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Description
Report Prepared By United States Government Accountability Office
[The following are excerpts of the report presented to the House of Representatives, Washington, D.C., December 20, 2006. The report in its entirety is located at the following web site: http://www.gao.gov/new.items/do7265.pdf.]
Each year, billions of dollars in dual-use items which have both commercial and military applications and defense items are exported from more than 300 U.S. sea, air, and land ports. To protect national security, foreign policy, and economic interests, the U.S. government controls the export of these items. (1) The Department of Commerce and Department of State (DoS) are principally responsible for regulating the export of dual-use and defense items, respectively.
A key function in the U.S. export control system is enforcement, which consists of various activities that aim to prevent or deter the illegal export of controlled defense and dual-use items and can result in apprehending violators and pursuing and imposing appropriate criminal and administrative penalties, such as imprisonment, fines, denials of export privileges, or debarment. Enforcement activities which include inspections, investigations, and punitive actions against violators of export control laws are largely carried out by the Department of Commerce, Department of Homeland Security, Department of Justice, and DoS. The Department of Enforcement activities can result in various outcomes. One recent case resulted in four business owners pleading guilty to illegally exporting defense items, including radars and smart weapons, to Chinese government-owned entities. Three were sentenced to prison, and all had to collectively forfeit almost $400,000, which represents their revenue from the illegal exports.
Attempts continue to be made by individuals, companies, terrorist organizations, and countries of concern to illegally obtain defense and dual-use items. (2) In light of this, [the committees] asked us to review export control enforcement activities. In response, we have the following.
* Described the roles, responsibilities, and authorities of the agencies responsible for export control enforcement
* Identified any challenges the agencies face in enforcing export control laws and regulations
* Assessed whether information on enforcement outcomes is provided to the export control agencies to inform the export control process and licensing decisions
This report is a publicly releasable version of a law enforcement sensitive report we issued on November 15, 2006. Therefore, some examples that involved law enforcement techniques or methods and that support our findings have been removed from this version.
To conduct our work, we identified enforcement roles, responsibilities, and authorities through an examination of export control statutes, regulations, formal interagency agreements, policies, procedures, and operating manuals. We interviewed agency officials at headquarters and selected field locations responsible for export enforcement including inspectors (3) and investigators from the Department of Homeland Security, investigators from the Department of Commerce, investigators and criminal prosecutors from the Department of Justice, and compliance officers from the DoS about enforcement activities and challenges. We also identified export control enforcement information maintained at the various agencies and spoke with DoS licensing and policy officials and Commerce officials to assess whether they obtain this information for decision making. We performed our review from September 2005 through August 2006 in accordance with generally accepted government auditing standards.
Results in Brief
Export control enforcement is inherently complex, involving multiple agencies that perform various functions using differing authorities. Several agencies within the Department of Commerce, Department of Homeland Security, Department of Justice, and DoS are primarily responsible for export control enforcement. These enforcement agencies conduct a variety of activities, including inspecting items to be exported, investigating potential export control violations, and pursuing and imposing appropriate criminal and administrative penalties. These agencies' enforcement authorities are granted through a complex set of laws and regulations, which give concurrent jurisdiction to the Department of Commerce, Department of Homeland Security, and the Department of Justice's Federal Bureau of Investigation (FBI) to conduct investigations of potential violations of export control laws for dual-use items, and to Homeland Security and the FBI to investigate potential defense item violations.
Enforcement agencies face several challenges in enforcing export control laws and regulations. For example, agencies have had difficulty coordinating investigations and agreeing on how to proceed on cases. Agreements for coordinating investigations do not exist among all the various agencies, and coordination and cooperation often hinge on the relationships developed by individual investigators from the various agencies. Some enforcement activities have also been affected by license determinations, which are used to confirm whether an item is controlled and requires a license and thereby confirm whether an export violation has occurred. DoS and the Department of Commerce officials said they need complete and accurate information from inspectors and investigators to make correct determinations. In some instances, inspectors and investigators said the time it takes to obtain a determination or changes in determinations has affected their enforcement activities. Other challenges that enforcement agencies face include balancing priorities and leveraging finite resources.
Criminal indictments and convictions are key to informing the export control process and licensing decisions. While enforcement agencies have databases to capture information relating to their own export enforcement activities, neither DoS nor the Department of Commerce systematically receives from the Department of Justice notification of the outcomes of criminal cases, including indictments and convictions for both defense and dual-use items and, therefore, lacks the full scope of information on individuals and companies that have been prosecuted. Such information is needed, in part, because indicted or convicted exporters may have their license applications or export privileges denied. Without outcomes of criminal cases, export control agencies may not gain a complete picture of individuals or companies seeking export licenses or trends in illegal export activities.
We are recommending that the Departments of Commerce, Homeland Security, Justice, and DoS take a number of actions to improve coordination and licensing determination efforts and facilitate information sharing of enforcement outcomes with the export control agencies within DoS and Commerce. In commenting on a draft of this report, Commerce, Homeland Security, and DoS generally agreed with the need for coordination but some noted differences in possible approaches. In some instances, they indicated that actions to address our recommendations were already under way. Justice did not provide formal comments, and Defense had no comments on the draft report. Commerce, Homeland Security, Justice, and DoS provided technical comments, which we incorporated in this report as appropriate.
Background
The U.S. government's control over the export of defense and dual-use items is intended to ensure that U.S. interests are protected in accordance with the Arms Export Control Act (AECA) and the Export Administration Act. (4) The U.S. government's control over the export of defense and dual-use items is primarily divided between two departments, DoS, and Department of Commerce, respectively shown in Table 1 with support for enforcement activities primarily from the Department of Commerce, through its Bureau of Industry and Security's Office of Export Enforcement (OEE), Department of Homeland Security, through its Customs and Border Protection (CBP), and Immigration and Customs Enforcement (ICE), Department of Justice, through the FBI, and the U.S. Attorneys Office. (5)
The DoS and Department of Commerce require exporters to identify items mat are on me departments' control lists and to obtain license authorization from the appropriate department to export these items, unless an exemption applies. Exemptions are permitted under various circumstances, such as allowing for the export of certain items to Canada without a license. Many dual-use items are exempt from licensing requirements. While items can be exempt from licensing requirements, they are still subject to U.S. export control laws. Because exporters are responsible for complying with export control laws and regulations, regulatory and investigative enforcement agencies conduct outreach to educate exporters on these laws and regulations. When shipping controlled items, exporters are required to electronically notify CBP officials at the port where the item will be exported, including information on the quantity and value of the shipment, the issued export license number, or an indication that the item is exempt from licensing requirements. (6)
Export enforcement aims to ensure U.S. controlled items do not fall into the wrong hands and to limit the possibility that illegal exports will erode U.S. military advantage. Export enforcement involves inspecting items to be shipped, investigating potential violations of export control laws, and punishing export control violators. (7) When inspectors, investigators, and prosecutors have questions about whether an item is controlled and requires a license, they request a license determination. (8) CBP and ICE request license determinations through ICE's Exodus Command Center, (9) which refers the request to DoS and Department of Commerce; OEE requests determinations directly from Department of Commerce licensing officers. Some FBI agents request license determinations through the Exodus Command Center, while others make such requests directly to DoS or Department of Commerce.
In fiscal year 2005, Department of Justice data showed that there were more than forty individuals or companies convicted of over 100 criminal violations of export control laws. (10) DoS reported over $35 million and Department of Commerce reported $6.8 million in administrative fines and penalties for fiscal year 2005.
For more than a decade, we have reported on a number of weaknesses and vulnerabilities in the U.S. export control system and made numerous recommendations, several of which have not been implemented. For example, in September 2002, we reported that Department of Commerce improperly classified some DoS-controlled items as the Department of Commerce controlled, increasing the risk that defense items would be exported without the proper level of review and control to protect national interests. (11) In June 2006, we reported that this condition remains unchanged and that Department of Commerce has not taken the corrective actions that we recommended in 2002. (12) We have also reported on long-standing problems in enforcement, including poor cooperation among the investigative agencies.... |
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