Export Controls:

License Screening and Compliance Procedures Need Strengthening

NSIAD-94-178: Published: Jun 14, 1994. Publicly Released: Jun 15, 1994.

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Pursuant to a congressional request, GAO reviewed export control activities at the Departments of State and Commerce, focusing on: (1) whether these agencies effectively use automated systems to screen license applications; (2) how well these agencies cooperate with each other and the U.S. Customs Service; (3) whether State is monitoring reexports and technology transfers by companies involved in munitions manufacturing or distribution agreements; and (4) how State ensures that munitions licenses are issued only to U.S. persons or foreign governments as the law requires.

GAO found that: (1) although both State and Commerce use automated computer systems to screen export applications for ineligible or questionable parties, they do not include many pertinent individuals and companies on their watchlists; (2) State and Commerce issue licenses to some parties without considering the available information against those parties; (3) because of procedural and system design deficiencies, the agencies' screening systems do not identify all the licenses involving watchlist parties; (4) State and Commerce do not routinely share the names on their respective watchlists despite the potential benefits and the agencies' similar export control missions; (5) State and Commerce issue licenses to parties that are on other agencies' watchlists; (6) while cooperation between State and Customs is excellent, cooperation between Commerce and Customs is poor; (7) State is not routinely collecting or reviewing annual sales reports; and (8) State does not require documentary evidence to prove U.S. citizenship for individuals applying for munitions export licenses.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: BXA has initiated actions to enable supervisors to quickly identify difficulties in adding new identification numbers, provide selected individuals with the ability to delete multiple identification numbers that were created in error, and alert employees who add names to the watchlist of the possibility of more than one identification number in the system for a particular entity.

    Recommendation: The Secretary of Commerce should direct the Bureau of Export Administration to establish and implement adequate procedures to ensure that multiple identification numbers are not assigned to the same party and eliminate existing multiple identification numbers from the system.

    Agency Affected: Department of Commerce

  2. Status: Closed - Implemented

    Comments: State and Commerce have begun sharing their watchlist information.

    Recommendation: The Secretary of Commerce should direct the Bureau of Export Administration to share the relevant portion of Commerce's watchlist with State on a regular basis and incorporate the relevant portion of State's watchlist into Commerce's watchlist.

    Agency Affected: Department of Commerce

  3. Status: Closed - Implemented

    Comments: BXA has formally assigned responsibility for entering the DOJ list of names to its watchlist in October 1993. It has also updated its data entry procedures to ensure accuracy and currency.

    Recommendation: The Secretary of Commerce should direct the Bureau of Export Administration to formally assign watchlist data-entry responsibilities among the staff and establish procedures and guidance to ensure data entries are complete and up-to-date.

    Agency Affected: Department of Commerce

  4. Status: Closed - Not Implemented

    Comments: While the recommendation is valid, DTC deems the recommended procedures to be too burdensome. Therefore, it will continue to rely on applicants' self-certification to fulfill the U.S. person status requirement.

    Recommendation: The Secretary of State should direct the Office of Defense Trade Controls to either require documentary proof instead of a certification of U.S. person status the first time an applicant applies for a license, or randomly verify with documentation the applicants' certifications of U.S. person status.

    Agency Affected: Department of State

  5. Status: Closed - Implemented

    Comments: According to the Deputy Director of DTC, DTC has been updating its agreements files for over a year and is continuing to do so.

    Recommendation: The Secretary of State should direct the Office of Defense Trade Controls to assign oversight and monitoring responsibilities for the manufacturing and distribution agreements among the staff and ensure that the files on these agreements are updated.

    Agency Affected: Department of State

  6. Status: Closed - Implemented

    Comments: State has made changes to its automated screening system in accordance with the recommendation. However, State wants to evaluate the impact of these changes after a trial period. If it is found that the changes result in significant delays in license processing, State would search for alternative means to accomplish the intent of the recommendation.

    Recommendation: The Secretary of State should direct the Office of Defense Trade Controls to redesign State's screening system to: (1) create an automated license tracking system that will document compliance division review for licenses involving watchlist parties; (2) automatically inform the licensing division if any party on a license is on the watchlist; and (3) prevent a license from being issued until compliance staff have completed their review.

    Agency Affected: Department of State

  7. Status: Closed - Implemented

    Comments: State and Commerce have begun sharing their watchlist information.

    Recommendation: The Secretary of State should direct the Office of Defense Trade Controls to share the relevant portion of State's watchlist with Commerce on a regular basis and incorporate the relevant portion of Commerce's watchlist into State's watchlist.

    Agency Affected: Department of State

  8. Status: Closed - Implemented

    Comments: DTC has formally assigned responsibility for monitoring the watchlist and receipt of information from other agencies to a Compliance Division employee. It has also established procedures and guidance on data entries into the watchlist.

    Recommendation: The Secretary of State should direct the Office of Defense Trade Controls to formally assign watchlist data-entry responsibilities among staff and establish procedures and guidance to ensure data entries are complete and up-to-date.

    Agency Affected: Department of State

  9. Status: Closed - Implemented

    Comments: BXA has begun to inform the intelligence community whenever a pre-license or post-shipment check does not corroborate the intelligence information on a party. If Commerce deems the intelligence information sufficient to deny a license application, it would also consult with the appropriate intelligence agency and request for a sanitized version of the original information.

    Recommendation: The Secretary of Commerce should direct the Bureau of Export Administration, when pre-licensing checks are conducted because of information from intelligence sources but result in no derogatory information, to routinely consult with the intelligence sources to: (1) assess the merits of the intelligence information; and (2) determine whether the information could be sanitized to permit its use in denying a license application.

    Agency Affected: Department of Commerce

 

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