12 February 2004
Congressional Report Faults Export Verification Program
GAO finds weaknesses in checking on license conditions for advanced
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
The GAO report can be viewed at http://www.gao.gov/new.items/d04357.pdf
Following is an excerpt from the report:
United States General Accounting Office
Report to Senator Jon Kyl, U.S. Senate
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
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.
Controls: Post-Shipment Verification Provides Limited Assurance
That Dual-Use Items Are Being Properly Used. GAO-04-357, January