license applications require time to deliberate and  ensure that license decisions are appropriate. However, State  and Commerce have not managed their respective export licensing  processes to ensure their efficient operation. These findings prompted us to recommend that State conduct analyses of  its licensing data to assess root causes of inefficiencies and then identify  and implement actions that would allow it to better manage its workload,  reexamine its processes, and determine the most effective workforce  structure. Concerns about efficiency have largely focused on State’s processing of  applications for arms exports, in part, because few dual-use exports  subject to Commerce’s controls require licenses. However, the overall efficiency of Commerce’s licensing  process is unknown in part because Commerce lacks efficiency-related  measures and analyses that would allow it to identify opportunities for  improvement. Poor Interagency Coordination Creates Vulnerabilities

Since multiple departments have a role to play in the export control  system, its effective operation depends on those departments working  together. However, we have identified instances related to export control  jurisdiction, the use of license exemptions, and the dissemination of  enforcement information when poor coordination among the departments  has created vulnerabilities in the system’s ability to protect U.S. interests. The departments have taken action to address some—but not all—of these  vulnerabilities. Given the different restrictions State and Commerce have on the items  subject to their controls, the determination of which items fall under  State’s export jurisdiction and which fall under Commerce’s is  fundamental to the U.S. export control system. However, we have  previously reported that State and Commerce have disagreed on which  department has jurisdiction over certain items. In another case, for  example, Commerce improperly determined that explosive detection  devices were subject to Commerce’s less restrictive export control  requirements when they were, in fact, State-controlled. Not only does this create an unlevel  playing field and competitive disadvantage—because some companies  may gain access to markets that others will not—but it also increases the  risk that critical items will be exported without the appropriate review and  resulting protections. For example, State officials  maintained that one exemption was only for use by U.S. government  personnel, while Defense officials stated it was available for use by  contractors working in direct support of Defense activities. For  approximately 4 years, the lack of a common understanding of the  exemption created a vulnerability as regulations and licensing  requirements could have been inconsistently applied. Prompted by  our recommendation, Justice began providing State and Commerce with  quarterly reports on criminal enforcement actions so that such  information can be considered upfront during the license application  review process. Although dramatic changes have occurred in the security and economic  environment since the start of the 21st century, State and Commerce have  not conducted systematic assessments to determine whether their  controls and processes are sufficient and appropriate or whether changes  are needed to better protect U.S. interests. Earlier this year, the President signed a package of directives that,  according to the White House, will ensure that U.S. export control policies  and practices support national security while facilitating economic and  technological leadership. Legislation has also  been introduced to make changes to the export control system. Other initiatives have not been widely used by exporters. Conclusions

The government’s safety net of programs is intended to protect critical  technologies while still allowing legitimate trade. It is only then  that meaningful and sustainable improvements to the export control  system can be developed and implemented to ensure the efficiency and  effectiveness of the system in protecting U.S. interests. High Risk Series: An Update. Defense Trade: Arms Export Control System in the Post-9/11  Environment. Export Controls: State and Commerce Department License Review Times  are Similar. Export Controls: Change in Export Licensing Jurisdiction for Two  Sensitive Dual-Use Items.
Why GAO Did This Study

In controlling the transfer of weapons and related technologies overseas, the U.S. government must limit the possibility of sensitive items falling into the wrong hands while allowing legitimate trade to occur. Achieving this balance has become more challenging due to redefined security threats and a globalized economy. The export control system is a key component of the safety net of programs intended to balance multiple U.S. interests. The export control system is managed primarily by the State Department, which regulates arms exports, and the Commerce Department, which regulates dual-use exports that have military and civilian applications. Unless an exemption applies, arms exports require licenses, while many dual-use exports do not require licenses. Based on GAO's extensive body of work on the export control system, this testimony focuses on export licensing inefficiencies, poor interagency coordination, and limits in State's and Commerce's ability to provide a sound basis for changes to the system. In prior work, GAO made recommendations to address vulnerabilities in the export control system, but many have not been implemented. Because of these vulnerabilities and others identified in the larger safety net of programs, GAO has designated the effective protection of technologies critical to U.S. national security interests as a high risk area warranting strategic reexamination.

What GAO Found

State and Commerce have not managed their respective export licensing processes to ensure their effective operations. In November 2007, GAO reported that procedural and automation weaknesses, along with workforce challenges, created inefficiencies in State's arms export licensing process. In less than 4 years, median processing times for license applications nearly doubled, with State's backlog of open cases peaking at 10,000. According to State officials, the department has begun analyzing its licensing data and implementing actions that will allow it to better manage its workload and determine the most effective workforce structure. While Commerce's license application processing times for dual-use exports have remained relatively stable, the overall efficiency of its process is unknown. This is due in part to Commerce's lack of performance measures for all steps in its process and analyses that would allow it to identify opportunities for improvement. Poor coordination among State, Commerce, and the other departments involved in the export control system has created vulnerabilities. State and Commerce have disagreed on which department has jurisdiction over the export of certain items. In one case, Commerce determined that an item was subject to its less restrictive export requirements when, in fact, it was State-controlled. Such improper determinations and unclear jurisdiction not only create an unlevel playing field--because some companies may gain access to markets that others will not--it also increases the risk that sensitive items, such as missile-related technologies, will be exported without the appropriate review and resulting protections. Further, State and Defense took almost 4 years to reach agreement regarding when certain arms export licensing exemptions could be used by exporters in support of Defense-certified programs. This lack of agreement could have resulted in export requirements being applied inconsistently. Also, in response to a GAO recommendation, State and Commerce only recently began regularly receiving information on criminal enforcement actions--information that is important to consider upfront when reviewing license applications for approval. Despite dramatic changes in the security and economic environment, State and Commerce have not undertaken basic management steps to ensure their controls and processes are sufficient and appropriate for protecting U.S. interests. Notably, neither department has assessed its controls in recent years. Nevertheless, State and Commerce maintained that no fundamental changes to their export control system were needed. Earlier this year, the White House announced that the President signed directives intended to ensure that the export control system focuses on meeting security and economic challenges. Similarly, legislation to make changes to the export control system has been introduced. However, few details about the basis for these initiatives are known. In the past, GAO has found that export control initiatives not grounded in analyses have generally not resulted in the desired improvements to the system.