DDTC’s Limited Compliance Data May Be Stunting Defense Services Oversight, GAO Says

The State Department can’t track how many voluntary disclosures it receives involving export violations related to defense services because of “limitations” in its IT system and data collection efforts, the Government Accountability Office said in a report last week. GAO said this may be preventing the agency from evaluating trends or risks related to illegal exports.

Although the agency told GAO it plans to improve its data entry system to better track defense services violations, the State Department was “unable to provide GAO with documentation of these plans,” the report said. The agency also hasn’t established a “definitive time frame” for implementing a new feature that would “improve the accuracy of disclosure submissions,” GAO said.

GAO said it conducted the study because of “recent high-profile cases” involving illegal defense service exports, which has “prompted questions about the U.S. government’s monitoring and enforcement of such cases.” GAO said the State Department should create better procedures for recording data on International Traffic in Arms Regulations violations and make changes to its data collection mechanisms to “improve accuracy and completeness of data.”

GAO said the State Department agreed with the recommendations. But the agency also told GAO that it “found significant factual and analytical errors” in the accountability office’s report and said it disagreed “with the manner in which GAO characterizes the Department’s data.” GAO said it “determined that there were no factual or analytical errors in the report and provided a thorough explanation for our determinations and findings, in our response.”

Even though the State Department doesn’t keep track of how many of the 8,547 voluntary disclosures it received from 2013 and 2021 involved defense service exports, it does track how many led to enforcement actions. The agency pursued 16 ITAR-related civil enforcement actions during that time frame, five for unauthorized defense service exports. But the agency may be missing data from voluntary disclosures that didn’t result in penalties -- GAO said voluntary disclosures accounted for an average of 94% of cases opened by the State Department’s Directorate of Defense Trade Controls during that period.

Agency officials told the accountability office it doesn’t have “sufficient resources to conduct a manual review of hundreds and potentially thousands of cases” from 2013 and 2021 to “verify the accuracy of a data call related to violations involving specific violation types and” U.S. Munitions List categories. Officials said they were “working toward” complete standard operating procedures for better data collection by the end of 2022 and hoped to implement them during the first quarter of this year, GAO said. But “State was unable to provide us with details or documents identifying or describing specific actions or internal controls it would include in the procedures.”

The DDTC also told GAO the agency is working on a new voluntary disclosure application in the Defense Export Control and Compliance System, which a DDTC official mentioned last year (see 2210140037). The new application would allow licensees and applicants, instead of DDTC compliance officers, to enter voluntary disclosure information, GAO said, which is currently submitted through mail or email. The disclosure application would also still require DDTC officials to “verify the completeness and accuracy of data entered by industry personnel during disclosure reviews,” the report said.

The agency told GAO in July that the “disclosure application will be available in the coming months.” A DDTC spokesperson said Feb. 10 that the development of the application is still "in progress."

Because the DDTC can’t provide data by category of ITAR violation, the agency can’t “readily use compliance data … as part of its oversight,” GAO said. “State may be unable to effectively determine whether there are trends in defense services that may indicate risks requiring additional oversight or internal controls for mitigation.”

GAO said other agencies monitor some of this data, including DOJ, which pursued at least 11 cases involving illegal defense service exports between 2013 and 2021. The actual number of cases investigated by the State Department is likely higher, the DOJ said, because the DOJ’s databases don’t specifically track ITAR violations and because the department usually levies charges under other statutes due to the “high legal bar of prosecuting” ITAR cases.

The State Department earlier this year released updated guidance for U.S. persons providing defense services abroad, including updated guidance for U.S. persons abroad (USPAB) authorization requests, a new sample certification letter for USPAB authorization requests, a new USPAB submission letter template and an updated set of frequently asked questions (see 2301060022).