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12 February 2004

Congressional Report Faults Export Verification Program

GAO finds weaknesses in checking on license conditions for advanced tech exports

The investigative agency of Congress has criticized as weak the U.S. Department of Commerce (DOC) program intended to verify that foreign users of U.S. advanced technology exports are complying with export license requirements.

At issue is the DOC's program of post-shipment verification for licensed exports of dual-use items to "countries of concern." Dual-use items can be used for either civilian or military applications. Countries of concern are those believed capable of supporting terrorism or contributing to the proliferation of weapons of mass destruction.

The General Accounting Office (GAO) said in a report released February 11 that while 99 percent of export licenses granted by the Commerce Department impose conditions for their use, few of those exports are subject to post-shipment verification (PSV) -- only about 6 percent in 2000-2002.

GAO said further that many of the checks that were made had weaknesses. It said foreign companies reported that Commerce inspectors failed to ask anything about compliance with license conditions. GAO said further that many of the inspectors lacked technical training for conducting the checks.

The report said some countries of concern, especially China, limit U.S. inspector access to facilities to which dual-use items are shipped, making it difficult to verify that exported items are being used as intended. And it said that results from the checks that were performed have little influence on subsequent export licensing and enforcement decisions.

GAO made several recommendations for improving the verification program and stated that Commerce Department officials generally agreed with them.

For this report GAO defined "countries of concern" to include Azerbaijan, Belarus, China, Egypt, India, Iran, Iraq, Israel, Kazakhstan, North Korea, Pakistan, Russia, Syria and Ukraine.

GAO issued the report upon the request of Senator John Kyl, an Arizona Republican.

The GAO report can be viewed at http://www.gao.gov/new.items/d04357.pdf

Following is an excerpt from the report:

(begin excerpt)

United States General Accounting Office
Report to Senator Jon Kyl, U.S. Senate
January 2004

EXPORT CONTROLS

POST-SHIPMENT VERIFICATION PROVIDES LIMITED ASSURANCE THAT DUAL-USE ITEMS ARE BEING PROPERLY USED


RESULTS IN BRIEF

During 2000 to 2002, Commerce approved 70 percent of the licenses it received for exporting dual-use items to countries of concern. The vast majority of these approved licenses -- 99 percent -- had conditions attached during the interagency process to alleviate concerns about potential diversion or misuse. However, few dual-use export licenses were subject to PSV [post-shipment verification] checks, Commerce's primary mechanism for checking that dual-use items arrive at their proper location and are used in compliance with the conditions of the export license. Our analysis of Commerce's export licensing data found that during fiscal years 2000 to 2002, Commerce completed PSV checks on 428 (6 percent) of the 7,680 dual-use licenses it approved for countries of concern.

We found three key challenges to the PSV process that reduce the effectiveness of this important activity. First, the process of conducting the checks has several weaknesses. U.S. officials do not always verify compliance with license conditions. As a result, 36 percent of the companies we visited or company representatives we spoke with in China, Hong Kong, India, and Russia reported that U.S. officials did not ask them about compliance or attempt to verify compliance with license conditions. In addition, in response to our survey, three-fourths of the U.S. officials who conducted checks between 2000 to 2002 reported that they lacked technical training in key technologies such as electronics, telecommunications, and information security systems. These technologies accounted for 89 percent of the checks conducted in countries of concern during fiscal years 2000 through 2002. Furthermore, end users of dual-use technology may not be aware of the license conditions they are supposed to abide by because Commerce does not require exporters to inform end users in writing of the license conditions. Only 5 of the 25 companies we visited had a copy of the license conditions.

Second, some countries of concern, most notably China, limit the U.S. government's access to facilities where dual-use items are shipped, making it difficult to verify whether exported items are being used as intended.

Third, PSV results have only a limited impact on future licensing decisions. Companies receiving an unfavorable PSV will be scrutinized more carefully in the future, but they can still obtain an export license. In addition, past PSV results play only a minor role in future enforcement actions.

We are recommending that the Secretary of Commerce (1) improve technical training for enforcement personnel conducting PSV checks, (2) ensure that personnel conducting PSV checks assess compliance with license conditions, and (3) require that the exporter inform the end user in writing of the license conditions. In commenting on our report, the Department of Commerce generally agreed with our recommendations and stated that it has already taken significant steps to strengthen the PSV process along the lines we recommended.

(end excerpt)


Related Link

Export Controls: Post-Shipment Verification Provides Limited Assurance That Dual-Use Items Are Being Properly Used. GAO-04-357, January 12, 2004