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Report to the Committee on Foreign Affairs, House of Representatives: 

United States Government Accountability Office: 
GAO: 

May 2010: 

Export Controls: 

Observations on Selected Countries' Systems and Proposed Treaties: 

GAO-10-557: 

GAO Highlights: 

Highlights of GAO-10-557, a report to the Committee on Foreign 
Affairs, House of Representatives. 

Why GAO Did This Study: 

The U.S. government annually controls billions of dollars worth of 
U.S. arms and dual-use items exported to its allies and partners 
through a system of laws, regulations, and processes. Weaknesses in 
this system led GAO in 2007 to include export controls as part of a 
high-risk area and called for a reexamination, including evaluating 
alternative approaches. Increasing international collaboration on 
defense programs also makes it important to understand how other 
countries control exports. Proposed treaties would change the process 
for the export or transfer of certain U.S. arms to the United Kingdom 
and Australia. 

Based on a request to review allies’ export control systems and the 
proposed treaties, this report (1) identifies how selected allies’ 
systems differ from the U.S. system, and (2) assesses how the proposed 
treaties will change controls on arms exports. 

To conduct its work, GAO selected six countries—Australia, Canada, 
France, Germany, Japan, and the United Kingdom—based on factors such 
as whether they were major destinations for U.S. goods or significant 
arms exporters; conducted site visits in four countries; analyzed 
agency documentation on the foreign and U.S. systems and treaty 
related documents; and interviewed officials. 

What GAO Found: 

Just as in the United States, selected allies’ export control systems 
have changed over time to address security interests and to satisfy 
international commitments. Significant structural and other 
differences exist between selected allies’ export control systems and 
the U.S. system. Five of the six countries have a single agency in 
charge of administering export control regulations for arms and dual-
use items. In the United States, the Department of State administers 
controls for arms and the Department of Commerce does so for dual-use 
items. This difference and others are evident in several major areas 
of the export control process—jurisdiction, licensing, enforcement, 
outreach, and performance assessments. For example, in licensing, 
France and the United Kingdom use a risk-based approach, allowing a 
company with a satisfactory compliance record and an established 
business case to export multiple shipments of less sensitive defense 
items to particular destinations or identified recipients under a 
single license. The U.S. export control system for arms is transaction 
based, generally requiring a license for each proposed arms export 
unless an exemption applies. Under this approach, exporters submit a 
separate license application to State for each destination when 
exporting arms to multiple parties. In another example of how the 
systems differ, four of the six countries have one agency in charge of 
enforcing export controls. In the U.S. system, multiple agencies have 
concurrent authority to enforce arms and dual-use export controls. 
Four countries have conducted performance assessments of their export 
control systems that resulted in significant changes. The United 
States has made several changes to improve certain aspects of its 
control system and, in April 2010, the Administration announced 
proposed reforms following an interagency review. While GAO did not 
assess the effectiveness of other countries’ systems, the practices 
highlighted in this report may inform U.S. reform efforts to increase 
the efficiency while maintaining or improving the effectiveness of the 
U.S. system. 

Two proposed Defense Trade Cooperation Treaties, one with the United 
Kingdom and the other with Australia, will establish significant 
changes in U.S. controls of certain arms exports and transfers. Case-
by-case reviews prior to export or transfer of arms under the treaties 
will not be required. Instead, treaty parties will establish approved 
communities of entities, facilities, and personnel eligible to export, 
transfer, or receive certain arms without licenses. State officials 
told GAO the treaties represent a move from transactional licensing 
and towards a more risk-based approach. To ensure security, the 
treaties will utilize existing safeguards and implement new ones. For 
example, record keeping requirements and the requirement to obtain 
U.S. government approval to export or transfer its arms outside of the 
approved community will remain in use under the treaties. A new 
safeguard under the treaties will require community members in the 
United Kingdom and Australia to handle unclassified U.S. arms at an 
increased security level. Several implementation issues, however, have 
yet to be resolved regarding enforcement, congressional oversight, and 
participation by small- and medium-sized businesses in the United 
Kingdom and Australia. 

What GAO Recommends: 

GAO is not making recommendations in this report. 

View [hyperlink, http://www.gao.gov/products/GAO-10-557] or key 
components. For more information, contact Belva M. Martin at (202) 512-
4841 or martinb@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Significant Differences Exist between Selected Countries' and U.S.'s 
Export Control Systems: 

Proposed Treaties Represent a Significant Change in Arms Export 
Control, and Several Issues Have Yet to Be Resolved: 

Concluding Observations: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of State: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Roles and Responsibilities in the U.S. Arms and Dual-Use 
Export Control Systems: 

Table 2: United States' and Selected Countries' Arms and Dual-Use 
Export Licenses Approved, License Officers, and Average Licenses 
Approved per Officer in 2008: 

Figures: 

Figure 1: Major Steps in the U.S. Export Control System: 

Figure 2: Events Related to the Defense Trade Cooperation Treaties: 

Abbreviations: 

BAFA: Federal Office of Economics and Export Control: 

BIS: Bureau of Industry and Security: 

DDTC: Directorate of Defense Trade Controls: 

DECO: Defence Export Control Office: 

DOD: Department of Defense: 

DTSA: Defense Technology Security Administration: 

EAR: Export Administration Regulations: 

ECO: Export Control Organisation: 

METI: Ministry of Economy, Trade, and Industry: 

NATO: North Atlantic Treaty Organization: 

OGEL: open general export licence: 

ITAR: International Traffic in Arms Regulations: 

USML: United States Munitions List: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

May 27, 2010: 

The Honorable Howard L. Berman: 
Chairman: 
The Honorable Ileana Ros-Lehtinen: 
Ranking Member: 
Committee on Foreign Affairs: 
House of Representatives: 

Each year, billions of dollars' worth of U.S. arms and dual-use items 
are exported to U.S. allies and strategic partners.[Footnote 1] To 
advance national security, foreign policy, and economic interests, the 
U.S. government controls these exports through a system of laws, 
regulations, and processes, some of which were established during the 
Cold War. Since that time, globalization and terrorist threats have 
made it significantly more complex and challenging to control these 
exports. For over a decade, we have documented a series of weaknesses 
in the U.S. export control system, including poor coordination among 
the multiple federal agencies involved, which have led to 
jurisdictional disputes and enforcement challenges, and the lack of 
systematic assessment of the overall effectiveness of the export 
control system. These weaknesses, coupled with significant changes in 
the national security and global economic environments, led us in 2007 
to designate the effective protection of technologies critical to U.S. 
national security interests--of which export control is a key 
component--as a high-risk area. While agencies have made several 
improvements in the export control system, we have called for a 
fundamental reexamination of the system and an evaluation of 
alternative approaches. In April 2010, the Administration announced 
proposed reforms following an interagency review of the entire U.S. 
export control system. 

In addition, increasing international collaboration on defense 
development programs and exemptions from export control processes make 
it important to understand how other countries control exports. 
Further, proposed treaties, known as the Defense Trade Cooperation 
Treaties, will change the process for export or transfer of certain 
arms to the United Kingdom and Australia.[Footnote 2] Based on your 
request, we examined selected allies' export control systems and the 
proposed treaties with the United Kingdom and Australia. Specifically, 
within the framework of the weaknesses that we previously documented 
in the U.S. export control system, we (1) identified how selected 
allies' export control systems differ from the U.S. export control 
system, and (2) assessed how the proposed Defense Trade Cooperation 
Treaties with the United Kingdom and Australia will change controls on 
arms exports. 

To identify how selected allies' export control systems differ from 
the U.S. export control system, we selected six countries to include 
in our review--Australia, Canada, France, Germany, Japan, and the 
United Kingdom. We selected these countries based on several factors, 
including whether they were major destinations for U.S. arms and dual- 
use exports, members of international export control regimes, or 
significant arms exporters. While their defense export markets are 
individually much smaller than that of the United States, these 
selected countries provide examples of how some U.S. allies have 
designed and implemented their export control systems. We used the 
broad areas in the U.S. export control system where, in our prior 
work, we found weaknesses--jurisdiction, licensing, enforcement, 
outreach, and performance assessments--to guide our examination of 
other countries' systems. We analyzed background documentation on 
selected allies' export control systems to gain a broader 
understanding of each system. We submitted a structured question set 
to countries in our review and obtained related documentation, such as 
export control system annual reports and export guidelines. We also 
conducted site visits to Australia, France, Germany, and the United 
Kingdom and interviewed officials in charge of administering and 
enforcing export controls. To obtain current information on the U.S. 
export control system, we reviewed agency documents on changes to the 
system and interviewed officials from the Department of State's 
Directorate of Defense Trade Controls (DDTC), the Department of 
Commerce's Bureau of Industry and Security (BIS), and the Department 
of Defense's (DOD) Defense Technology Security Administration (DTSA). 
The information on foreign countries' export control laws and 
regulations in this report does not reflect our independent legal 
analysis, but is based on interviews, questionnaires, and secondary 
sources such as analyses by foreign law specialists at the U.S. 
Library of Congress. We used the information gathered from our review 
of documents, structured question sets, site visits, interviews, and 
foreign law specialists' analyses as the basis for our comparison of 
the U.S.'s and foreign countries' systems. Our comparison does not 
include an assessment of the effectiveness of the selected countries' 
export control systems. 

To assess how the proposed Defense Trade Cooperation Treaties with the 
United Kingdom and Australia will change controls on arms exports, we 
reviewed the treaties, the treaties' implementing arrangements, 
congressional testimony, and related documentation. We submitted a 
structured question set on the treaties and analyzed responses from 
the United Kingdom and Australia. We subsequently interviewed 
officials from State, the United Kingdom's Ministry of Defence, and 
Australia's Department of Defence on the treaties' implementation. 
Additional information on our scope and methodology may be found in 
appendix I. 

We conducted this performance audit from January 2009 to May 2010 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

The U.S. export control system for arms and dual-use items involves 
multiple federal agencies, but two agencies administer the regulatory 
framework--generally the Department of State administers controls for 
arms and the Department of Commerce does so for dual-use items, which 
have both military and civilian applications.[Footnote 3] In managing 
its respective system, each department is responsible for limiting the 
possibility of export-controlled items and technologies falling into 
the wrong hands while also allowing legitimate trade to occur. The two 
departments' implementing regulations contain lists that identify the 
items and related technologies that each department controls, and 
establish requirements for exporting those items.[Footnote 4] In most 
cases, Commerce's controls over dual-use items are less restrictive 
than State's controls over arms. Commerce controls many commercially 
available items such as aircraft, computers, and telecommunications 
equipment, which generally do not require licenses prior to export. 
Conversely, State-controlled items generally require licenses for most 
destinations unless an exemption applies. Exporters generally are 
responsible for determining which department controls each item they 
seek to export and which regulatory requirements apply.[Footnote 5] 
Unless an exemption applies, exporters submit a license application if 
their items are controlled to either State or Commerce to receive 
approval to export, depending on which agency controls the item. When 
deciding whether to approve or deny an application, State and Commerce 
evaluate it against several factors, including an assessment of all 
parties to the transaction and how the recipient plans to use the 
item. As part of the application review process, State and Commerce 
consult with other agencies.[Footnote 6] State and Commerce also 
conduct outreach programs that are designed to increase companies' 
knowledge of export control regulations and to promote compliance. 
Figure 1 below outlines the major steps in the U.S. export control 
system. 

Figure 1: Major Steps in the U.S. Export Control System: 

[Refer to PDF for image: illustration] 

1) Exporter determines which agency controls the item and submits 
license application. 

2) State reviews arms license application; 
2a) DOD and other agencies may provide feedback on application and 
recommend to approve or deny. 

2) Commerce reviews dual-use license application; 
2a) DOD and other agencies may provide feedback on application and 
recommend to approve or deny. 

3) Exporter is notified whether license was approved or denied. 

4) If approved, Customs reviews selected license information submitted 
by exporters and may also inspect goods prior to shipment. 

5) Item is exported to foreign recipient. 

6) Agencies may conduct enforcement activities after export. 

Source: GAO analysis of agencies’ export control processes. 

[End of figure] 

Responsibility for enforcing U.S. export control laws and their 
associated regulations largely rests with various agencies within the 
Departments of Commerce, Homeland Security, Justice, and State. These 
agencies engage in a variety of enforcement activities, including 
inspecting items prior to export, investigating possible export 
control violations, prosecuting alleged violations, and imposing 
appropriate criminal and civil penalties. Table 1 below details the 
roles and responsibilities in the U.S. arms and dual-use export 
control systems. 

Table 1: Roles and Responsibilities in the U.S. Arms and Dual-Use 
Export Control Systems: 

Principal regulatory agency: Commerce Department's Bureau of Industry 
and Security; 
Mission: Regulates and enforces controls on the export of dual-use 
items by weighing economic, national security, and foreign policy 
interests; 
Statutory authority: Export Administration Act of 1979, as amended[A]; 
Implementing regulations: Export Administration Regulations. 

Principal regulatory agency: State Department's Directorate of Defense 
Trade Controls; 
Mission: Regulates export of arms by giving primacy to national 
security and foreign policy concerns[B]; 
Statutory authority: Arms Export Control Act, as amended[C]; 
Implementing regulations: International Traffic in Arms Regulations. 

Other federal agency[D]: Department of Defense; 
Mission: Provides input on which items should be controlled by State 
and which by Commerce, and may conduct technical and national security 
reviews of export license applications submitted by exporters to 
either State or Commerce. 

Other federal agency[D]: Department of Homeland Security; 
Mission: Enforces arms and dual-use export control laws and 
regulations through border inspections and investigations[E]. 

Other federal agency[D]: Department of Justice; 
Mission: Investigates suspected criminal violations in certain areas 
of counterintelligence, including potential export control violations, 
and prosecutes suspected violators of arms and dual-use export control 
laws[E]. 

Source: GAO analysis of cited laws and regulations. 

[A] Authority granted by the act lapsed on August 20, 2001. 50 U.S.C. 
app. § 2401 et. seq. However, Executive Order 13222, Continuation of 
Export Control Regulations, which was issued in August 2001 under the 
authority provided by the International Emergency Economic Powers Act 
(50 U.S.C. § 1702), continues the controls established under the act 
and the implementing Export Administration Regulations. Executive 
Order 13222 requires an annual extension and was recently renewed by 
Presidential Notice on August 13, 2009. 

[B] State also participates in the review of export license 
applications submitted to Commerce and provides input on which items 
should be subject to control under the Export Administration 
Regulations. 

[C] 22 U.S.C. § 2751 et. seq. 

[D] The Department of Energy participates in the review of export 
license applications submitted to Commerce and provides input on which 
items should be subject to control under the Export Administration 
Regulations. 

[E] Homeland Security, Justice, and Commerce investigate potential 
dual-use export control violations. Homeland Security and Justice 
investigate potential arms export control violations. 

[End of table] 

In 2007, the United States signed separate Defense Trade Cooperation 
Treaties with the United Kingdom and Australia to provide for the 
license-free export or transfer of selected arms under certain 
circumstances.[Footnote 7] The stated goals of each proposed treaty 
include enabling treaty parties to achieve fully interoperable forces, 
establishing a closer framework for security and defense cooperation 
among treaty parties, and leveraging the strengths of the security and 
defense industries in the treaty parties' countries. Only certain 
governmental and nongovernmental entities, facilities, departments, 
agencies, and personnel in each treaty party's country will be 
eligible to export, acquire, or transfer applicable exported arms 
under the treaties. The treaties will be applicable to exports and 
transfers in support of certain activities, and will not apply to arms 
that are identified as excluded from the scope of the treaties. 
Exporters are not required to use the treaties and will continue to 
have the option to apply for a license or other authorization to 
export or transfer treaty-eligible arms. Implementation of the 
treaties is currently on hold pending ratification by the U.S. Senate 
and Australia's Parliament, but has already been ratified by the 
United Kingdom's Parliament. A timeline of events related to the 
Defense Trade Cooperation Treaties is included below in figure 2. 

Figure 2: Events Related to the Defense Trade Cooperation Treaties: 

[Refer to PDF for image: timeline] 

June 2007: 
The U.S. and the United Kingdom signed the Defense Trade Cooperation 
Treaty. 

September 2007: 
The U.S.-Australia treaty was submitted to the U.S. Senate. 

September 2007: 
The U.S. and Australia signed the Defense Trade Cooperation Treaty. 

December 2007: 
The U.S.-United Kingdom treaty was submitted to the U.S. Senate. 

February 2007: 
State issued the implementing arrangements for the U.S.-United Kingdom 
treaty. The United Kingdom Parliament ratified the treaty. 

March 2008: 
State issued the implementing arrangements for the U.S.-Australia 
treaty. 

May 2008: 
The Senate Foreign Relations Committee held its first hearing on the 
treaties. 

June 2008: 
State prepared draft regulations for public comment, but has not 
published them in the Federal Register. 

September 2008: 
Australia’s Parliamentary Joint Standing Committee on Treaties 
recommended binding treaty action be taken. 

December 2009: 
The Senate Foreign Relations Committee held a second hearing on the 
treaties. 

Source: GAO analysis of data from the United Kingdom, Australia, and 
U.S. Department of State. 

[End of figure] 

Significant Differences Exist between Selected Countries' and U.S.'s 
Export Control Systems: 

Selected Countries Use Single Licensing Agency and Consolidated 
Control List to Determine Which Controls Apply: 

Five of the six countries in our review--Australia, Canada, Germany, 
Japan,[Footnote 8] and the United Kingdom--have a single agency in 
charge of regulating arms and dual-use items and use consolidated 
control lists to determine which controls apply. In the U.S. system, 
State administers controls for arms and Commerce does so for dual-use 
items and each maintains a list of controlled items. Just as in the 
United States, selected allies' export control systems have changed 
over time to address security interests and to satisfy international 
commitments. In Australia, the Defence Export Control Office (DECO) 
within the Australian Department of Defence serves as the single 
regulatory body for implementing both arms and dual-use export 
controls.[Footnote 9] Australian companies submit arms and dual-use 
export applications to DECO, which assesses each item against its 
Defence and Strategic Goods List to determine what controls apply. 
DECO also further evaluates the item against the Weapons of Mass 
Destruction (Prevention of Proliferation) Act 1995 to determine if it 
could be used in or assist a weapon of mass destruction program. 
Canada's Export Controls Division of the Department of Foreign Affairs 
and International Trade uses an overarching control list--known as the 
Export Control List--to evaluate export control permits for arms and 
dual-use items.[Footnote 10] Germany's Federal Office of Economics and 
Export Control (BAFA)[Footnote 11] and the United Kingdom's Export 
Control Organisation (ECO)[Footnote 12] manage export controls within 
single departments. Germany's BAFA receives arms and dual-use export 
license applications and also uses a consolidated list to determine 
how the item should be controlled.[Footnote 13] In the United Kingdom, 
ECO receives arms and dual-use export applications and compares them 
to its consolidated list of strategic military and dual-use items that 
require export authorization. Japan's METI also has a single list that 
it uses to review applicable arms and dual-use controls for export 
license applications. These countries' systems may involve other 
agencies in the review of export licenses, but having one organization 
that processes both arms and dual-use export license applications also 
provides a single point of entry to the system for exporters who may 
be unsure of what controls apply to their exports. 

France, however, is similar to the United States, in that it relies on 
more than one agency to regulate proposed arms and dual-use exports. 
For arms exports, France's system involves a two-step process whereby 
companies apply for prior approval to export and then submit an export 
license application. An interagency commission chaired by a body 
within the Prime Minister's office, known as the General Secretariat 
for National Defence, and which also includes the Ministries of 
Defence, Foreign Affairs, and Finance, evaluates companies' requests 
for prior approval to export.[Footnote 14] Export license applications 
are submitted to the Ministry of Defence and assessed by the 
Ministries of Defence, Foreign Affairs, and Finance, in coordination 
with the General Secretariat for National Defence. Dual-use exports 
are regulated through a separate process under France's Ministry of 
Economy, Industry, and Employment. 

In the U.S. system, companies seeking to export arms and dual-use 
items generally are responsible for determining whether those items 
are regulated by Commerce or State and the applicable export 
requirements. Commerce maintains a list of controlled dual-use items 
known as the Commerce Control List and State's USML includes the arms 
that are subject to its regulations. If in doubt about whether an item 
is controlled by State, or when requesting that an item be transferred 
from State to Commerce control, an exporter may request a commodity 
jurisdiction determination from State. If an exporter is uncertain of 
how an item is classified on the Commerce Control List, it may request 
a commodity classification where Commerce will provide the appropriate 
export control classification number. We previously reported that 
State and Commerce have disagreed on which department has jurisdiction 
over certain items and recommended that they develop procedures to 
improve coordination between the agencies within the existing 
structure of the U.S. system. In June 2009, the National Security 
Council issued new procedures for the commodity jurisdiction process. 
These procedures provide for improved interagency coordination and 
completion of commodity jurisdiction determinations or resolution of 
commodity jurisdiction disputes within 60 days.[Footnote 15] State 
officials reported that the new procedures have resulted in 
improvements in commodity jurisdiction processing times. 

Selected Countries' License Types and Review Processes Differ from the 
United States: 

Several licensing system differences exist between the foreign 
countries in our review and the United States, including the use of 
risk-based license types, consultation with other government agencies 
and access to a single electronic licensing system in licensing 
reviews, the extent to which the birth countries of foreign employees 
are considered when making export license decisions, and the scope of 
the licensing effort. 

Risk-Based License Types: 

France and the United Kingdom use a risk-based approach to allow a 
company with a satisfactory compliance record and an established 
business case to export multiple shipments of less sensitive defense 
items under a single license to particular destinations or identified 
recipients, known as an open individual export or global license. 
Germany uses a similar approach when granting a global license for 
military items exported as part of a government cooperation program. 
When granted one of these licenses, a company must have a program in 
place for monitoring its compliance with license requirements and 
maintain documentation of all transactions under the license. The 
United Kingdom and Germany also conduct inspections to assess 
companies' compliance with license requirements and Germany and France 
require companies to submit periodic reports on their exports. 
Specifically, the United Kingdom may issue an open individual export 
license that covers multiple shipments of specified goods to 
particular destinations or identified recipients. This license is 
generally valid for a period of 5 years. According to United Kingdom 
officials, there are usually no quantity or dollar-value limits 
associated with these licenses. The United Kingdom issued 176 open 
individual export licenses in 2008, and according to officials, two-
thirds were for military goods.[Footnote 16] Recent open individual 
export licenses have included items involved in the removal of 
unexploded ordnance and items in support of another government's naval 
forces. French government officials stated that when a company would 
have to submit a significant number of export license applications for 
related goods or to several destinations, they issue a global license 
for exports of nonsensitive military goods to European Union members 
and other countries. These licenses are valid for 1 year and may be 
renewed. French officials stated that they have issued 101 global 
licenses since 2004. Germany's global export license--valid for 2 
years with one extension for 2 more--authorizes multiple shipments of 
military items to recipients in North Atlantic Treaty Organization 
(NATO) or NATO-equivalent countries as part of government cooperation 
programs.[Footnote 17] In 2007, Germany issued 100 global export 
licenses. Furthermore, the European Union issued a directive on 
intracommunity transfers in 2009 relating to the simplification of 
transfers of defense-related products between European Union member 
states, including the use of general transfer licenses. Under this 
directive, whose provisions will be applicable as of June 30, 2012, 
member states, such as France, Germany, and the United Kingdom, will 
be able to establish general transfer licenses that authorize 
suppliers to transfer defense-related products to certified recipients 
within the European Union.[Footnote 18] In the case of Australia, a 
company may export unspecified quantities of defense and related goods 
to a single recipient using a military export license. These licenses 
are valid for 2 years, and Australian officials reported that they 
issued 87 in 2008. 

The U.S. export control system for arms is transaction based, 
generally requiring a license for each proposed arms export unless an 
exemption applies. For example, if a U.S. exporter wants to export 
arms to more than one destination, it generally must submit a separate 
license application to State for each destination.[Footnote 19] State, 
however, has developed three comprehensive export authorizations--for 
a major program, a major project, or a global project--that are 
similar to the open and global licenses used in other countries. They 
were developed as part of State's Defense Trade Security Initiative to 
promote transnational defense cooperation with NATO member countries, 
Australia, Japan, and Sweden. The major program comprehensive 
authorization, for example, provides a single U.S. exporter with 
approval for a range of exports, including hardware, technical data, 
and defense services.[Footnote 20] Since 2000, State has issued two 
comprehensive authorizations--one for the Eurofighter program and one 
for the Joint Strike Fighter program. According to State officials, 
companies have opted to not use these comprehensive authorizations 
because they were concerned about the difficulty of ensuring 
subcontractor compliance with arms export regulations. 

State officials acknowledged the value of adopting open or global 
licenses, but told us that congressional reporting requirements cause 
them to treat each export as an individual transaction. For example, 
under the Arms Export Control Act, State must give written 
notification to Congress at least 15 days in advance of State's intent 
to approve licenses for defense articles and services of $100 million 
or more, or for major defense equipment of $25 million or more, to 
NATO member countries or Japan, Australia, or New Zealand.[Footnote 
21] State officials stated that they would not know when the value of 
defense articles and services or major defense equipment had hit the 
threshold for notification if they were to use open or global licenses. 

Consultation and Access to Single Electronic System in Licensing 
Reviews: 

Another licensing difference between the foreign countries in our 
review and the United States involves the agencies within a respective 
country that are consulted on arms license applications. In Germany, 
for example, where a Commerce-like agency is the export control 
regulatory body, economic perspectives are considered when evaluating 
arms and dual-use export applications. In Australia's and France's 
license review processes, agencies with economic perspectives are also 
included in the review of sensitive arms export license applications. 
Australia has established a formal group known as the Standing 
Interdepartmental Committee on Defence Exports to coordinate agency 
perspectives on sensitive arms and dual-use license applications. 
[Footnote 22] The committee has four permanent members, including the 
Department of Defence, the Department of Foreign Affairs and Trade, 
the Australian Trade Commission,[Footnote 23] and representatives from 
the Department of the Prime Minister and Cabinet. Members provide 
advice to the Department of Defence's DECO for consideration in the 
approval or denial of an application. In France's system, the 
Ministries of Defence, Foreign Affairs, and Finance independently 
evaluate arms export license applications and, in coordination with 
the General Secretariat for National Defence, make recommendations to 
approve or deny.[Footnote 24] For example, according to French 
officials, the Ministry of Finance considers the capacity of a foreign 
government to honor its financial commitments and the export's impact 
on sustainable economic growth. 

To facilitate license consultations, some of the selected countries we 
reviewed have the capability for agencies to access a single 
electronic licensing system when reviewing licenses. For example, the 
United Kingdom's SPIRE licensing system allows companies to submit 
export license applications electronically and permits all agencies 
involved in the export control application review process to access 
the system in order to review and comment on applications. The system 
also allows exporters to check the status of their applications 
electronically and to use completed applications as templates for 
future applications. As another example, French officials told us they 
developed the Interdepartmental Information System for Export Controls 
to facilitate consultation among the Ministries of Defence, Foreign 
Affairs, and Finance and the General Secretariat for National Defence 
on arms export license applications.[Footnote 25] Other countries in 
our review--Canada, Germany, and Japan--have also developed electronic 
licensing systems to facilitate license reviews. However, unlike the 
United Kingdom's electronic system that permits all agencies involved 
in the license application review process to access the system, German 
officials told us that only BAFA, the agency responsible for 
regulating both arms and dual-use export controls, can access 
Germany's electronic licensing system. Similarly, Canada's system can 
only be accessed by the Department of Foreign Affairs and 
International Trade and the Canada Border Services Agency, but 
providing access to other agencies is a priority. Australian officials 
told us they are in the process of procuring an electronic system. 

In the U.S. export control system, State primarily consults with DOD 
and other State offices on arms export applications,[Footnote 26] 
whereas Commerce consults with DOD, State, and the Department of 
Energy on dual-use export applications. For arms export applications, 
DOD provides State with technical and national security reviews of 
proposed arms exports and other State offices provide it with 
assessments of possible foreign policy, human rights, and 
nonproliferation concerns. DOD and State offices also recommend 
whether the export license application should be approved or denied. 
State works with DOD and other State offices to reconcile conflicting 
recommendations. State officials told us, however, that they do not 
consult with Commerce in making license decisions because the Arms 
Export Control Act authorizes arms exports in furtherance of foreign 
policy and national security, but not for economic reasons. For dual-
use export applications, Commerce officials told us they refer the 
applications to State's Bureau of International Security and 
Nonproliferation. State officials noted that this bureau is 
responsible for determining which other bureaus within State will 
review dual-use export applications, but this generally does not 
include referral to State's arms export license office. 

While State and Commerce each have an electronic system in place to 
receive most export license applications and respond to applicants, 
DOD officials in charge of managing DOD reviews of export license 
applications told us they do not have access to these systems and 
therefore do not use them when providing advisory input. Instead, DOD 
has its own electronic system for providing advisory input to both 
State and Commerce. For example, State uses DTrade 2 for processing 
most arms export license applications, while DOD relies on USXports to 
provide State and Commerce with its technical and national security 
reviews of export license applications. DOD officials also said the 
lack of access to each other's electronic systems affects the U.S. 
government's ability to coordinate efficiently on export license 
applications or commodity jurisdiction requests. DOD and State have 
signed an agreement for State to adopt DOD's USXports system in order 
to improve communication and coordination in the export licensing 
process. 

Importance of Nationality in Export License Decisions: 

In making arms and dual-use license decisions, the selected countries 
in our review generally do not consider the birth countries of foreign 
employees when deciding whether to grant access to controlled items, 
while this can be a factor for the U.S. Department of State. 
Specifically, Australian officials said they consider factors such as 
the sensitivity of the goods, destination, how the goods will be used, 
the recipient of the goods, and the exporter's compliance history. 
Australia and Canada have citizens who were born in ITAR-proscribed 
countries.[Footnote 27] Australian officials told us that seeking 
information about an employee's national origin when responding to 
State Department export license data requests and then using that 
information to make employment-related decisions was prohibited by 
Australia's antidiscrimination laws. Canadian officials also told us 
that their companies have faced challenges with the State Department's 
consideration of nationality because companies have to balance their 
obligations under Canadian human rights law with State's licensing 
requirements. 

In the U.S. system, State and Commerce use different approaches when 
considering a foreign person's nationality to make export control 
decisions. Commerce's policy on determining nationality for release of 
technology to a foreign national is generally based on a foreign 
person's most recent citizenship or permanent residence.[Footnote 28] 
In contrast, in making export control decisions, State considers a 
foreign person's current citizenship status and his or her country of 
birth if there is indication of dual nationality, which occurs when 
the foreign person's country of birth is different from the country of 
citizenship.[Footnote 29] Specifically, State may assess an 
applicant's foreign employees' nationalities when determining whether 
to approve an agreement between a U.S. company and a foreign company 
to share controlled data. According to State, if a foreign person's 
country of birth is different from the country where he or she 
currently resides in and holds citizenship from, it raises the issue 
of dual nationality and whether the individual has ties to his or her 
country of birth, which would indicate a degree of loyalty and 
allegiance to that country. Under these circumstances, the license 
would be considered on the basis that it could be an export to both 
countries.[Footnote 30] If a person's country of birth is prohibited 
from receiving U.S. arms, as are China, Iran, and North Korea, State 
collects additional information to confirm that the individual has no 
significant ties to his or her country of birth. However, according to 
State, a person born in a country prohibited from receiving U.S. arms 
would not receive similar scrutiny before gaining access to export-
controlled items or information if he or she were a U.S. citizen. 

State officials told us the National Security Council was reviewing a 
State discussion paper on how State and Commerce have considered 
nationality in order to reconcile their different approaches. State 
took steps in December 2007 to mitigate the impact of its 
consideration of nationality by amending the ITAR. The amendment 
permits access to unclassified U.S. arms for a foreign signatory's 
third country[Footnote 31] or dual national employees under a 
technical assistance or manufacturing licensing agreement if those 
employees are nationals of members of NATO or European Union countries 
or Australia, Japan, New Zealand, or Switzerland.[Footnote 32] State 
has also entered into arrangements with several Canadian government 
agencies and the Australian Department of Defence to permit access to 
ITAR-controlled items for agency personnel that are dual nationals and 
possess at least a Canadian Secret-level security clearance or an 
Australian Department of Defence security clearance.[Footnote 33] In 
March 2010, the Administration announced that it would seek to 
eliminate unnecessary obstacles for exporting products to companies 
with dual national and third-country national employees, and State 
officials told us they are working with other agencies and Congress on 
this issue. 

Scope of the Licensing Effort: 

The countries in our review individually approved fewer arms and dual- 
use export licenses than the United States in 2008. The lower number 
of approved arms licenses is consistent with the smaller volume of 
defense trade in these countries in comparison to the United 
States.[Footnote 34] Table 2 describes the number of arms and dual-use 
export licenses approved and license officers and the average number 
of export licenses approved per officer in 2008 for the United States 
and selected countries in our review.[Footnote 35] 

Table 2: United States' and Selected Countries' Arms and Dual-Use 
Export Licenses Approved, License Officers, and Average Licenses 
Approved per Officer in 2008: 

Countries: Australia; 
Number of export licenses approved: 2,929; 
Number of license officers: 17; 
Average number of export licenses approved per officer: 172. 

Countries: Canada[A]; 
Number of export licenses approved: 4,007; 
Number of license officers: 8; 
Average number of export licenses approved per officer: 501. 

Countries: France[B]; 
Number of export licenses approved: 14,576[C]; 
Number of license officers: 63 to 68[C]; 
Average number of export licenses approved per officer: 214 to 231. 

Countries: Arms; 
Number of export licenses approved: 12,576[C]; 
Number of license officers: 50 to 55[C]; 
Average number of export licenses approved per officer: 229 to 252. 

Countries: Dual-use; 
Number of export licenses approved: 2,000[C]; 
Number of license officers: 13; 
Average number of export licenses approved per officer: 154. 

Countries: Germany[D]; 
Number of export licenses approved: 28,652[C]; 
Number of license officers: 70[C]; 
Average number of export licenses approved per officer: 409. 

Countries: Japan[E]; 
Number of export licenses approved: 10,000[C]; 
Number of license officers: 30; 
Average number of export licenses approved per officer: 333. 

Countries: United States; 
Number of export licenses approved: 86,247; 
Number of license officers: 108; 
Average number of export licenses approved per officer: 799. 

Countries: Arms[F]; 
Number of export licenses approved: 68,302; 
Number of license officers: 52; 
Average number of export licenses approved per officer: 1,314. 

Countries: Dual-use[G]; 
Number of export licenses approved: 17,945; 
Number of license officers: 56; 
Average number of export licenses approved per officer: 320. 

Countries: United Kingdom[H]; 
Number of export licenses approved: 9,936; 
Number of license officers: 47[C]; 
Average number of export licenses approved per officer: 211. 

Source: GAO analysis of State, Commerce, and selected foreign 
countries' data. 

[A] The licenses included in this table refer to those items where 
Canada's Export Control Division has sole export control 
responsibility. As noted previously, the Department of Foreign Affairs 
and International Trade and the Canadian Nuclear Safety Commission 
share export control responsibility for nuclear and nuclear-related 
dual-use items. This table does not include approved licenses for 
these items. 

[B] France provided us with the number of decisions reached on 
requests for prior approval to export arms, approved arms export 
licenses, the approximate number of arms export license amendments, 
and the approximate number of approved dual-use export licenses. 

[C] Countries provided us with an estimated number. 

[D] Germany provided us with the approximate number of licenses 
approved in 2008, but did not provide the number of license amendments. 

[E] The Head Office of Japan's METI provided us with an estimated 
number of individual licenses approved annually by that office, which 
does not include the number of license amendments or information from 
their regional branch offices. As noted previously, since Japan only 
exports arms in exceptional cases most of these licenses would be for 
dual-use exports. 

[F] State officials reported they processed a total of 83,888 actions 
in 2008 with approximately 1,613 actions per license officer. 
Approximately 10,000 of the actions excluded from table 2 were 
applications that were not properly filled out by the exporter and 
were returned without action by State. We also excluded other actions 
such as applications for temporary imports, international import 
certificates, general correspondence requests (such as a request to 
remove or modify a license condition), and jurisdiction determination 
requests, as other countries did not provide similar data. 

[G] Commerce's data on the number of export licenses approved are 
reported by fiscal year. 

[H] The United Kingdom's 2008 Strategic Export Controls annual report 
included the number of approved export licenses, but United Kingdom 
officials reported that they do not keep track of the number of 
license amendments. 

[End of table] 

The total number of export licenses approved varied among the 
countries in our review. For example, in 2008, Australian officials 
reported approving 2,929 licenses, while German officials reported 
approving approximately 28,652. The total number of licenses approved 
in that same year was similar in the United Kingdom, France, and 
Japan, as officials reported approving approximately 10,000 to 15,000 
licenses. In contrast, U.S. officials reported approving over 86,247 
arms and dual-use licenses in 2008, an amount that exceeded the total 
number of licenses approved by all countries in our review combined. 
Furthermore, countries in our review generally devoted proportionately 
more resources than the United States toward license approval, 
averaging between 172 and 501 licenses per officer. In contrast, State 
approved 1,314 arms licenses per officer, while Commerce's ratio was 
comparable to Japan's at 320. 

Three countries in our review--Canada, France, and the United Kingdom--
and the United States all track average license processing times. For 
example, Canada reported in 2009 that its average processing time for 
selected countries with comparable export controls was 5 business 
days, and 20 business days for other countries. French officials 
reported that it took an average of 38 days to process an arms export 
license and an average of 18 days for a dual-use license in 2008. The 
United Kingdom noted that it processed 73 percent of its standard 
individual export licenses within 20 business days in 2008 and this 
license type accounted for the overwhelming majority of those issued 
by the United Kingdom. Other countries provided us their license 
processing goals or estimates. For example, Australian officials told 
us they had a goal of processing most applications within 15 business 
days and a goal of 35 business days for sensitive applications. 
Japanese officials reported that for cases where they have no 
particular concern, their average processing time was between a few 
days and 2 weeks. German officials told us it took 3 to 4 weeks on 
average to process an arms export license, and in some cases, licenses 
could be processed within a week. Recently, State took steps to 
restructure its workforce to reduce processing times and the number of 
open cases. For 2008, State officials reported an average license 
processing time of 16.5 calendar days down from an average of 43 
calendar days in 2006.[Footnote 36] Commerce averaged 27 days for its 
review of licenses.[Footnote 37] 

Selected Countries Have a Single Agency in Charge of Enforcing Export 
Controls: 

Export enforcement is another area where the structural difference 
between the foreign countries and the U.S. is evident. Four of the six 
countries in our review have one agency in charge of enforcing export 
controls. Specifically, the customs department is the main enforcement 
body in Australia, France, Germany, and the United Kingdom. For 
example, United Kingdom officials reported Her Majesty's Revenue and 
Customs is the sole agency responsible for the enforcement of export 
controls and coordinates regularly with ECO and other United Kingdom 
agencies as appropriate, sharing intelligence, utilizing resources in 
coordinated risk assessment exercises, and conducting joint training 
seminars. Similarly, Australian officials told us that their Customs 
and Border Protection Service is the main enforcement body and 
coordinates closely with DECO, the intelligence community, and the 
Australian Federal Police to ensure that export controls are applied 
effectively and to conduct investigations of possible violations. 
United Kingdom and Australian officials reported that there are no 
significant challenges for their respective enforcement agencies in 
coordinating with export licensing and other agencies. 

In Canada and Japan, enforcement responsibilities are shared between 
two agencies. Specifically, the Canada Border Services Agency and the 
Royal Canadian Mounted Police are responsible for the enforcement of 
export controls in Canada. Canada Border Services Agency officers must 
be satisfied that an exporter has fully complied with the provisions 
of their export control legislation before allowing the export of any 
goods and may exercise certain powers including search, detention, and 
seizure. The Royal Canadian Mounted Police are responsible for 
enforcing all laws between ports of entry along the U.S.-Canadian 
border, including those laws concerning the illegal export of 
controlled items. The Royal Canadian Mounted Police and the Canada 
Border Services Agency cooperate in the conduct of investigations 
related to possible criminal violations of export controls that occur 
along the U.S.-Canadian border. Canadian officials told us that their 
export control system has faced enforcement challenges similar to 
those we previously identified in the U.S. system. However, they also 
reported that Canada has taken steps to overcome these challenges by 
enhancing communication between enforcement agencies and improving 
training and outreach to enforcement agencies. In Japan, the Customs 
bureau is involved in enforcing export controls by determining at the 
border whether the items being exported are subject to controls and 
whether or not a license has been obtained. Japan's National Police 
Agency is in charge of conducting investigations when laws and 
regulations have been violated, including the primary law governing 
export controls. 

In the U.S. system, export enforcement authorities are granted through 
a complex set of laws and regulations, which give concurrent 
jurisdiction to Commerce, Homeland Security, and Justice's Federal 
Bureau of Investigation to conduct investigations of potential 
violations of export control laws for dual-use items, and to Homeland 
Security and the Federal Bureau of Investigation to investigate 
potential arms violations. We previously reported that enforcement 
agencies faced several challenges in enforcing export control laws and 
regulations, such as coordinating investigations. Similar to Canada, 
in 2007, the Department of Justice established the National Export 
Enforcement Initiative, a cooperative effort among export enforcement 
and regulatory agencies to increase training, improve interagency 
coordination, and enhance prosecution. Additional coordination occurs 
through the Immigration and Customs Enforcement's National Export 
Enforcement Coordination Network. We view this as a positive step, but 
have not reviewed to what extent these initiatives have addressed the 
challenges identified in our prior work. 

Some Countries Reported Extensive Outreach Programs: 

As in the United States, countries in our review have outreach 
programs. Two countries, the United Kingdom and Australia, have 
extensive outreach programs that are similar to Commerce's, but 
State's outreach effort is limited. These programs are generally 
designed to increase companies' knowledge of export control 
regulations and to promote compliance. Exporters need sufficient 
guidance to interpret regulations correctly, properly use exemptions, 
and protect critical technologies. The United Kingdom and Australia 
have staff dedicated to outreach activities, including four personnel 
in the United Kingdom's Export Control Training and Skills Academy, 
and four personnel within Australia's Treaty and Outreach Branch. With 
this dedicated staff, these organizations conduct multiple seminars 
and workshops during the year throughout their respective countries. 
The United Kingdom conducted 38 seminars and training courses 
nationwide, attended by over 750 people from 300 organizations during 
2008. Also in 2008, Australian officials reported providing 1-day 
workshops to 364 individuals from 140 companies throughout the 
country. Australian officials told us they attribute the recent 
increase in the number of dual-use applications, improvement in the 
overall quality of license applications, and an increase in the amount 
of voluntary disclosures of violations to their outreach efforts over 
the last few years. United Kingdom industry officials reported close 
collaboration with ECO in the development of publications, training 
seminars, and the SPIRE electronic licensing system. 

The United Kingdom and Australia also reported providing formal 
training to government staff about export controls. ECO conducts the 
Staff and Partners Export Control Awareness School for staff across 
the United Kingdom's government, including the Foreign Office, 
Ministry of Defence, and Department for International Development that 
support the export licensing process. Australia's outreach includes an 
export control seminar for its Department of Defence staff and 
workshops for other government agencies, such as Foreign Affairs and 
Trade, Customs, and the Attorney General's Department, upon request. 

The United Kingdom also has two Web-based search tools to help 
exporters identify the items that require export licenses. The Goods 
Checker can be used to search for items on the United Kingdom's 
Strategic Export Control List. The OGEL Checker helps users determine 
what items they can export using an open general export licence. 
[Footnote 38] The United Kingdom reported that over 2,300 individuals 
from more than 30 countries registered to use these tools during 2008. 

Other countries in our review have outreach programs that may include 
interaction between government officials and industry, publication of 
written material, and websites. For example, French officials conduct 
meetings with industry representatives to keep them informed of export 
control issues, and Japan reported providing training courses for 
industry. Also, both Canada and Germany publish handbooks on their 
export control systems. Finally, all of the countries in our review 
maintain websites that contain export control information. These 
websites vary in content, but may include the procedures for obtaining 
a license, control lists, and compliance guidelines. 

In the United States, Commerce reported that it has 14 personnel that 
conducted a range of outreach activities in fiscal year 2008. For 
example, Commerce conducted 41 domestic and 7 international dual-use 
export control outreach seminars, an annual export controls and policy 
conference, and 33 presentations with public and private sector 
organizations, reaching over 8,000 people. Commerce also reported 
assisting approximately 53,000 business representatives through its 
telephone counseling program and providing dual-use export control 
training to approximately 150 government officials. In addition, 
Commerce reported that it launched an online training room with a 
series of introductory training modules, which were viewed more than 
45,000 times, and developed four online seminars that reached over 550 
participants. These online training modules and seminars help 
exporters identify which dual-use products need a license and cover 
other topics such as license applications, prohibited end users, and 
compliance programs. 

State conducts speaking engagements at companies and conferences and 
hosts quarterly in-house seminars, but it does not maintain online 
training or have dedicated outreach staff. For example, State 
participates in training and outreach programs sponsored by a joint 
government and industry nonprofit organization.[Footnote 39] State 
officials noted that they participated in 9 such events during 2008, 
reaching a total audience of 2,868 people. State officials also 
reported conducting 30 company visits which reached 1,625 people. 
These visits are designed to better understand how companies are 
implementing their export control programs and to assess whether these 
programs are in compliance with the Arms Export Control Act and ITAR. 
In addition, State's outreach program includes a response team that 
answers export control questions via phone and email, but these are 
contracted personnel and some of them work part-time. Furthermore, 
response team members spend much of their time determining the status 
of license applications. State officials told us they lack resources 
for outreach as they focus on processing licenses and cannot use 
registration fees to fund staffing for outreach efforts. 

Selected Countries Have Reported Conducting Performance Assessments: 

Most of the foreign countries we reviewed reported conducting broad 
performance assessments of their export control systems, while the 
United States has generally not done so in the past. For example, in 
2007, the United Kingdom conducted a comprehensive review to evaluate 
the effectiveness of the export control regulations it enacted in 2004 
in order to comply with a national policy of assessing major 
legislation 3 to 5 years after implementation.[Footnote 40] In 
assessing the effectiveness of the regulations, the United Kingdom 
identified denied license applications that would have been approved 
prior to 2004. The review also noted areas for improvement, and ECO 
performed impact assessments to determine the potential costs and 
benefits of proposed regulatory changes. The review led to significant 
revisions in the system. For example, the United Kingdom revised its 
controls on trading goods by establishing a new three-tiered structure 
of goods with varying levels of control associated with each tier. The 
United Kingdom determined that the prior two-tiered structure was not 
the most effective because there was a category of goods that needed 
more control than the goods in the lower tier, but less than those in 
the upper tier. Small arms and light weapons, for instance, were 
placed in the new middle tier. This tier requires licenses for trading 
these items, but not for advertising them for sale. Furthermore, 
United Kingdom persons or companies anywhere in the world involved in 
trading upper-and middle-tier goods are required to obtain licenses. 
The regulations, and the changes that resulted from the review, were 
consolidated and issued under Export Control Order 2008. Officials 
stated that they expect to conduct a postimplementation review of this 
new order in 2012. 

Australia, France, and Japan also reported conducting different types 
of assessments to identify ways to improve their export control 
systems. Australia's Government Solicitor completed a study in 2005 to 
evaluate the nation's export control legislation against those of 
other countries. We were unable to obtain a copy of this study because 
it was not publicly releasable, but Australian officials told us that 
it identified several areas for improvement. In addition, the 
officials stated that Australia has proposed new legislation to 
strengthen its system in response to the study, which if passed, will 
introduce further controls on intangible goods and services such as 
software, and broaden the coverage of weapons of mass destruction 
activities to include the handling, operation, and movement of 
chemical and biological weapons and their associated delivery systems. 
Australian officials also stated that the government conducted a 
regulation impact study of the proposed legislation which determined 
that the changes would not impose unreasonable costs on industry. 
French officials told us the government conducted a national audit of 
its export control system and recently made changes to its processes 
for dual-use items. For example, they noted the establishment of the 
Dual-Use Export Control Office, staffed by officials from multiple 
ministries across the government. Another change was the creation of 
an interagency committee that meets approximately once a month to 
assess the most sensitive dual-use license applications. French 
officials stated that these changes were expected to improve the 
quality of their license assessments and to shorten license process 
times. In 2006, Japan formed a working group composed of government, 
industry, and academia to identify challenges in its export control 
system and develop concrete proposals to improve it. Japanese 
officials noted that as a result of this review, they strengthened 
requirements on intangible technology transfers and punitive measures 
for export violations, and introduced controls on brokering and 
transshipment. While Canada and Germany reported that they monitor 
their export control systems to identify areas for improvement, these 
countries did not report formal assessments of their systems. 

We have previously reported that neither State nor Commerce have 
conducted systematic assessments to determine what corrective actions 
may be needed to ensure they are fulfilling their missions. In January 
2008, the President signed directives to make improvements to existing 
processes in the State and Commerce export control systems. State 
officials told us the directives focused on improving current 
efficiencies rather than making fundamental changes. For example, one 
of the changes was for State to implement a 60-day licensing process. 
Changes to the Commerce system included a requirement to review and 
update the items covered by the Commerce Control List and to expand 
the list of foreign parties subject to greater licensing requirements. 
In August 2009, the President directed the National Economic Council 
and the National Security Council to conduct an interagency review of 
the entire U.S. export control system. The purpose of this review was 
to consider reforms to the system that would enhance the national 
security, foreign policy, and economic security interests of the 
United States. In April 2010, the Administration outlined the reasons 
for reform, including that the U.S. export control system has a 
complicated structure involving multiple agencies with separate 
control lists, leading to jurisdictional confusion, and has hindered 
the ability of allies to cooperate with U.S. forces. The 
Administration also proposed a framework for moving to a single 
licensing agency, control list, enforcement coordination agency, and 
electronic licensing system. 

Proposed Treaties Represent a Significant Change in Arms Export 
Control, and Several Issues Have Yet to Be Resolved: 

Exports and Transfers of Arms under the Treaties Will Not Require 
Licensing, but New and Existing Safeguards Will Be Applied: 

Under the proposed Defense Trade Cooperation Treaties, specified arms 
will not undergo the case-by-case review required by the U.S. 
licensing process when being considered for export or transfer. 
[Footnote 41] Instead, these arms will be exported and transferred 
license-free to certain governmental and nongovernmental entities, 
facilities, and personnel that constitute the approved community in 
each country. State officials told us the treaties represent a move 
from transactional licensing and towards a more risk-based approach. 
State has estimated that the treaties could remove the requirement to 
obtain a license for approximately two-thirds of the items that 
currently require licenses for both the United Kingdom and Australia, 
enabling it to focus its resources on other transactions. 

According to United Kingdom officials, before entities, facilities, 
and personnel in the United Kingdom can become members of the approved 
community, they must first be accredited through existing defense 
security programs and processes, such as the United Kingdom's List X 
facility clearance program. Australian officials told us that 
Australian entities, facilities, and personnel must first be on a list 
of those approved to handle classified information and material, 
similar to Australia's Defence Industry Security Program. 
Specifically, both countries will use existing protocols to conduct 
security clearance checks of facilities and information systems to 
verify that these facilities and systems meet minimum security 
standards and are equipped to handle treaty arms.[Footnote 42] In both 
countries, government personnel and nongovernmental entities' 
employees must have the appropriate security accreditation and a need 
to know. Government personnel and nongovernmental entities' employees, 
except for members of the United Kingdom armed forces, will also be 
evaluated to determine the extent to which they have close or 
significant ties to countries and entities of concern, among other 
factors.[Footnote 43] Nongovernmental community members in the United 
Kingdom and Australia will require approval from both treaty parties--
the United States and the United Kingdom and the United States and 
Australia, respectively. As part of the approval process for community 
membership, each government will consider multiple factors prior to 
approving a nongovernmental entity or facility, such as (1) the 
potential risk to national security, including interactions with 
countries proscribed by the respective treaty parties' laws or 
regulations; (2) the extent of foreign ownership, control, or 
influence; (3) prior convictions or current indictment for violations 
of arms-export laws or regulations; and (4) the entity's export 
licensing history in the United States. State officials told us that 
U.S. companies must be registered with State and eligible to export 
arms in order to be part of the U.S.'s approved community, but do not 
need to be approved by the United Kingdom and Australia. The proposed 
treaties provide for consultations between governments regarding 
either party's concerns about a nongovernmental entity or facility in 
the approved communities, which may lead to the removal of that entity 
or facility from the community. United Kingdom, Australian, and U.S. 
officials told us that prior to shipping any arm under the treaties 
there is a requirement to verify that the recipient is a member of an 
approved community. 

To ensure security, the treaties will use existing safeguards and 
implement new ones. For example, similar to current requirements for 
United Kingdom, Australian, and U.S. exporters, members of the 
approved communities will be required to maintain records of exports 
and transfers under the treaties for at least 5 years. Members of 
either the United Kingdom or Australian communities will be required 
to provide these records upon request to their respective governments. 
These records may also be provided to the United States. While 
previously exported treaty arms may be moved or transferred within the 
United Kingdom and Australian approved communities without prior 
written authorization of the U.S. government, the re-export and re- 
transfer of all treaty arms will require approval by treaty parties-- 
similar to how arms re-exports and re-transfers are currently handled 
in the U.S. export control system.[Footnote 44] For example, in order 
to re-export or re-transfer a treaty arm from Australia's approved 
community, the exporter must first obtain approval from State and 
submit evidence of State's approval to the Australian government. Once 
the re-export or re-transfer has been approved, the arm at issue will 
no longer be considered to be within the scope of the treaty, but will 
instead be subject to the applicable U.S. and Australian export 
controls. Treaty parties may continue to monitor how the approved 
community member is using the treaty arm and assist one another with 
these activities. 

The proposed treaties include several new security measures. For 
example, they will require that U.S. unclassified arms be handled at 
an increased security level in the United Kingdom and Australia. 
[Footnote 45] The United Kingdom will apply its Official Secrets Act 
(which governs the handling of classified material) to all treaty 
arms, including both U.S. unclassified and classified arms. Similarly, 
Australia will handle all treaty arms as classified. Exporters will be 
required to label treaty articles and indicate the level of 
classification. United Kingdom and Australian officials told us that 
they will modify existing compliance programs for the handling of 
classified materials to include coverage of treaty arms. For example, 
Australia plans to perform the same reviews and inspections that it 
regularly conducts under its Defence Security Compliance Program, 
[Footnote 46] but it will also monitor compliance with the treaty's 
marking and handling requirements. According to United Kingdom 
officials, they plan on using the compliance protocols already set 
forth in its List X program, though activities specific to treaty 
compliance will not be laid out until the treaty is implemented. 
Furthermore, members of the United Kingdom and Australian approved 
communities will be required to conduct internal audits to monitor 
their compliance with treaty requirements, and nongovernmental members 
will be subject to oversight by their respective governments. 
According to United Kingdom and Australian officials, internal export 
compliance programs are currently encouraged in their systems, but are 
not required.[Footnote 47] 

Several Implementation Issues Have Yet to Be Resolved: 

Enforcement: 

The proposed treaties require cooperation among treaty parties on 
enforcement of export controls, but plans to fully implement 
enforcement procedures have not been finalized. While compliance with 
the proposed treaties will provide an exemption from U.S. Arms Export 
Control Act licensing requirements, any conduct falling outside of the 
terms and procedures of the treaty will be subject to the Act, the 
ITAR, and applicable criminal, civil, and administrative penalties or 
sanctions. According to United Kingdom and Australian officials, 
enforcement of the proposed treaties will be as provided for in the 
United Kingdom's Official Secrets Act (including associated 
regulations and other legislation as appropriate) and Australia's 
proposed treaty implementing legislation. The treaties will require 
the United Kingdom and Australia to support U.S. enforcement efforts, 
including (1) promptly investigating suspected violations of treaty 
procedures; (2) notifying the United States of investigation results 
and prosecutions; and (3) cooperating in carrying out investigations. 
However, U.S. and United Kingdom officials told us they are still 
working to finalize regulatory changes to implement treaty enforcement 
procedures and Australian officials stated that its treaty 
implementing legislation is currently in draft form. The Justice 
Department testified in December 2009 that with relatively minor 
regulatory amendments the United States will have sufficient legal 
authorities to prosecute and take administrative action against those 
that violate treaty requirements. State officials told us the U.S. 
regulatory changes will not be finalized until the treaties are 
ratified because the ratification process could introduce additional 
requirements. Therefore, because the enforcement procedures of the 
treaty party countries have not been finalized, we could not assess 
how they will implement enforcement responsibilities to ensure 
sufficient international cooperation. 

Congressional Notification: 

Congressional notification requirements under the Arms Export Control 
Act will not apply to arms exported or transferred to an approved 
party under the treaties. As previously discussed, the Arms Export 
Control Act requires State to notify Congress when a proposed arms 
export or transfer exceeds certain dollar thresholds. The Senate 
Foreign Relations Committee is considering legislation that would 
apply the requirements for congressional notification in the Arms 
Export Control Act to arms exported under the treaties. The treaties 
allow all party governments to provide their legislative bodies with 
appropriate legislative notifications, but do not detail specific 
notification procedures. State has committed to provide Congress with 
information on proposed exports that meet certain dollar-value 
thresholds, to notify Congress in advance of arms becoming eligible 
for export under the treaties, and to report on major treaty 
violations. However, these procedures have not been formalized by 
statute or regulation. Similar to regulations to enforce the treaties, 
State officials told us that congressional notification procedures 
will not be finalized until the treaties are ratified. 

Small-and Medium-Sized Business Participation: 

Australian government officials and industry representatives in 
Australia and the United Kingdom have acknowledged that small-and 
medium-sized businesses may face challenges in participating in the 
treaties. For example, in the United Kingdom, small firms may not have 
List X-accredited facilities and may be limited in their ability to 
finance facilities that meet List X accreditation requirements. 
Similarly, small-and medium-sized companies in Australia may not be 
able to afford the information technology and security systems 
required for membership in Australia's approved community. Australian 
industry representatives noted that this may discourage small-and 
medium-sized businesses from exporting and transferring arms under the 
treaties rather than through the existing licensing system. Australian 
government officials told us that one possible way to facilitate 
greater small-and medium-sized business participation would be to 
allow these companies to work in approved community members' 
facilities. 

Concluding Observations: 

Over the last decade, we have identified a number of weaknesses in the 
U.S. export control system and have called for a fundamental 
reexamination of the system, including evaluating alternative 
approaches. Recently, the Administration announced proposed export 
control reforms following an interagency review, including its 
framework for moving to a single licensing agency, control list, 
enforcement coordination agency, and electronic licensing system. As 
the Administration moves forward with its proposals, it can consider 
how similar structures and practices are used in other countries' 
export control systems. It can also evaluate other practices used in 
these countries' systems, such as the use of risk-based licenses, for 
their potential applicability in the United States. While the proposed 
reform framework presents an opportunity to make improvements to 
enhance the national security, foreign policy, and economic interests 
of the United States, the challenge will be to increase the system's 
efficiency while maintaining or improving its effectiveness. In 
addition, the Administration noted that pending defense trade treaties 
with the United Kingdom and Australia are a part of proposed export 
control reforms. To ensure the treaties' successful implementation, 
several remaining issues, such as enforcement, will continue to be 
important as Congress deliberates the approval of the treaties and 
State develops plans for their execution. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, State officials 
acknowledged GAO's thorough and thoughtful treatment of the 
complexities involved with export controls. These officials made 
several comments with respect to the greater volume of export license 
applications that State approved, concluding that this greater volume 
reflects, among other things, State's more stringent controls compared 
to other countries. State also commented that its licensing officers 
process far more cases than their counterparts in other agencies and 
governments and do so more quickly. While we did not specifically 
review the effectiveness of other countries' controls, each of these 
countries is a member of several international export control regimes 
and considers national security interests in their license review 
process. Also, while State approves more licenses per officer than 
other countries in our review, some countries use a risk-based 
licensing approach that allows multiple shipments of less sensitive 
items to be approved under a single license, potentially reducing the 
total number of licenses they review. As noted in our report, State 
generally requires a license for each proposed arms export. With 
respect to the proposed treaties, while State agreed that U.S. 
regulatory changes will not be finalized until the treaties are 
ratified, they noted that the U.S. government plans on how the treaty 
will be enforced have been clear. We agree that information on treaty 
enforcement has been made available, but as we state in the report, 
enforcement procedures of the treaty party countries have not been 
finalized and are subject to change until the treaty is ratified and 
regulations are implemented. State comments are included in their 
entirety in appendix II of this report. State, Commerce, and DOD also 
provided technical comments, which we have incorporated as appropriate. 

We plan no further distribution of this report until 30 days from the 
report date. At that time, we will send copies of the report to the 
Secretary of State, the Secretary of Commerce, the Secretary of 
Defense, and interested congressional committees. We will also make 
copies available to others upon request. In addition, the report will 
be available at no charge on GAO's Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions on matters discussed in this 
report, please contact me at (202) 512-4841 or martinb@gao.gov. 
Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this report. GAO staff who 
made key contributions to this report are listed in appendix III. 

Signed by: 

Belva M. Martin: 
Acting Director Acquisition and Sourcing Management: 

[End of section] 

Appendix I: Scope and Methodology: 

To identify how selected allies' export control systems differ from 
the U.S. export control system, we selected six countries to include 
in our review--Australia, Canada, France, Germany, Japan, and the 
United Kingdom. Countries were selected based on several factors, 
including whether they were (1) major destinations for U.S. arms and 
dual-use items as determined by the number of licenses issued by the 
Department of State's Directorate of Defense Trade Controls and the 
Department of Commerce's Bureau of Industry and Security, (2) members 
of international export control regimes, or (3) major arms exporters. 
We also sought regional diversity among selected countries. We 
reviewed prior GAO reports to identify broad weaknesses in the U.S. 
export control system--jurisdiction, licensing, outreach, enforcement, 
and performance assessments--which we used to focus our comparison of 
the U.S. and other countries' systems. We analyzed background 
documentation to gain an understanding of each selected ally's export 
control system. We submitted a structured question set to each country 
and obtained related documentation, including data on the numbers of 
export license officers and licenses approved in 2008, export control 
system annual reports, and export guidelines. We also conducted site 
visits to Australia, France, Germany, and the United Kingdom and 
interviewed officials in charge of administering and enforcing export 
controls, and industry representatives. In addition, we interviewed 
European Union officials in Belgium to understand the relationship 
between the European Union's export control requirements and those of 
the United Kingdom, France, and Germany. We interviewed foreign 
embassy officials in the United States from each of the selected 
countries and contacted the supreme audit institution in each country 
to determine whether any audits had been conducted on the country's 
export control system. To obtain current information on the U.S. 
export control system, we reviewed agency documents on changes to the 
system and interviewed officials from State's Directorate of Defense 
Trade Controls, Commerce's Bureau of Industry and Security, and the 
Department of Defense's Defense Technology Security Administration. 
The information on foreign countries' export control laws and 
regulations in this report does not reflect our independent legal 
analysis, but is based on interviews, questionnaires, and secondary 
sources, such as analyses by foreign law specialists at the U.S. 
Library of Congress. We used the information gathered from our review 
of documents, structured question sets, site visits, interviews, and 
foreign law specialists' analyses as the basis for our comparison of 
the U.S.'s and foreign countries' systems. Our review does not include 
an assessment of the effectiveness of the selected countries' export 
control systems. 

To assess the reliability of data on the number of export license 
officers and licenses approved in 2008, we discussed the data with 
knowledgeable officials, obtained written responses to questions about 
the data, and, where possible, verified the data with other published 
sources. We found the data to be sufficiently reliable for the 
purposes of providing a general indication of the size of each 
country's export control system. 

To assess how the proposed Defense Trade Cooperation Treaties with the 
United Kingdom and Australia will change controls on arms exports, we 
reviewed the treaties, their implementing arrangements, and the list 
of items that were excluded from each treaty. We submitted a 
structured question set on the treaties to the United Kingdom and 
Australia and analyzed their responses. We subsequently interviewed 
officials from State's Directorate of Defense Trade Controls, the 
United Kingdom's Ministry of Defence, Australia's Department of 
Defence, and United Kingdom and Australian companies to clarify the 
treaties' provisions and to assess possible implementation challenges. 
We also analyzed congressional testimony, State Department responses 
to congressional questions for the record, and United Kingdom and 
Australian treaty related documentation. 

We conducted this performance audit from January 2009 to May 2010 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Department of State: 

United States Department of State: 
Chief Financial Officer: 
Washington, D.C. 20520: 

May 25, 2010: 

Ms. Jacquelyn Williams-Bridgers: 
Managing Director International Affairs and Trade: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548-0001: 

Dear Ms. Williams-Bridgers: 

We appreciate the opportunity to review your draft report, "Export 
Controls: Observations on Selected Countries' Systems and Proposed 
Treaties," GAO Job Code 120791. 

The enclosed Department of State comments are provided for 
incorporation with this letter as an appendix to the final report. 

If you have any questions concerning this response, please contact 
Robert Copley, Deputy Director, Bureau of Political-Military Affairs 
at (202) 663-2803. 

Sincerely, 

Signed by: 

James L. Millette: 

cc: 
GAO — John Neumann: 
PM — Andrew Shapiro: 
State/OIG — Tracy Burnett: 

[End of letter] 

Department of State Comments on GAO Draft Report: 

Export Controls: Observations on Selected Countries' Systems
and Proposed Treaties (GAO-10-557, GAO Code 120791): 

Thank you for allowing the Department of State to comment on the draft 
report "Export Controls: Observations on Selected Countries' Systems 
and Proposed Treaties." We appreciate the opportunity and wish to 
express appreciation for the GAO's thorough and thoughtful treatment 
of the complexities involved with this topic. 

State would like to call particular attention to the information 
conveyed in Table 2 (Export Licenses Approved, License Officers, and 
Average Licenses Approved per Officer in 2008). The data reflects that 
the United States issues far more licenses for the export of arms than 
any other country in the survey. We note that this apparent disparity 
is driven by a number of factors, not least of which is the disparity 
in the relative size of the economies of the countries represented in 
the chart and the wars in Iraq and Afghanistan where U.S. forces 
represent by far the largest contingent of the coalition forces 
involved in those conflicts. The disparity is also likely a reflection 
of relatively more stringent licensing controls imposed by the U.S. on 
its exports, and particularly arms exports, resulting in greater need 
for export licenses in the U.S. It is noteworthy that France, the only 
other country on the chart that divides its numbers into dual-use and 
arms exports like the U.S. does, issued a slightly higher percentage 
of arms export licenses than did the U.S. during 2008. French arms 
exports constituted 86% of 2008 exports compared to 79% for the U.S. 
during the same period. 

State would also like to thank the GAO for documenting through this 
report the extraordinary efficiency of State's licensing officers who 
process far more cases than their counterparts in other agencies and 
other governments, and do so more quickly. The report documents that 
the government of the United Kingdom (UK) issues 73% of its licenses 
within 20 business days whereas the U.S. issued 75% of its licenses 
within 20 calendar days. The U.S. issued nine times more licenses with 
only twice as many licensing officers. This report sheds important 
light on State's need for flexibility in the use of registration fees 
in order to be able to hire additional licensing officers and to 
provide a permanent outreach capability. 

Finally, State wishes to clarify one important aspect of the report's 
treatment of the question of enforcement of the proposed Defense Trade 
Cooperation Treaties with the UK and Australia. While the report is 
technically correct in stating that "U.S. regulatory changes will not 
be finalized until the treaties are ratified because the ratification 
process could introduce additional requirements," we must point out 
that the Treaties, their implementing arrangements, and definitions 
have been publicly posted on our websites for over two years. Draft 
regulations have been shared with the Senate Foreign Relations 
Committee and re-drafted in light of their comments and in close 
cooperation with the Department of Justice. In other
words, it has been quite clear for sometime how the U.S. Government 
will enforce the Treaties. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

Contact: 

Belva M. Martin, (202) 512-4841 or martinb@gao.gov: 

Acknowledgments: 

In addition to the individual named above, John Neumann, Assistant 
Director; Jeff Hartnett; Stephen V. Marchesani; Marie Ahearn; Jessica 
Bull; Griffin Glatt; Brenna Guarneros; Ian Jefferies; Susan Neill; and 
Ramzi Nemo made contributions to this report. 

[End of section] 

Footnotes: 

[1] For the purposes of this report, the term arms refers to defense 
articles, defense services, and related technical data, as specified 
in 22 U.S.C. § 2778, and the term dual-use refers to items that have 
both commercial and military applications, such as high-performance 
computers, radars, and underwater television cameras. 

[2] Treaty Between the Government of the United States of America and 
the Government of the United Kingdom of Great Britain and Northern 
Ireland Concerning Defense Trade Cooperation, June 21 and 26, 2007, S. 
Treaty Doc. No. 110-7; Treaty Between the Government of the United 
States of America and the Government of Australia Concerning Defense 
Trade Cooperation, September 5, 2007, S. Treaty Doc. No. 110-10 
(collectively the "treaties"). The treaties, as agreed to by the U.S. 
President, were received in the U.S. Senate and referred to the 
Committee on Foreign Relations on September 20, 2007 and December 3, 
2007, respectively, which held a hearing on both on December 10, 2009. 
The treaties have yet to be ratified by the U.S. Senate. 

[3] Commerce also administers controls for some items that have solely 
civilian use. 15 C.F.R. § 730.3. 

[4] Commerce administers the dual-use export control system through 
requirements contained in the Export Administration Regulations (EAR), 
15 C.F.R. § 730 et seq. These regulations include the list of dual-use 
items subject to specific controls, known as the Commerce Control 
List. The State Department administers the arms export control system 
through requirements contained in the International Traffic in Arms 
Regulations (ITAR), 22 C.F.R. § 120 et. seq. These regulations include 
the list of arms subject to specific controls, known as the United 
States Munitions List (USML). 

[5] Exporters can make a commodity jurisdiction request to the 
Department of State in order to receive a determination as to whether 
a defense article or service is covered under the ITAR. State makes 
the determination in consultation with the Departments of Commerce and 
Defense, as appropriate. 22 C.F.R. §120.4. Exporters may also request 
an advisory opinion, classification, or a determination from Commerce 
as to whether an item, technology, or activity is subject to the EAR. 
15 C.F.R. § 734.6. 

[6] As provided for under Executive Order 12981, the Departments of 
Defense, Energy, and State have the authority to review any export 
license application submitted to the Department of Commerce, and 
Commerce may refer export license applications to other departments or 
agencies as appropriate. Exec. Order No. 12,981, 60 Fed. Reg. 62,981 
(Dec. 5, 1995). These departments or agencies must notify Commerce as 
to the types of applications they do not wish to review, in the event 
that they determine that certain types of applications need not be 
referred to it. If there is disagreement among the agencies, the 
application goes through an interagency dispute resolution process. 

[7] The treaties are applicable to defense articles--including 
articles, services, and related technical data--listed on the USML. 
Arms exports and transfers under the treaties must support certain 
activities, including (1) combined military or counter-terrorism 
operations; (2) cooperative security and defense research, 
development, production, and support programs; (3) mutually agreed 
upon security and defense projects where the United Kingdom or 
Australian government is the end-user; and (4) where the U.S. 
government is the end-user. The first three activities in this list 
will be described or identified in the treaties' implementing 
arrangements. 

[8] Japan does not permit arms exports to other countries. However, in 
exceptional cases, Japan has allowed arms and military technologies to 
be exported to the United States in order to implement joint 
development and production related to ballistic missile defense 
systems. In these cases, exporters must apply for a license from the 
Ministry of Economy, Trade, and Industry (METI), which is the sole 
agency in charge of regulating arms and dual-use items. 

[9] There are a couple of exceptions to DECO's role in regulating arms 
and dual-use exports. The Department of Foreign Affairs and Trade is 
responsible for the domestic implementation of United Nations Security 
Council sanctions which, in some instances, place restrictions on 
defense and dual-use goods and associated services, where those goods 
or services are not specified as part of Australia's Defence and 
Strategic Goods List. The Department of Resources, Energy, and Tourism 
is responsible for issuing permits related to uranium and other 
nuclear goods. 

[10] Canada's Export Control Division of the Department of Foreign 
Affairs and International Trade has sole responsibility for 
controlling the following on its Export Control List: non-nuclear-
related dual-use items; items that are specially designed or modified 
for military purposes and those that present a strategic military 
concern; items that are used or could be used in systems capable of 
delivering chemical, biological or nuclear weapons; chemical 
substances, biological agents, and related items that could be used in 
the production of chemical and biological weapons; and strategic goods 
and technology, such as global navigation satellite systems, 
propulsion and space-related equipment, and ground control stations. 
The Department of Foreign Affairs and International Trade and the 
Canadian Nuclear Safety Commission share export control responsibility 
for nuclear and nuclear-related dual-use items. This report only 
addresses those items where Canada's Export Control Division has sole 
export control responsibility. 

[11] Germany's BAFA is part of the Federal Ministry of Economics and 
Technology. 

[12] The United Kingdom's ECO is part of the Department for Business, 
Innovation, and Skills. 

[13] Germany's consolidated Export List includes a section for arms 
and one for dual-use items. Some items in the arms section, contained 
in a specific list known as "war weapons," are subject to additional 
prohibitions and licensing requirements under the War Weapons Control 
Act, and are reviewed and approved by another part of the Federal 
Ministry of Economics and Technology. When applying for an export 
license to BAFA, applicants have to submit a copy of the war weapons 
license granted by the Federal Ministry of Economics and Technology if 
the export is subject to the War Weapons Control Act. 

[14] The Prime Minister's office has delegated the authority to sign 
prior approvals to export to the General Secretariat for National 
Defence. 

[15] Specifically, the procedures provide that a commodity 
jurisdiction determination will be issued by State within 60 days of 
receipt from applicants, or if there is an interagency dispute it will 
be escalated to the National Security Council by the 50th day under 
the procedures. National Security Council, "Procedures on Commodity 
Jurisdiction Determinations" (June 18, 2009). 

[16] Open individual export licenses are also issued for other goods, 
such as dual-use items and clothing and equipment to protect 
journalists and aid agency workers in areas of conflict. 

[17] NATO-equivalent countries refers to countries such as Australia, 
Japan, and New Zealand. 

[18] United Kingdom officials stated that this directive does not 
override national legal requirements and the United Kingdom maintains 
the right to impose restrictions on re-transfers. 

[19] State regulations allow exporters to request permission to export 
technical data to multiple countries within a single license 
application, but do not permit such requests for the export of 
hardware. Commerce has a special comprehensive license which 
authorizes multiple exports of eligible, preapproved Commerce-
controlled dual-use items and services to preapproved recipients and 
eligible destinations. 15 C.F.R. Part 752. Commerce reported that it 
had issued a total of 12 special comprehensive licenses as of January 
2010, including 1 in 2008 and 1 in 2009. 

[20] A major project authorization provides approval for a range of 
export activities associated with a foreign government's commercial 
acquisition of defense technologies. A global project authorization 
covers all exports planned to occur under a government-to-government 
international agreement for a cooperative project. 

[21] For other countries, State must give written notification to 
Congress at least 30 days in advance of State's intent to approve 
licenses for defense articles and services of $50 million or more, or 
for major defense equipment of $14 million or more. 22 U.S.C. § 2776. 

[22] Australian officials told us that applications are considered 
sensitive if they involve significant dual-use items, items with a 
direct military application, and items that may involve a weapon of 
mass destruction concern, a country of concern, or a country that is 
subject to sanctions. 

[23] The Australian Trade Commission is the government's trade and 
investment development agency and operates under the Department of 
Foreign Affairs and Trade. 

[24] According to French officials, in the case of very sensitive dual-
use export license applications, an interagency commission, chaired by 
the Ministry of Foreign Affairs, meets to discuss them. The 
interagency commission consists of representatives from several 
ministries and organizations within the French government, such as the 
Ministries of Energy and Defence and the General Secretariat for 
National Defence. 

[25] French officials also told us they are in the process of 
developing an electronic licensing system for dual-use applications. 

[26] DDTC's guidance for referring license applications mentions that 
State can also refer applications to the Department of Energy and the 
National Aeronautics and Space Administration. 

[27] The ITAR states it is the policy of the United States to deny 
licenses for exports of defense articles and services, destined for 
certain countries--including Belarus, Cuba, Iran, North Korea, Syria, 
and Venezuela. This policy also applies to countries with respect to 
which the United States maintains an arms embargo (e.g., Burma, China, 
Liberia, Sudan) or whenever an export would not otherwise be in 
furtherance of world peace and the security and foreign policy of the 
United States. 22 C.F.R. § 126.1(a). 

[28] Commerce's definition of an export includes the release of 
technology or software subject to the EAR in a foreign country or to a 
foreign national in the United States. EAR, 15 C.F.R. § 734.2(b)(2). 
The release to a foreign national in the United States is deemed to be 
an export to the home country or countries of the foreign national. 
This deemed export rule does not apply to persons lawfully admitted 
for permanent residence in the United States or persons who are 
protected individuals under the Immigration and Naturalization Act (8 
U.S.C. § 1324b(a)(3)). EAR, 15 C.F.R. § 734.2(b)(ii). 

[29] Under ITAR, a foreign person is defined as any person who is not 
a lawful permanent resident of the United States or who is not a 
protected individual, such as political refugees or political asylum 
holders. 22 C.F.R. § 120.16. 

[30] State's guidance states that this normally does not present a 
problem unless the country of birth is a country where exports are 
prohibited under 22 C.F.R. § 126.1. 

[31] For export control purposes, State's DDTC considers a third- 
country national to be an individual from a country other than the 
country which is the foreign signatory to the technical assistance or 
manufacturing license agreement. A third-country national may also be 
a dual national if he or she holds nationality from more than one 
country. 

[32] This ITAR amendment provides that all access must take place 
completely within the physical territories of the aforementioned 
countries or the United States. 22 C.F.R. § 124.16. 

[33] Under this arrangement, Australian Department of Defence 
personnel that are dual nationals cannot be nationals from the 
prohibited countries listed in ITAR section 126.1. 

[34] In March 2010, the Stockholm International Peace Research 
Institute reported that the United States was the largest supplier of 
major conventional weapons from 2005 to 2009, accounting for 30 
percent of the global arms export market. By comparison, Germany, 
France, and the United Kingdom accounted for 11 percent, 8 percent, 
and 4 percent, respectively, of the global arms export market for 
major conventional weapons over the same period. 

[35] We also included license amendments in the count of total 
licenses approved where such data were available. 

[36] State officials told us they calculate their average license 
processing time from the date they receive the application until it is 
returned to the applicant, and includes the time spent in obtaining 
other agencies' input, participating in interagency dispute 
resolution, and notifying Congress of particular transactions. 

[37] Commerce officials stated the average processing time for dual-
use export applications includes the time that other agencies take to 
review and provide recommendations, but does not include time spent in 
the interagency dispute resolution process. 

[38] An open general export licence (OGEL) allows the export or trade 
of specified controlled goods by any company, removing the need for 
exporters to apply for an individual license, provided the shipment 
and destinations are eligible and that certain conditions are met. 
ECO's compliance officers conduct periodic audits of exporters who 
hold open general export licences. 

[39] This organization, the Society of International Affairs, was 
formed in 1967 by the federal government and industry. Its purpose is 
to serve as a forum for the exchange of information--through events 
such as luncheons, conferences, and workshops--related to export and 
import licensing issues. 

[40] The United Kingdom has an office called the Better Regulation 
Executive which works with government agencies to improve both new and 
existing regulations, and publishes guidance on postimplementation 
reviews. 

[41] As discussed earlier in this report, the treaties are applicable 
to defense articles--including articles, services, and related 
technical data--listed on the USML. 

[42] State officials told us they do not intend to conduct additional 
security evaluations of facilities and personnel. 

[43] For approval for membership in Australia's community, personnel 
will be subject to an additional background check if the initial check 
gives rise to concern of significant ties to a country that is 
proscribed in U.S. regulations. Access will not be granted until 
mutually determined by the United States and Australia. Furthermore, 
for nationals of third countries who are not also Australian citizens, 
approval for membership in the Australian community will require U.S. 
and Australian authorization. 

[44] Under the treaties, re-export and re-transfer refer to the 
movement of previously exported treaty arms from the approved United 
Kingdom and Australian communities. Specifically, re-export refers to 
exporting treaty arms to a location outside of the United Kingdom or 
Australia. Re-transfer refers to the movement of a treaty arm to a 
location within the United Kingdom or Australia. 

[45] U.S. classified arms exported and transferred under the treaties 
will continue to be treated as classified in the United Kingdom and 
Australia. U.S. material is classified if it is determined that the 
unauthorized release of the material could be expected to result in 
damage to U.S. national security. Classified information may only be 
accessed by individuals who have been cleared for access and have a 
need-to-know. 

[46] Australia operates the Defence Security Compliance Program to 
monitor members' compliance with the Defence Industry Security Program 
discussed earlier. 

[47] In Australia, Defence Industry Security Program members, as part 
of the Defence Security Compliance Program, are required to have 
internal compliance programs. As mentioned previously, the United 
Kingdom's ECO conducts periodic audits of exporters who hold open 
individual or general export licences. 

[End of section] 

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