On April 23, 2012, the U.S. Government Accountability Office (GAO) issued a report that outlines research results on: (1) the activities by the U.S. export control agencies (Agencies) to address transshipment risk and (2) the extent to which U.S. agencies assessed the impact of export control reforms on the resource needs for compliance activities. GAO analyzed U.S. licensing data for 13 transshipment countries and visited Hong Kong, Singapore, and the United Arab Emirates. (Report highlights can be found here.)
GAO's report states that the Agencies use various compliance activities to prevent the diversion or misuse of exported items against U.S. interests or allies and reduce illicit transshipment risk, such as vetting transactions prior to export, analyzing shipping data and monitoring the end use of items, and educating companies and foreign governments about illicit transshipment risks.
GAO found that, "[The] Agencies have not fully assessed the potential impact that control list reforms may pose for the resource needs of their compliance activities. Agencies estimate that Commerce will receive between 16,000 and 30,000 additional license applications as a result of proposed reforms to move less sensitive items from State to Commerce. Agency documents state that this step would allow them to focus resources on items most critical to national security and may make compliance easier for exporters because Commerce imposes fewer requirements than State's controls. However, Commerce has not assessed the impact this added responsibility would have on its end-use check resource needs. Also, under the reforms, fewer items may require export licenses, thereby reducing uncertainty as to whether export sales will be approved. Some agency officials suggested potential risks, such as an increased need for more end-use checks and the loss of information from reviewing exports through the licensing process prior to export. The agencies have not yet assessed the impact of these potential risks on their resource needs."
Based on the report findings, GAO recommends that Commerce and State should assess the potential impact of control list reforms on the resource needs of their compliance activities.