Department of Defense

Office of the Inspector General -- Audit

Interagency Review of the Commerce Control List and the U.S. Munitions List -- Report No. D-2001-092 (PDF)

Date: March 23, 2001



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In August 1998, the Chairman of the Senate Committee on Governmental Affairs requested that the Inspectors General from the Departments of Commerce, Defense, Energy, State, and the Treasury and the Central Intelligence Agency conduct an interagency review of the export licensing processes for dual-use commodities and munitions. The objective of the review was to determine whether current practices and procedures were consistent with national security and foreign policy objectives. An interagency Offices of the Inspectors General (OIG) Report No. 99-187, "Interagency Review of the Export Licensing Processes for Dual-Use Commodities and Munitions," was issued in June 1999.

Public Law 106-65, National Defense Authorization Act for Fiscal Year 2000, section 1402, "Annual Report on Transfer of Militarily Sensitive Technologies to Countries and Entities of Concern," October 5, 1999, required the President to submit an annual report to Congress, beginning in the year 2000 and ending in the year 2007, on the transfer of militarily sensitive technology to countries and entities of concern. The National Defense Authorization Act further required that the Inspectors General of the Departments of Commerce (Commerce), Defense (Defense), Energy (Energy), and State (State), in consultation with the Director, Central Intelligence Agency, and the Director, Federal Bureau of Investigation, conduct an annual review of policies and procedures of the U.S. Government with respect to their adequacy to prevent export of sensitive technologies and technical information to countries and entities of concern. An amendment to section 1402(b), found in section 1075 of the National Defense Authorization Act for FY 2001, further requires the Inspectors General to include in their annual report the status or disposition of recommendations that have been set forth in previous annual reports under section 1402.

To comply with the first-year requirement of the National Defense Authorization Act, the OIGs conducted an interagency review of Federal agency compliance with the deemed export licensing requirements contained in the Export Administration Regulations and the International Traffic in Arms Regulations. To comply with the second-year requirement of the National Defense Authorization Act, the OIGs conducted an interagency review to assess policies and procedures for developing, maintaining, and revising the Commerce Control List (CCL) and the U.S. Munitions List (USML).

The United States controls the export of certain goods and technologies for national security, foreign policy, or nonproliferation reasons under the authority of several different laws. The Export Administration Act of 1979, as amended, is the primary legislative authority for controlling the export of dual-use commodities,1 whereas the export of goods and technologies that have only military use is controlled under the authority of the Arms Export Control Act. The Government publishes two lists, the CCL and USML, which identify the goods and technologies that are subject to export controls. Exporters use the CCL, which is managed by the Commerce Bureau of Export Administration, to determine what dual-use commodities are subject to control. For munitions, exporters refer to the USML, which is managed by State's Office of Defense Trade Controls.

Our overall objective was to assess policies and procedures for developing, maintaining, and revising the CCL and USML. In addition, Commerce, Defense, and State OIGs assessed whether a need exists for more transparency in the commodity jurisdiction process. Commerce and Defense OIGs also assessed whether a need still exists for greater transparency in the commodity classification process.

Review Results.

Review of the Commerce Control List. The Commerce and Defense OIGs reported that improvements could be made in how the CCL is developed, maintained, and revised. Specifically, the Commerce OIG was concerned about the clarity and user-friendliness of the CCL. Because of those concerns, exporters may make errors in determining whether their item is controlled by the CCL and, as such, may either apply for a license when one is not required or not apply when a license is required. In maintaining the CCL, the Commerce OIG found that some items included in four Export Control Classification Numbers are controlled on the CCL for national security reasons, but are no longer controlled by the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies. The Defense OIG reported that enhancements are needed to improve the review of unilaterally controlled items on the CCL and the review of countries listed on the Commerce Country Chart. Further, the Commerce OIG found that changes resulting from the multilateral plenary2 sessions are not always reflected in the list in a timely manner. As a result of those problems, items may be subjected to tighter or more lenient controls than the Export Administration Act allows. The Energy OIG concluded that Energy, which has a minor role in developing, maintaining, and revising the CCL and USML, is providing appropriate support to the development and review of the Nuclear Referral List,3 a subset of the CCL. The process appears to be working appropriately and no concerns have been raised by other agencies regarding Energy's role.

Review of the U.S. Munitions List. The Defense and State OIGs found that the Office of Defense Trade Controls had not performed a comprehensive review of the USML since 1993. The Commerce OIG found that most users believed that the USML is not as easy to understand and use as the CCL. In an effort to improve export controls, in May 2000 a series of Defense Trade Security Initiatives was announced by the Secretary of State. One of those initiatives, number 17, "Periodic Reviews of the USML," requires that the Defense Threat Reduction Agency and State's Office Defense Trade Controls review the USML to ensure clarity and appropriateness. To comply with the initiative, the Defense Threat Reduction Agency has scheduled a review of 5 of the 19 active USML categories to be completed in May 2001. To help improve the user-friendliness of the USML, the Defense Threat Reduction Agency is supposed to help ensure that USML categories reflect the technologies considered significant in the list of militarily critical technologies and clarify USML language to ensure that users of the list can easily identify the items requiring export licenses. However, the Defense OIG found that critical parameters for the military technologies listed in the list of militarily critical technologies, a list developed to be a guide for export controls, may be outdated and that developing technologies with potential military applications may not have been identified on the list. The Defense and State OIGs jointly concluded that periodic reviews of the USML required by the Defense Trade Security Initiatives are needed and should continue into the future.

Commodity Jurisdiction Process. The Commerce, Defense and State OIGs found that their respective agencies did not comply with mandatory timeframes set forth in National Security Council guidance for processing commodity jurisdiction requests. Exporters unsure as to whether an item is on the USML can request a commodity jurisdiction determination from the Office of Defense Trade Controls to rule on the export licensing jurisdiction for the item. The commodity jurisdiction process can also be used to consider moving an item currently covered by the USML to the CCL. Specifically, the Bureau of Export Administration and the Defense Threat Reduction Agency did not comply with the timeframes to respond to the Office of Defense Trade Controls on commodity jurisdiction referrals because of competing priorities and limited resources and because the Office of Defense Trade Controls did not impose or enforce any deadlines. When the Office of Defense Trade Controls received the referrals from the Bureau of Export Administration and the Defense Threat Reduction Agency, it was also not timely in making its final commodity jurisdiction determinations because of resource constraints and competing priorities. As a result, all three agencies contributed to commodity jurisdiction determinations being made to exporters in an untimely manner-a situation that can cause delays or cancellations in shipments and uncertainty in the business community regarding the export control jurisdiction of certain items. The Commerce and State OIGs also identified problems associated with commodity jurisdiction cases being processed and tracked manually. Specifically, the manual system for processing commodity jurisdiction determination requests can be unreliable and does not lend itself to providing transparency and accountability for the commodity jurisdiction process. This situation increases the risk that documents can be lost, misplaced, or misdirected, resulting in unnecessary delays.

Unresolved Jurisdictional Issues. The Commerce and State OIGs noted a breakdown in the interagency process for resolving jurisdictional disputes for night vision equipment and space qualified items.4 With regard to night vision equipment, the Commerce and State OIGs noted ongoing disagreements about whether such equipment should be licensed by the Bureau of Export Administration or by the Office of Defense Trade Controls. Because of the inability of the licensing agencies to resolve the dispute, license applications are being delayed and exporters are confused about which agency they should apply to for a license for those goods. In addition, the U.S. Government has not been able to make a decision about which agency has jurisdiction for 16 categories of space qualified items currently controlled under the CCL. As a result, the National Security Council initiated a review to determine which Federal agency should have jurisdiction for the 16 space qualified items and was expected to rule in April 2000. However, as of March 2001, no decision has been made. Finally, the Commerce and State OIGs determined that the lack of formal policies and procedures in the Government jurisdiction process has led to confusion among both licensing agencies and exporters.

Commodity Classification Process. The Commerce and Defense OIGs reported that the commodity classification process was not transparent because the Bureau of Export Administration may not be referring munitions-related commodity classifications to the Defense Threat Reduction Agency and the Office of Defense Trade Controls. The failure of the Bureau of Export Administration to refer such commodity classifications to the other licensing agencies, as called for in guidance issued by the National Security Council in 1996, leaves the Bureau of Export Administration vulnerable to incorrect classifications. That finding was also reported as part of the 1999 interagency OIG export licensing review. While concurring with the 1999 Commerce OIG recommendation to work with the National Security Council to develop specific criteria and procedures for the referral of munitions-related commodity classifications to the Defense Threat Reduction Agency and the Office of Defense Trade Controls, the Bureau of Export Administration has taken no action to correct the problems because it maintains that it is currently in compliance with the National Security Council guidance. In addition, during the current review, the Commerce OIG found that the Bureau of Export Administration was not providing the Office of Defense Trade Controls with a copy of the final commodity classification determinations for any commodity classifications reviewed.

Followup to Prior Interagency Review. Appendix B contains the current status of the recommendations made by each agency as required by the amendment to section 1402 of the National Defense Authorization Act for FY 2001.

Recommendations, Agency Comments, and OIG Responses. The participating OIGs made specific recommendations relevant to their own agencies. Recommendations, agency comments, and OIG responses are included in the separate reports issued by each office, which are in Appendix C (Commerce), Appendix D (Defense), Appendix E (Energy), and Appendix F (State). Because of time constraints, agency managers were not asked to respond to this interagency report.

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1Some controlled commodities are designated as "dual-use," that is, goods and technologies that have both civilian and military use.

2Plenary sessions are the annual and/or semiannual meetings of the various multilateral regimes fully attended by all qualified members.

3The Nuclear Nonproliferation Act of 1978, Section 309 (c) states that "The President shall publish procedures regarding control by the Department of Commerce over all export items, other than those licensed by the Commission [Nuclear Regulatory Commission], which could be, if used for purposes other than those for which the export is intended, of significance for nuclear explosive purposes." The Act also states that the Secretaries of Commerce and Energy are both responsible and must agree to changes in control procedures in consultation with other agencies. The Nuclear Referral List consists of those items on the CCL controlled for nuclear nonproliferation concerns.

4According to the Export Administration Regulations, the term "space qualified" refers to products designed, manufactured, and tested to meet the special electrical, mechanical, or environmental requirements for use in the launch and deployment of satellites or high-altitude flight systems operating at altitudes of 100 km or higher.



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