Export Controls:

Processes for Determining Proper Control of Defense-Related Items Needs Improvement

GAO-02-996: Published: Sep 20, 2002. Publicly Released: Sep 20, 2002.

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The U.S. government controls the export of defense-related items to minimize the risk such exports may pose to its interests. The U.S. export control system is primarily divided between two regulatory regimes, one managed by the Department of State for defense items and another managed by the Department of Commerce for dual-use items that have both military and commercial applications. Companies are responsible for determining which department to use and what requirements apply when exporting their items, but can obtain government assistance through two different processes. If companies have determined that their items are Commerce-controlled but are uncertain of export licensing requirements, they may request a classification from Commerce through the commodity classification process. Commerce can refer classification requests to State and the Department of Defense to confirm that the items are Commerce-controlled. However, if companies are unsure of which department has jurisdiction over their items, they can request a determination through the commodity jurisdiction process from State, which consults with Commerce and Defense. In implementing the commodity classification process, Commerce has improperly classified some State-controlled items as Commerce-controlled and has not adhered to regulatory time frames for responding to requests. Improper classifications have occurred because Commerce rarely obtains input from State and Defense before making decisions. Commerce officials stated that they have sufficient experience to determine which items can be classified as Commerce-controlled without referring requests to State and Defense, which could delay the process. However, in several instances, Commerce improperly provided companies with classifications for State-controlled items, increasing the risk of such items being inappropriately exported. State has not adhered to established time frames when implementing the commodity jurisdiction process and has been unable to issue determinations for some items due to interagency disputes occurring outside the process. Causes for delays included late input from Defense and Commerce, disagreements over the appropriate jurisdiction for an item, need for sufficient information to make determinations, and untimely initial determinations to Defense and Commerce before finalizing an item's jurisdiction. Delays in the process can discourage companies from requesting determinations, as well as affect their ability to compete in certain markets.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Bureau of Industry and Security has decided that it will not revise the guidance it provides to exporters regarding the submission of classification requests.

    Recommendation: To ensure that Commerce has sufficient information to make timely and appropriate commodity classifications, the Secretary of Commerce should direct the Bureau of Industry and Security to revise guidance for companies on the information to be provided with commodity classification requests and consider including a requirement for information on an item's origins and applications.

    Agency Affected: Department of Commerce

  2. Status: Closed - Implemented

    Comments: The Bureau of Industry and Security has stated in its original agency comments that it already had an effort underway to hire additional resources so that it could comply with existing timeframes. The Bureau has since informed GAO that this hiring effort has been completed.

    Recommendation: To comply with existing time frames for responding to classification requests, the Secretary of Commerce should direct the Bureau of Industry and Security to assess the amount of resources needed, then reallocate resources as appropriate.

    Agency Affected: Department of Defense

  3. Status: Closed - Not Implemented

    Comments: The Department of State has not added additional resources to process commodity jurisdiction requests even though established timeframes for processing those requests are still not being met.

    Recommendation: To improve the timeliness of the commodity jurisdiction process, the Secretaries of State, Commerce, and Defense should direct the respective entities within their departments to assess the amount of resources needed to make jurisdiction recommendations and determinations within established time frames, then either reallocate resources as appropriate or seek changes to the established time frames that are consistent with available resources.

    Agency Affected: Department of State

  4. Status: Closed - Implemented

    Comments: As discussed in the report, the Defense Department assigned an additional person to support the commodity jurisdiction review process. The department has indicated that it will continue to monitor and assess the overall process and take further action as necessary.

    Recommendation: To improve the timeliness of the commodity jurisdiction process, the Secretaries of State, Commerce, and Defense should direct the respective entities within their departments to assess the amount of resources needed to make jurisdiction recommendations and determinations within established time frames, then either reallocate resources as appropriate or seek changes to the established time frames that are consistent with available resources.

    Agency Affected: Department of Commerce

  5. Status: Closed - Implemented

    Comments: The Bureau of Industry and Security had stated in its original agency comments that it already had an effort underway to hire additional resources so that it could comply with existing timeframes. The Bureau has since informed GAO that this hiring effort has been completed.

    Recommendation: To improve the timeliness of the commodity jurisdiction process, the Secretaries of State, Commerce, and Defense should direct the respective entities within their departments to assess the amount of resources needed to make jurisdiction recommendations and determinations within established time frames, then either reallocate resources as appropriate or seek changes to the established time frames that are consistent with available resources.

    Agency Affected: Department of State

  6. Status: Closed - Not Implemented

    Comments: The interagency guidance has not yet been revised.

    Recommendation: To improve transparency and consistency of the commodity classification and jurisdiction process, that the Secretaries of State, Commerce, and Defense should revise interagency guidance to incorporate any changes to the referral process and time frames for making decisions.

    Agency Affected: Department of State

  7. Status: Closed - Not Implemented

    Comments: The interagency guidance has not been revised.

    Recommendation: To improve transparency and consistency of the commodity classification and jurisdiction process, that the Secretaries of State, Commerce, and Defense should revise interagency guidance to incorporate any changes to the referral process and time frames for making decisions.

    Agency Affected: Department of Defense

  8. Status: Closed - Not Implemented

    Comments: The interagency guidance has not been revised.

    Recommendation: To improve transparency and consistency of the commodity classification and jurisdiction process, that the Secretaries of State, Commerce, and Defense should revise interagency guidance to incorporate any changes to the referral process and time frames for making decisions.

    Agency Affected: Department of Commerce

  9. Status: Closed - Not Implemented

    Comments: The commodity classification referral criteria have not been revised. The interagency guidance has not been revised and this recommendation remains open.

    Recommendation: To increase transparency to stakeholders and minimize the risk of Commerce making jurisdictional determinations through the commodity classification process, the Secretary of Commerce should direct the Bureau of Industry and Security to promptly review existing guidance and develop, with the concurrence of the appropriate entities within State and Defense, criteria for referring commodity classification requests to those departments. In developing the criteria, the departments should agree on a common definition of terms to be contained in the criteria. Until the departments develop and implement referral criteria, the risk of Commerce improperly classifying State-controlled items will continue to exist.

    Agency Affected: Department of Defense

  10. Status: Closed - Not Implemented

    Comments: No new procedures for referring classification requests have been implemented.

    Recommendation: To increase transparency and assist State in enforcing its statutory requirements, the Secretary of Commerce should direct the Bureau of Industry and Security to develop, with the concurrence of State's Office of Defense Trade Controls, procedures for referring requests that are returned to companies because the items are State-controlled or require a commodity jurisdiction review.

    Agency Affected: Department of Commerce

  11. Status: Closed - Not Implemented

    Comments: The department disagreed with the recommendation to issue initial determinations in accordance with the guidance and has taken no action to implement our recommendation.

    Recommendation: The Secretary of State should direct the Office of Defense Trade Controls to issue initial determinations in accordance with the guidance.

    Agency Affected: Department of Commerce

 

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