Export Controls: Department of Commerce Controls over Transfers of Technology to Foreign Nationals Need Improvement

GAO-02-972 Published: Sep 06, 2002. Publicly Released: Sep 06, 2002.
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To protect its national security and foreign policy interests, the United States controls exports of civilian technologies that have military uses. U.S. firms may be required to obtain a license from the Department of Commerce before exporting these "dual-use" technologies from the United States to many other countries, including countries of concern. Since Commerce regulations also deem domestic transfers of controlled dual-use technologies to citizens of these countries to be exports, Commerce may require firms that employ foreign nationals working with these technologies in this country to obtain "deemed" export licenses. The firms should, in many cases, hold a deemed export license, and the foreign nationals should have an appropriate visa classification, such as an H-1B specialized employment classification. Commerce issues deemed export licenses to firms that employ or sponsor foreign nationals after consulting the Departments of Defense, State, and Energy. Deemed export licenses are generally valid for 2 years and comprise almost 10 percent of all export licenses approved by Commerce. In fiscal year 2001, Commerce approved 822 deemed export license applications and rejected 3. Most of the approved licenses allowed foreign nationals from countries of concern to work with advanced computer, electronic, or telecommunication and information security technologies in the United States. To better direct its efforts to detect possible unlicensed deemed exports, in fiscal year 2001 Commerce screened thousands of applications for H-1B and other types of visas submitted by foreign nationals overseas. From these applications, it developed 160 potential cases for follow-up by enforcement staff in the field. However, Commerce did not screen thousands of H-1B change-of-status applications submitted domestically to the Immigration and Naturalization Service for foreign nationals already in the United States. In addition, Commerce could not readily track the disposition of the 160 cases referred to field offices for follow-up because it lacks a system for doing so. Commerce attaches security conditions to almost all licenses to mitigate the risk of providing foreign nationals with controlled dual-use technologies. However, according to senior Commerce officials, Commerce staff do not regularly visit forms to determine whether these conditions are being implemented because of competing priorities, resource constraints, and inherent difficulties in enforcing several conditions.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Commerce The Secretary of Commerce should work with the Immigration and Naturalization Service to use all existing U.S. government data in its efforts to identify all foreign nationals potentially subject to deemed export licensing requirements.
Closed – Implemented
Commerce Bureau of Industry and Security (BIS) officials stated that they have taken several steps to identify foreign nationals potentially subject to deemed export licensing requirements. First, Commerce now has access to State's Consolidated Consular Database to expedite their reviews of deemed export cases. Second, since January 2004, the Department of State's Bureau of Non-Proliferation has referred Visa Mantis Security Advisory opinions to BIS in instances when deemed export implications might exist. Third, Commerce established a screening process with the Department of Homeland Security so that any changes in visa status potentially requiring deemed export licenses are forwarded to Commerce for review. Commerce and DHS agreed that this process would be more efficient than giving access to Commerce, as initially contemplated.
Department of Commerce The Secretary of Commerce--in consultation with the Secretaries of Defense, State, and Energy--should establish a risk-based program to monitor compliance with deemed export license conditions. In doing so, the Secretary of Commerce should draw upon the full range of technical expertise available to him, including that within the department or elsewhere in the federal government. If the secretaries of these agencies conclude that certain security conditions are impractical to enforce, they should jointly develop enforceable conditions or alternative methods to ensure that deemed exports to not place U.S. national security interests at risk while promoting U.S. commercial interests.
Closed – Implemented
In response to our report recommendation, Commerce's Bureau of Industry and Security (BIS) has taken actions to better monitor compliance with deemed export license conditions. First, BIS conducted a pilot program during fiscal year 2003 to better assess compliance with license conditions, including deemed export license conditions. The program was designed to monitor and enhance compliance with license conditions by working with exporters to ensure they have in place export management systems capable of tracking and ensuring license condition compliance, and by detecting and prosecuting violations of license conditions. During this pilot, Commerce identified six investigative leads that were sent to BIS field offices for additional investigative actions. Second, in fiscal year 2004, BIS made a series of site visits to individual companies to better assess deemed export licensing practices. As part of these visits, Commerce reviews physical and information security programs, personnel screening practices, training and awareness programs, and self-audit activities.

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