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Highlights

In fiscal year 2008, the Foreign Military Sales (FMS) program sold over $36 billion dollars in defense articles and services to foreign governments. The Departments of State, Defense (DOD), and Homeland Security (DHS) all have a role in the FMS program. In 2003, GAO identified significant weaknesses in FMS control mechanisms for safeguarding defense articles transferred to foreign governments. In 2007, GAO designated the protection of technologies critical to U.S. national security a high-risk area. GAO was asked to (1) evaluate program changes State, DOD, and DHS have made since 2003 to ensure that unclassified defense articles transferred to foreign governments are authorized for shipment and monitored as required, and (2) determine what information DOD has to administer and oversee the FMS program. GAO conducted 16 case studies; analyzed U.S. port data and FMS agreements; reviewed program performance metrics; and interviewed cognizant officials.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense 1. To establish procedures for DOD verification of FMS shipments, the Secretary of Defense should direct the Under Secretary of Defense for Policy to provide additional guidance to the military services on how to verify FMS shipment documentation.
Closed - Implemented
The Defense Transportation Regulation (DTR) was updated to include improved guidance on export requirements and DOD processes for verifying Foreign Military Sales shipment documents. Existing guidance was also clarified in an update of the Security Assistance Management Manual (SAMM). Additional changes will be made to the DTR and the SAMM after the Department of State publishes revisions to 126.6 of the International Traffic in Arms Regulations (ITAR), which have not yet been finalized.
Department of State 2. To ensure Customs and Border Protection (CBP) port officials have the information needed to verify FMS shipments are authorized, the Secretary of State should direct the Assistant Secretary for Political-Military Affairs, the Secretary of Defense should direct the Under Secretary of Defense for Policy, and the Secretary of Homeland Security should direct the Commissioner of Homeland Security's U.S. CBP to coordinate on establishing a process for: (1) ensuring the value of individual shipments does not exceed the total value of the FMS agreement; (2) designating a primary port for each new and existing FMS agreement; (3) developing a centralized listing of these primary ports for use by CBP port officials; and (4) providing CBP officials with information on FMS agreements that were closed prior to fiscal year 2008.
Closed - Not Implemented
In providing comments on this report, State concurred with this recommendation but has not taken any of the actions necessary to implement it. Because more than five years have passed since the report was issued, the recommendation is being closed as not implemented. Changes to the International Traffic In Arms Regulations (ITAR) section 126.6 were drafted in 2009, but were never finalized. DOD's Defense Security Cooperation Agency provided the State Department's Directorate of Defense Trade Controls with proposed revisions related to the recommendation, however the administration's priorities have, since 2010, focused on implementing the presidentially mandated export control reform initiative, with its main task of rebuilding the U.S. Munitions List, thus regulatory changes related to FMS have not been fully evaluated and completed.
Department of Homeland Security 3. To ensure Customs and Border Protection (CBP) port officials have the information needed to verify FMS shipments are authorized, the Secretary of State should direct the Assistant Secretary for Political-Military Affairs, the Secretary of Defense should direct the Under Secretary of Defense for Policy, and the Secretary of Homeland Security should direct the Commissioner of Homeland Security's U.S. CBP to coordinate on establishing a process for: (1) ensuring the value of individual shipments does not exceed the total value of the FMS agreement; (2) designating a primary port for each new and existing FMS agreement; (3) developing a centralized listing of these primary ports for use by CBP port officials; and (4) providing CBP officials with information on FMS agreements that were closed prior to fiscal year 2008.
Closed - Not Implemented
Although the Department of Homeland Security (DHS) concurred with the recommendation, the agency has not taken all the actions necessary to implement this recommendation. Because more than five years have passed since the report was issued, the recommendation is being closed as not implemented. DHS's Customs and Border Protection (CBP) and DOD's Defense Security Cooperation Agency (DSCA) met most recently on June 16, 2014 to discuss plans for an electronic interface that will ensure the current exportable value of Letters of Offer and Acceptance (LOA) and will align with CBP records of exports. Currently, DSCA is reviewing a draft Memorandum of Agreement with CBP. DHS has not yet finalized its update to the Department of State License Handbook for CBP officers.
Department of Defense 4. To ensure Customs and Border Protection (CBP) port officials have the information needed to verify FMS shipments are authorized, the Secretary of State should direct the Assistant Secretary for Political-Military Affairs, the Secretary of Defense should direct the Under Secretary of Defense for Policy, and the Secretary of Homeland Security should direct the Commissioner of Homeland Security's U.S. CBP to coordinate on establishing a process for: (1) ensuring the value of individual shipments does not exceed the total value of the FMS agreement; (2) designating a primary port for each new and existing FMS agreement; (3) developing a centralized listing of these primary ports for use by CBP port officials; and (4) providing CBP officials with information on FMS agreements that were closed prior to fiscal year 2008.
Closed - Not Implemented
Although DOD concurred with most of our recommendation and partially concurred with the second part of the recommendation, the agency has not yet completed actions to fully implement it. Because more than five years have passed since the report was issued, the recommendation is being closed as not implemented. With regard to part 1 of recommendation 2, DSCA and Customs and Border Protection (CBP) last met on June 16, 2014 to discuss an electronic interface between Information Technology systems. DSCA officials stated that in the future, such an interface will ensure the current exportable value of Letters of Offer and Acceptance (LOA) align with CBP's records of exports. Also in response to part 1 of recommendation 2, DOD has previously updated its policy and guidance related to classified shipments and documenting the cost of repair items correctly. For parts 2 and 3 of recommendation 2, as of July 2014, a centralized port listing and process has not yet been established. DSCA and CBP are working to develop an electronic interface that will identify the exportable value on FMS cases. A system that is accessible to all CBP personnel will eliminate the need to identify a primary port and a centralized listing of primary ports, according to DSCA. In response to part 4 of recommendation 2, DSCA emails a list of closed cases at the end of every fiscal quarter.
Department of Defense 5. To ensure that correct FMS shipments reach the right foreign customers, the Secretary of Defense should direct the Under Secretary of Defense for Policy to examine its existing mechanisms and determine if they can be used to improve tracking of FMS shipments.
Closed - Implemented
In July 2013, improvements to the Enhanced Freight Tracking System (EFTS) began as follows: (1) By identifying certain locations for deliveries in the system, EFTS is now able to use geographic location on shipments to determine when milestones are reached. (2) DSCA has funded USTRANSCOM to provide an upgraded data feed to EFTS. The upgrade will provide consolidation information, increased transaction types, and in-transit reports. (3) DSCA issued policy for an online and offline spreadsheet based reporting alternative for security cooperation shipments. DSCA policy 13-01 was implemented on June 20, 2013, and provided delivery reporting instructions for all Building Partner Capacity program shipments.
Department of Defense 6. To ensure that FMS defense articles are monitored as required, the Secretary of Defense should direct the Under Secretary of Defense for Policy to create written guidance for selecting in-country visits that consider a risk-based approach.
Closed - Implemented
In 2012, DOD incorporated new guidelines for Compliance Assessment Visits into their Security Assistance Management Manual (SAMM) Chapter 8, Section C.8.5. This section indicates that risk assessments are one of the factors that DSCA considers when determining countries to be scheduled for Compliance Assessment Visits.
Department of Defense 7. To improve the administration and oversight of the FMS program, the Secretary of Defense should direct the Under Secretary of Defense for Policy to better determine the administrative costs of implementing the FMS program and develop metrics that allow Defense Security Cooperation Agency (DSCA) to comprehensively assess the performance of the FMS program.
Closed - Implemented
DSCA Policy No. 10-18 was signed on March 26, 2010. It provides performance metrics and established a Letter of Offer and Acceptance (LOA) Anticipated Offer Date to increase responsiveness to the purchaser. The policy is available at: http://www.dsca.mil/samm/PolicyMemos/2010/DSCA%2010-18.htm

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