	Background

Under the authority of the Arms Export Control Act, State regulates and  controls arms exports by U.S. companies to help ensure that those exports  are consistent with national security and foreign policy interests. Trends Indicate DDTC’s Licensing Process Is Under Stress

Our analysis shows several trends have emerged in the processing of arms  export cases, which indicate the system is under stress. Most of the increase was for licenses for permanent export. Second,  processing times almost doubled from fiscal year 2003 to 2006. Open cases  increased from about 5,000 in October 2002 to about 7,500 in April 2007,  reaching a high of more than 10,000 open cases in September 2006 (see   fig. Actions Taken by DDTC to Achieve Short-Term Gains Are Unsustainable

At the beginning of fiscal year 2007, DDTC launched its “winter offensive,”  a campaign to reduce the growing number of open cases. Through  extraordinary measures—such as extending work hours; canceling staff  training, meetings, and industry outreach; and pulling available staff from  other duties to process cases—DDTC was able to reduce the number of  open cases by 40 percent in 3 months. Systemic Inefficiencies Underlie Overall Trends in the Licensing Process

While some blips in the trends can be attributed to onetime events or  efforts, such as the winter offensive, the overall trends of increased  processing times and open cases are affected by several factors, including  procedural inefficiencies, electronic processing system shortcomings, and  human capital challenges. Our analysis shows that DDTC has taken increasingly longer to  refer cases. As shown in table 1, the median days from when the case was  received to outside referral increased from 7 days in fiscal year 2003 to 20  days during the first 7 months of fiscal year 2007. Although 77 percent of cases are now received electronically  through D-Trade, its implementation has been problematic and electronic  processing has not been the promised panacea for improving processing  times. For example,  the number of licensing officers on board has fluctuated over recent years  and was at the same level in fiscal years 2003 and 2006, yet the number of  cases processed increased about 20 percent during the same period (see  table 2). DDTC Does Not Conduct Systematic Assessments to Identify Root Causes of Problems and to Develop Sustainable Solutions

DDTC management does not systematically assess licensing data to  identify inefficiencies. Agency Comments

We provided a draft of this report to the Departments of State and Defense  and for their review and comment. Appendix I: Scope and Methodology

To determine trends in arms export case processing by State’s Directorate  of Defense Trade Controls (DDTC), we obtained State’s arms export case  data for fiscal year 2003 through April 30, 2007. To identify factors contributing to trends in processing times and open  cases, we interviewed officials from DDTC, State bureaus to which cases  are most frequently referred, the Department of Defense’s (DOD) Defense  Technology Security Administration (DTSA), and selected arms exporters. We  obtained and analyzed data on DDTC funding and staffing levels.
Why GAO Did This Study

To regulate the export of billions of dollars worth of arms to foreign governments and companies, the Department of State's (State) Directorate of Defense Trade Controls (DDTC) reviews and authorizes export licenses and other arms export cases. While such reviews require time to consider national security and foreign policy interests, the U.S. defense industry and some foreign government purchasers have expressed concern that the U.S. export control process is unnecessarily time-consuming. In 2005, GAO reported that processing times for arms export cases had increased despite State efforts to streamline its process. GAO was asked to (1) describe recent trends in the processing of arms export cases and (2) identify factors that have contributed to these trends. To conduct its work, GAO obtained and analyzed State arms export case data for fiscal year 2003 through April 30, 2007; reviewed relevant laws, regulations, and guidelines, as well as DDTC funding and staffing information; and interviewed State and Department of Defense officials and selected arms exporters.

What GAO Found

Three key trends indicate that DDTC's arms export licensing process is under stress. First, the number of arms export cases processed by DDTC increased 20 percent between fiscal years 2003 and 2006. Most of this increase was for licenses for permanent export. Second, during the same period, median processing times almost doubled. Third, the number of open arms export cases increased 50 percent from about 5,000 in October 2002 to about 7,500 in April 2007, with a high of more than 10,000 cases in September 2006. At the beginning of fiscal year 2007, DDTC launched a campaign to reduce the growing number of open cases. Through extraordinary measures--such as canceling staff training, meetings, and industry outreach, and pulling available staff from other duties to process cases--DDTC was able to cut the number of open cases by 40 percent in 3 months. However, such measures are not sustainable in the long term, do not address underlying inefficiencies and problems, and may have negative unintended consequences for the mission. While some blips in the trends can be attributed to onetime events or efforts--such as DDTC's campaign to reduce open cases--procedural inefficiencies, electronic processing system shortcomings, and human capital challenges underlie the overall trends. For example, GAO's analysis shows that DDTC is taking increasingly longer to refer cases to other agencies or State bureaus for additional review--from 7 days in fiscal year 2003 to 20 days during the first 7 months of fiscal year 2007. In addition, implementation of DDTC's electronic system for submitting applications has been problematic, and electronic processing has not been the promised panacea for improving processing times. DDTC does not perform systematic assessments to identify root causes of increased workload, processing times, and open cases and, in turn, develop sustainable solutions.