oversight

Automated Export System: Prospects for Improving Data Collection and Enforcement Are Uncertain

Published by the Government Accountability Office on 1997-11-14.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to the Chairman, Committee on
                 the Judiciary, U.S. Senate



November 1997
                 AUTOMATED
                 EXPORT SYSTEM
                 Prospects for
                 Improving Data
                 Collection and
                 Enforcement Are
                 Uncertain




GAO/NSIAD-98-5
             United States
GAO          General Accounting Office
             Washington, D.C. 20548

             National Security and
             International Affairs Division

             B-278136

             November 14, 1997

             The Honorable Orrin Hatch
             Chairman, Committee on the Judiciary
             United States Senate

             Dear Mr. Chairman:

             Since the 1980s, federal agencies responsible for compiling U.S. trade
             statistics and enforcing U.S. export laws have experienced serious
             problems in obtaining accurate and timely data on exports. To improve
             reporting and enhance enforcement efforts, the U.S. Customs Service and
             the Census Bureau in 1991 initiated the Automated Export System (AES).
             AES allows exporting companies to electronically enter data on shipments,
             automatically checks for errors, and provides data to help detect export
             violations. Although it introduced the system as voluntary, Customs
             recognized that achieving a high level of participation in AES would be
             difficult and wanted its use to be mandatory. In 1996, Customs sought to
             make AES mandatory for some users. However, AES was not made
             mandatory, in part because companies raised concerns about the impact
             of AES on their business practices, especially if they are required to enter
             data before shipments depart.

             At your request, we reviewed the potential impact of AES and the views of
             the export community regarding AES. Specifically, we sought to determine
             whether AES is likely to achieve its objectives of improving export data,
             enhancing enforcement efforts, and streamlining export data collection
             and, in so doing, we obtained the export community’s views on AES. As you
             requested, we are also providing information on the export procedures of
             other selected countries. (See app. I for information on selected
             countries.)


             Merchandise trade, the exchange of goods with other nations, is an
Background   increasingly important component of the U.S. economy. The U.S. Customs
             Service collects data on imports and exports that the U.S. Census Bureau
             uses to produce statistics on U.S. trade. While Customs has numerous
             import responsibilities, its export functions include guarding against the
             exportation of illegal goods, such as protected technologies, stolen
             vehicles, and illegal currency.




             Page 1                                  GAO/NSIAD-98-5 Automated Export System
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Customs has broad authority to enforce export laws and regulations.
However, it has historically placed more emphasis on imports than on
exports. While U.S. import data is recognized as generally reliable, export
data is viewed as less accurate. A 1997 Census report notes that the value
of U.S. exports has probably been underreported by between 3 and
7 percent but could be understated by as much as 10 percent.1
Underreporting of exports can significantly affect the accuracy of
statistics on the nation’s trade balance. Inaccurate trade statistics can be
an impediment in negotiations for bilateral and multilateral trade
agreements. Export statistics also are relied on by the government to
calculate the gross domestic product (which is used to assess the
performance of the U.S. economy) and to determine appropriate
promotional programs for expanding exports. Export data is also used to
establish controls on sensitive exports.

A primary source of export statistics is information that is recorded on a
form called the Shipper’s Export Declaration (SED). The SED contains
information such as the nature, value, quantity, and destination of the
goods to be exported. Generally, exporters or their agents are required by
regulation to file the SED for each export transaction having a value over a
certain amount, now set at $2,500 for all shipments without a license.2
Under current regulations, the SED must be delivered to the exporting
carrier prior to exportation.3 Ocean and air carriers, with a bond on file,4
are permitted to file the complete manifest (a carriers manifest lists all the
cargo it is transporting) with Customs within 4 working days after
departure. For overland shipments, the SED must be presented to Customs
at the time of export.

The major sources of error in merchandise trade statistics include missing
SEDs and incomplete or inaccurate reporting. Since the 1980s, Customs,
Census, and other government agencies have conducted numerous
studies, which found serious problems with companies properly
completing the document and filing it at the required time and place. For
example, Customs completed an audit of selected ocean vessel manifests
in 1996 that found about 29 percent of shipments listed on the manifest did
not have the required SED. In 1997, Customs conducted an audit of airline

1
See “Understatement of Export Merchandise Trade Data,” U.S. Bureau of the Census, Foreign Trade
Division (Washington, D.C.: Jan. 1997).
2
 Mail shipments must be reported if they have a value over $500.
3
 15 C.F.R. § 30.12.
4
 15 C.F.R. § 30.24.



Page 2                                                GAO/NSIAD-98-5 Automated Export System
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                   manifests that determined 40 percent of SEDs were incorrectly completed.
                   Without a properly completed SED, an export is either not recorded or
                   recorded incorrectly.

                   Currently, about one-third of all export transactions are recorded on paper
                   SEDs. Census collects another third5 of the export data on a monthly basis
                   directly from exporting businesses through an electronic filing system
                   known as the Automated Export Reporting Program (AERP). Census is
                   terminating AERP in December 1999 because it believes the system is
                   outdated and that AES will provide more accurate data. (Twenty-five
                   percent of all AERP transmissions contain errors that must be corrected.)
                   Census officials stated that AERP has systems limitations related to the
                   amount of data it can accept. They stated that the system would require a
                   complete redesign in methodology and computer technology in order to be
                   able to accept more participants and improve data quality, resulting in a
                   system similar to AES. Census officials also noted that about one-third of all
                   AERP participants submit their data late via AERP.



Context for AES’   Customs and Census initiated AES in 1991 to improve (1) the collection and
Development        reporting of export statistics and (2) the enforcement of export
                   regulations. Initially, the system was designed to replace the manual
                   process of handling paper SEDs with a more efficient and less costly
                   automated process that would increase the accuracy, completeness, and
                   timeliness of SED data.

                   AES is an interactive system that allows exporters or their agents to
                   electronically transmit SED information directly to Customs before a
                   carrier’s departure. In order to improve the quality of export data, data
                   transmitted via AES is subjected to a series of automatic edits. The system
                   in turn sends back to the exporter a message to check the data if it does
                   not fall within statistical parameters developed by Customs and Census.
                   (See app. II for information on how AES works.)

                   According to Customs, AES was also designed to improve the enforcement
                   of export controls by evaluating the risk of export shipments based on




                   5
                    The remaining one-third of export data is captured by the U.S.-Canada data exchange, whereby the
                   United States and Canada exchange import records and use them to determine each country’s exports
                   to one another. For more information on the data exchange, see Measuring U.S.-Canada Trade: Shifting
                   Trade Winds May Threaten Recent Progress (GAO/GGD-94-4, Jan. 19, 1994).



                   Page 3                                              GAO/NSIAD-98-5 Automated Export System
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certain criteria, such as the country of destination and the type of cargo;6
compiling exporter histories; allowing for trend analysis; and providing
inspectors with detailed commodity data prior to departure. Customs
officials believe that the more export information they have, the more
focused their efforts to target illegal shipments will be.

Finally, in 1994, in response to several initiatives including the Vice
President’s National Performance Review, Customs decided that AES
should be expanded to provide a centralized database for collecting and
processing export documentation required by the U.S. government.
Customs planned to work with other U.S. government agencies that have
export-related responsibilities to help these agencies meet their export
information requirements through AES. (See p. 18 for a discussion of the
present status of the single electronic filing center.)

Customs installed AES in all U.S. vessel ports in October 1996, and
currently it is operational in all ports, including air, rail, and truck transit
ports.7 Customs and Census officials estimate that they spent
approximately $12.9 million to develop and implement AES from fiscal
year 1992 to 1997. These costs include, among other things, expenses for
contractors, travel, and training. According to Customs’ and Census’
figures, both agencies estimate that together they will spend an additional
$32.2 million through fiscal year 2002 on AES implementation and
maintenance.

This new system would require companies to make various changes in
how they submit their export data to Customs. Companies that submit
their export data via AERP will have to undergo modifications in
programming the processing of their export data or return to submitting
paper SEDs. Companies that submit their data via paper SEDs but want to
participate in AES will have to automate their export processing, and/or
purchase AES software, or use the facilities of a port authority or service
center to transmit their data.

In addition, some segments of the trade community have alleged that AES
will require major changes in their current business practices. Because

6
 Customs officials estimate that they inspect less than 1 percent of export shipments. Customs has not
historically tracked the number of seizures that have resulted from its inspections. However, as of
June 1997, all ports have been required to collect data on all outbound cargo inspections, including all
commercial or personal shipments exported by any mode of transportation, and the resulting number
of seizures of illegal exports.
7
 AES is not yet accepting transportation data for air, rail, and truck carriers. According to Customs
officials, AES will be accepting air and rail transportation data by the end of 1998 and truck
transportation data in 1999.



Page 4                                                 GAO/NSIAD-98-5 Automated Export System
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                       Customs has not strictly enforced the legal requirement that companies
                       submit their SEDs to the carrier prior to departure, many companies have
                       grown accustomed to turning in their SEDs to the carriers late. AES will
                       require that companies file their export data directly to Customs, rather
                       than the carrier, prior to departure.

                       The trade community has varying views on AES. To obtain these views, we
                       conducted two surveys of potential AES users: (1) a nationally
                       representative sample of 400 U.S. ocean freight forwarders and Non-Vessel
                       Operating Common Carriers (NVOCC)8 and (2) 80 U.S. exporting companies
                       that file paper SEDs. We also interviewed officials from 12 of the largest
                       U.S. sea and air carrier companies and several trade groups representing
                       various segments of the export community. (See app. III for complete
                       survey results.) (We did not independently verify information provided by
                       U.S. companies and trade groups.) We also interviewed Customs officials
                       at 13 sea, air, and land ports. As of June 1997, we completed the surveys
                       and interviews.


                       It is not yet clear what benefits will result from the use of AES because
Results in Brief       many critical implementation issues remain unsolved. Although AES has
                       the potential to improve export reporting and enhance enforcement
                       efforts, it is unlikely to achieve these objectives unless more exporters are
                       willing to participate and limitations that prevent other agencies from fully
                       using the system are resolved. Concerning the trade community’s limited
                       participation, we identified the following:

                   •   Only a small fraction of the export community—37 companies—is
                       currently using AES, and the data entered represents less than 1 percent of
                       all exports.
                   •   Our survey of exporting companies suggests that most of them are not
                       likely to use AES over the next 3 years.
                   •   Twenty-five percent of all U.S. ocean freight forwarders had not heard of
                       AES.




                       8
                        Freight forwarders and NVOCCs make the arrangements for the shipment of goods for most
                       exporters, including the filing of information required by Customs, Census, and other federal agencies.
                       NVOCCs differ from freight forwarders in that they may also lease a vessel to transport the goods. For
                       ease of presentation, hereafter we refer to both groups as “freight forwarders.” Although our freight
                       forwarder study population consisted of active licensed ocean freight forwarders and NVOCCs listed
                       by the Federal Maritime Commission, and is not representative of air freight forwarders, 85 percent of
                       the company officials we spoke with told us that their firms provide services to clients exporting by
                       air.



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The primary benefit cited by companies using AES and planning to use AES
was automated filing. Other benefits cited included the potential for
reducing paperwork and personnel and associated administrative costs,
participating in the initial development of AES, and filing all export data at
a central filing point. However, for some segments of the trade community,
these benefits are outweighed by their concerns regarding the
predeparture filing requirement, which they contend is inconsistent with
their business practices and will be costly and burdensome to their
business.

AES  is designed to improve Customs’ enforcement efforts by providing
detailed commodity data to help the inspector target illegal shipments. It
also is designed to provide a database that can be run against specific
criteria to identify high-risk shipments and compile exporter histories.
However, the system’s usefulness as an enforcement tool is limited for
several reasons. First, as currently designed, it is not linked with the
databases of other law enforcement agencies. Second, under a program to
facilitate the use of AES, Customs plans to permit approved exporters to
file export data after shipment, which could undermine efforts to detect
export violations before illegal goods are transported. Third, AES allows
SED information to be transmitted only hours before a shipment’s
departure, which in most cases will not provide inspectors sufficient time
for targeting possible illegal shipments. Finally, many Customs inspectors
anticipate that illegal exporters are unlikely to use AES to file their export
data, further limiting AES’ potential as an enforcement tool.

Also, AES faces limitations in achieving its goal to create a single
information collection and processing center for the electronic filing of
export documentation required by the U.S. government. The system was
also designed to reduce related export documents. Many export-related
agencies are subject to existing regulations requiring them to retain their
own licensing procedures. Ten of the 13 agencies with major
export-related responsibilities say they have export requirements that will
not be fully satisfied through AES.

Customs is attempting to resolve these issues through several means. For
example, the Commissioner of Customs has proposed that Customs enter
into formal negotiations with the trade community to resolve outstanding
issues of concern. In addition, Customs is continuing to work with other
agencies to identify any of their export requirements that can be
potentially incorporated into AES.




Page 6                                   GAO/NSIAD-98-5 Automated Export System
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                              Because Customs and Census plan to spend $32 million beyond the
                              $13 million expended to date, we are concerned that Customs and Census
                              will allow the system to proceed without fully resolving these issues. In
                              our opinion, AES is at a critical juncture in its implementation. Senior
                              management attention at both Customs and Census is needed to determine
                              the extent to which concerns can be addressed that affect participation by
                              the export trade community, that deal with the improvement of export
                              enforcement, and that respond to the requirements of other agencies with
                              export-related functions. After addressing these concerns, a cost-benefit
                              analysis of AES is needed to determine how or whether to proceed with
                              implementation.


                              Although AES has features to improve export data collection and
Factors Hindering             enforcement efforts and to reduce paperwork, the system’s effectiveness
AES’ Ability to Meet          is hindered by low participation of the export community. Unless AES
Its Objectives                participation increases significantly, AES will not enhance the quality of
                              export data or the enforcement of export regulations. In addition, other
                              factors may limit AES’ ability to achieve its objective of enhancing export
                              control enforcement. For example, Customs’ plans to introduce a
                              post-departure filing program may impede the system’s effectiveness as a
                              tool for targeting illegal exports. Finally, AES will not likely serve as a
                              central point for collecting and processing all export documents because
                              other export-related agencies have information needs that they say cannot
                              be fulfilled through AES.


Trade Community               Trade community participation in AES is currently very limited, and our
Participation Is Low and      work showed most companies do not have immediate plans to participate
Likely to Be Limited in the   in AES. As of September 1997, AES participants included 8 exporters, 27
                              freight forwarders, and 2 sea carriers out of tens of thousands of
Near Future                   export-related businesses. Currently, less than 1 percent of all export data
                              is being submitted via AES.

                              Customs expects participation in AES to increase for several reasons. For
                              example, Customs is planning to introduce the Automated Export System
                              Post-Departure Authorized Special System (AES-PASS), which is a program
                              designed to encourage participation in AES by allowing qualified exporters9

                              9
                               The exporter or the freight forwarder (on behalf of the exporter) will be allowed to apply for the
                              program, and government agencies with export requirements will be responsible for authorizing an
                              applicant’s participation. These agencies will review all applications according to criteria and
                              standards established by their respective agencies. Approval to participate in AES-PASS must be
                              unanimous.



                              Page 7                                                GAO/NSIAD-98-5 Automated Export System
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                               to submit a minimal amount of information prior to export—generally an
                              exporter identification number and a reference number for the shipment.
                              Further, Census is terminating AERP and hopes current users will switch to
                              AES. Customs also anticipates an increase in participation since AES first
                              came online in July 1997 for exports via air, truck, and rail.

Most Companies Surveyed Do    Despite Customs’ expectations of increased participation, most companies
Not Have Immediate Plans to   we surveyed do not have immediate plans to use AES. We surveyed 400
Get on AES                    randomly selected freight forwarder companies and 80 exporters that file
                              paper SEDs. As shown in figures 1 and 2, only about 36 percent of freight
                              forwarders and about 32 percent of exporters we spoke with currently
                              plan to use AES to submit their SED information; only 50 percent and
                              42 percent of those companies, respectively, reported that they plan to get
                              on AES within the next 3 years. Of the companies that plan to use AES, only
                              4 percent of the freight forwarders and 5 percent of the exporters have
                              filed a notice with Customs10 that they plan to participate in AES or are
                              testing AES. (See fig. 3.) In addition, more than half the companies we
                              surveyed that plan to use AES do not know when they will use it. Most
                              companies did not know how much it will cost their company to
                              implement AES and were not familiar with the AES-PASS program (see fig. 4).




                              10
                                In order to participate in AES, companies must file a notice, or letter of intent, with Customs.



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Figure 1: Freight Forwarders’ Plans
Regarding AES
                                                                                                              Never heard of AES 25.0%

                                      Plan to use   35.7%




                                                                                                                               a
                                                                                                             Plans not known       25.3%
                                                    Will not use   14.0%




                                      Note: To present a complete composite of ocean freight forwarders’ posture toward AES, figure 1
                                      includes the responses from two survey questions: question 9, which asked whether or not
                                      companies had heard of AES, and question 12, which asked those companies who had heard of
                                      AES about their plans regarding its use.

                                      a
                                       Companies whose “plans are not known” include companies that were undecided about whether
                                      to use AES and company officials we interviewed who did not know their companies’ plans
                                      regarding AES.




                                      Page 9                                              GAO/NSIAD-98-5 Automated Export System
                                       B-278136




Figure 2: Exporters’ Plans Regarding
AES
                                       Plan to use 31.7%                                                   Never heard of AES 22.2%




                                       Will not use   17.5%                                                             a
                                                                                                      Plans not known       28.6%




                                       Note: To present a complete composite of the total exporter survey population’s posture toward
                                       AES, figure 1 includes the responses from two survey questions: question 9, which asked whether
                                       or not companies had heard of AES, and question 12, which asked those companies who had
                                       heard of AES about their plans regarding its use.

                                       a
                                        Companies whose “plans are not known” include companies that were undecided about whether
                                       to use AES and company officials we interviewed who did not know their companies’ plans
                                       regarding AES.




                                       Page 10                                            GAO/NSIAD-98-5 Automated Export System
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Figure 3: Freight Forwarders’ and Exporters’ Status of Involvement With AES (Those Planning to Use AES)

Percent of respondents
100


 80


 60


 40


 20


   0                                                                  a                   b
           Studying AES        Planning to file     Filed letter/testing      Other                       Do not know
                                  Status of involvement with AES among planned users

                                              Freight Forwarder      Exporter




                                          Note: Figure applies to the 117 freight forwarders and 20 exporters that plan to use AES.

                                          a
                                           Includes companies that filed a notice or letter of intent with Customs that they intend to get on
                                          AES, and companies that are testing AES.
                                          b
                                           Comments from companies that responded that their status of involvement in AES was “other”
                                          included those that were in the process of developing AES software or not at that time actively
                                          pursuing participating in AES because of a lack of information on the system.




                                          Page 11                                                GAO/NSIAD-98-5 Automated Export System
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Figure 4: Freight Forwarders’ and
Exporters’ Knowledge of AES (Those
Planning to Use AES)                 Percent of respondents
                                     100



                                      80



                                      60



                                      40



                                      20



                                       0
                                                    Cost unknown              Timingofofuse
                                                                             Timing      useunknown
                                                                                             unknow        AES-PASS
                                                                                                         Unfamiliar    unfamiliar
                                                                                                                    with AES-PASS
                                                                      Knowledge of AES among planned users

                                                                              Freight Forwarder   Exporter




                                     Note: Figure applies to the 117 freight forwarders and 20 exporters that plan to use AES.


Benefits Cited by the Trade          Companies and industry groups we spoke with cited certain benefits to
Community Do Not Outweigh            getting on AES. The primary incentive mentioned was automating their
Concerns                             export system. About 50 percent of the companies we surveyed that plan
                                     to use AES said that automation was an incentive to use AES. The other
                                     benefit voiced by over 15 percent of respondents was the potential for a
                                     single filing point for all export data, referred to as “one-stop filing” by
                                     Customs. In addition, those companies we interviewed that are already
                                     using AES said that they were doing so to reduce paperwork and personnel
                                     and associated administrative costs, take advantage of new automated
                                     initiatives, and participate in the development of AES.

                                     While the cost of automation and lack of knowledge regarding AES were
                                     cited as possible impediments to AES participation by the export




                                     Page 12                                              GAO/NSIAD-98-5 Automated Export System
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community,11 predeparture filing emerged as a key concern among some
segments of this group. Our work indicates that whether or not
predeparture filing posed a problem for businesses was related to the type
of export or mode of transportation used to export.

According to industry groups and several companies’ officials we
interviewed, filing information predeparture is inconsistent with their
business practices. These officials told us that they often do not know the
precise volume and value of their final shipment until just before
departure, which makes it difficult to file their paperwork on time.
Predeparture filing was a particular concern for exporters of bulk goods or
grain commodities. Some of these companies said that they would have to
enter estimates in AES prior to departure and that the estimates would then
have to be revised later, thereby resulting in rework. One exporter
described this as having to do “twice the work.”

Regarding carriers, all of the eight airlines and air couriers we spoke with
said that meeting the predeparture filing requirement would present a
problem for their current business operations; six said that they would not
participate in AES due to this requirement. While the air couriers we
interviewed said that they generally have the SEDs in hand prior to
departure, because of the fast-paced nature of the air courier business they
are unable to input SED data into AES before the aircraft departs.
Representatives from both these industries told us that they anticipate
having to input data into AES as a service to exporters and freight
forwarders.

Representatives from companies participating in Customs’ evaluation of
AES, conducted in two vessel ports in 1996 before AES was expanded to all
ports, indicated problems with predeparture filing. Representatives from
some companies stated that 80 percent of the time they have all the
information needed to complete the SED prior to departure of the vessel.
However, for the remaining 20 percent of the time, they have difficulty in
obtaining and providing predeparture data. In addition, the evaluation did
not include airlines and air couriers, which have significant concerns
regarding predeparture filing. It also did not include exporters of bulk
commodities that have similar concerns.


11
  Cost of automation was cited by 28 percent of freight forwarders not planning to use AES as a reason
for not doing so. None of the exporters we surveyed cited cost as a reason for not getting on AES.
(Current AES participants reported that their costs ranged from a $50 setup fee and $2.50 per AES
transmission fee for filers using the Internet to $250,000 for a company undergoing a complete
conversion from manual to automated filing.) Lack of knowledge about AES was cited by 11 percent of
freight forwarders and 36 percent of exporters we surveyed who did not plan to use AES.



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                           Export industry groups also have repeatedly expressed concerns about the
                           AES-PASS program, which allows exporters to file most of their export
                           information postdeparture, but still requires companies to file some data
                           prior to departure. Specifically, they have stated that AES-PASS will be costly
                           and burdensome to exporters without providing much benefit to the
                           government. For example, in a March 1997 letter to the Commissioner of
                           Customs, a group of large exporters stated that AES-PASS requires exporters
                           to bear a predeparture reporting burden for all shipments while doing
                           “nothing to improve data collection or compliance.” They stated that
                           AES-PASS would require two submissions for a single shipment—both pre-
                           and post-departure—resulting in additional programming of automated
                           processes. In June 1997, the Trade Resource Group, the private advisory
                           group to Customs on AES, expressed similar concerns in a letter to the
                           Commissioner of Customs.

                           In response to the export community’s continued dissatisfaction with AES
                           requirements (particularly filing information predeparture via AES and/or
                           AES-PASS), in June 1997 the Commissioner of Customs proposed that
                           industry groups enter into formal negotiations with Customs to resolve
                           issues of disagreement regarding AES. Customs has used such negotiations,
                           which rely on an outside moderator, to resolve issues with the trade
                           community in the past. According to Customs officials, this approach will
                           provide a forum for the trade community and Customs to discuss, and
                           potentially resolve, the outstanding issues of concern to both parties.
                           Customs officials told us that they are uncertain as to when the
                           negotiations will begin.


AES’ Ability to Enhance    AES is designed to provide a “smart targeting system” that would allow
Enforcement Is Currently   inspectors to focus their attention on possible illegal shipments among the
Limited                    thousands of exports leaving the country each day. For example, AES is
                           designed to compile exporter histories, allow for trend analysis, and
                           provide a prioritized list of targets for selective enforcement actions.12
                           However, AES’ ability to meet this objective is limited by four major
                           factors. First, AES does not currently link with other law enforcement
                           databases, such as those maintained by the Treasury; the Federal Bureau
                           of Investigation; and the National Insurance Crime Bureau (which


                           12
                             Currently, inspectors only receive general information on the exports in paper documents provided
                           by the carrier. (Because SEDs are held by the carrier and not Customs inspectors, if an inspector
                           wants to review an SED, he usually must request that the carrier fax it to the Customs port.) In
                           addition to this information, inspectors also target shipments based on information provided from
                           informants and other law enforcement agencies, and their own “gut instinct” based on years of
                           experience.



                           Page 14                                              GAO/NSIAD-98-5 Automated Export System
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                            maintains a database on stolen vehicles). Customs inspectors told us that
                            AES would be a more effective enforcement tool if it linked with these
                            databases, allowing inspectors to obtain information more quickly on
                            exporters with prior export violations or on stolen vehicles that may be
                            exported. Customs officials told us that they are considering trying to have
                            AES link with other enforcement databases in the future, but that at present
                            they have no definitive plans to do so. They noted that very few
                            enforcement or administrative databases are directly linked to each other
                            because of logistics, funding, and security concerns.

                            Second, AES-PASS will not provide adequate information to target shipments
                            because it only requires a minimal amount of data prior to departure—the
                            exporter identification number; a reference number for the shipment; and
                            a few additional data elements, such as the license code and number if the
                            export requires a license. It will not provide the detailed commodity data
                            that inspectors told us they need for better enforcement. Because so little
                            predeparture information is provided on AES-PASS, some inspectors we
                            interviewed were concerned that AES-PASS would undermine any advantage
                            that AES would have provided, for example, ready access to more detailed
                            commodity data predeparture.

                            Third, AES allows SED information to be transmitted only hours before a
                            shipment’s departure (as with the current paper system), and inspectors
                            told us that in most cases this is not sufficient time for targeting possible
                            illegal shipments. While some inspectors told us that they would need SED
                            information about 4 hours in advance of the carrier’s departure in order to
                            target shipments, others said they would need 24 hours. (We did not
                            evaluate the feasibility of companies being able to file data within these
                            time frames.) Finally, since participation in AES is voluntary, an illegal
                            exporter is unlikely to use the system for filing export data. Inspectors at
                            several ports told us that there is no incentive for exporters to get on AES,
                            and others stated that they believe AES would need to be mandatory to be
                            effective.


Most Other Agencies’        According to both Census and Customs, AES has the potential to provide
Export Requirements         exporters with “one-stop shopping” by creating a single electronic filing
Cannot Be Fully Satisfied   center for all U.S. export data. AES was not designed to replace any
                            agency’s authority to regulate exports. The system was designed to serve
by AES                      as a source of export data for agencies with export requirements and to
                            reduce redundancies in filing and paperwork associated with various
                            export control requirements. However, AES is unlikely to achieve those



                            Page 15                                  GAO/NSIAD-98-5 Automated Export System
B-278136




objectives because most agencies’ export requirements cannot be fully
satisfied through AES. For example, 8 of the 13 agencies13 identified by
Customs as having regulatory authority over exports14 are not using AES to
fulfill their export licensing or permit requirements because of existing
regulations that require them to retain their own licensing procedures,
including collecting information provided by the exporter. As a result,
exporters will have to continue to apply to multiple agencies for approval
to export certain commodities. (About 30 percent of all U.S. freight
forwarders export goods that require export licenses.) For example,
exporters seeking to ship products that have both civilian and military
applications would still have to apply directly to the Commerce
Department’s Bureau of Export Administration for approval. In addition,
exporters of chemicals and pharmaceutical drugs are required to apply
directly to the Drug Enforcement Administration (DEA) 15 days prior to
exportation in order for DEA to conduct an investigation.

Although AES is designed to eliminate the paper SED, it will not
substantially reduce or eliminate agency paperwork or the electronic filing
associated with the issuance of export licenses, certificates, or permits.
For example, the Department of Agriculture’s Food Safety and Inspection
Service issues inspection certificates for agricultural exports that must
accompany the shipment abroad, precluding the possibility of electronic
filing through AES. In addition, DEA officials noted that they are governed
by international conventions, to which the United States is a signatory,
that mandate their use of internationally standardized paper licenses for
exports of certain chemicals and pharmaceutical products.

According to Customs officials, there are several obstacles that prevent
them from quickly achieving this goal. For example, many agencies lack
sufficient staff or budgetary resources, have outdated regulations that may
need to be changed, and/or are reluctant to share data with other agencies
even though they may collect the same data. Customs recognizes that
these obstacles will need to be overcome in order to have AES fully
interface with other export-related agencies.

Despite these limitations, officials at three agencies with export reporting
(rather than licensing) requirements—Census, the Maritime

13
  For two other agencies, other factors preclude their full use of AES: the Department of Energy’s
Office of Nonproliferation and National Security has export license review functions that will not be
fully satisfied though AES; and the Environmental Protection Agency cannot use AES for other
reasons (see p. 21).
14
 In 1994, Customs established a group, consisting of 13 U.S. government agencies, to determine each
agency’s procedures for regulating exports and the information each agency collects from the export
community to fulfill its statutory and regulatory requirements.


Page 16                                               GAO/NSIAD-98-5 Automated Export System
                                 B-278136




                                 Administration, and the Energy Information Administration—indicate that
                                 AES has the potential to satisfy their needs. Specifically, it is expected to
                                 eliminate their paperwork processing and help them fulfill their reporting
                                 requirements. Several other agencies, including the Bureau of Export
                                 Administration, the Office of Foreign Assets Control, and the Office of
                                 Arms Control and Nonproliferation indicated that as designed, AES would
                                 provide a more efficient means to track and monitor cargo shipments
                                 against approved licenses. Currently, AES validates cargo against State
                                 Department and Bureau of Export Administration licenses.

Slow Progress in Developing      Since 1994, Customs has tried to develop an automated interface with
Interfaces With Other Agencies   other government agencies to maximize opportunities to share export
                                 information through AES and streamline data collection. After Customs
                                 determines the feasibility of working with a particular agency, Customs
                                 seeks to (1) reach commitments to collaborate on their use of AES,
                                 (2) define and incorporate the informational requirements of these
                                 prospective users, and (3) conclude the process with a memorandum of
                                 understanding (MOU) that guides the implementation of the final interface.

                                 Currently, only Census has signed an MOU with Customs legally stipulating
                                 each agency’s responsibility for collecting, transmitting, and securing data
                                 captured in AES, in addition to cost-sharing arrangements. Customs has
                                 obtained written commitments from five other agencies to collaborate on
                                 AES. Some of the areas being discussed are data to be included in AES,
                                 information sharing and access, and the development of compatible
                                 information systems.15 Of these six agencies, Customs has completed and
                                 incorporated into AES the user requirements of Census, the Bureau of
                                 Export Administration, and the Office of Defense Trade Controls,
                                 specifying each agency’s requirements for collecting and processing data.
                                 One reason that progress has been slow is that Customs has assigned only
                                 one full-time person to develop interfaces with other government
                                 agencies.

                                 Other agencies have not committed to use AES for a variety of reasons. For
                                 example, according to officials at the Bureau of Alcohol, Tobacco, and
                                 Firearms, the agency lacks sufficient resources to develop a compatible
                                 automated system, and DEA has regulations that preclude its use of AES.
                                 Officials at the Environmental Protection Agency told us that they cannot
                                 use AES, as they do not currently have an agreement with Census to access
                                 SED data. Furthermore, although AES does include Nuclear Regulatory


                                 15
                                  None of the agencies that issue licenses, certificates, or permits have agreed to transfer their license
                                 application data through AES.



                                 Page 17                                                 GAO/NSIAD-98-5 Automated Export System
                                            B-278136




                                            Commission license codes in order to validate licensed shipments, agency
                                            officials indicated that the agency already has an automated information
                                            system that meets its needs. (See fig. 5.)


Figure 5: Status of Customs’ Agreements With Export-Related Agencies



           Agencies                Signed commitments to            User requirements            Signed memorandum of
                                     collaborate on AES           incorporated into AES              understanding to
                                                                                                    implement system
                                                                                                        interface
  Bureau of Alcohol, Tobacco
  and Firearms
  Bureau of Export
  Administration
  Bureau of the Census

  Defense Security Assistance
  Agency
  Drug Enforcement
  Administration
  Energy Information
  Administration
  Environmental Protection
  Agency
  Food Safety and Inspection
  Service
  Maritime Administration

  Office of Nonproliferation and
  National Security
  Nuclear Regulatory
  Commission
  Office of Defense Trade
  Controls
  Office of Foreign Assets
  Control



                                            It has been well documented that successful information systems require
                                            the continuing involvement and commitment of senior executives.16 In this
                                            case, where the concept of AES entails integrating the export reporting
                                            functions of 14 separate federal agencies, extensive high-level
                                            coordination and exchange are not presently in place to explicitly define
                                            what export reporting and/or licensing requirements can or cannot be


                                            16
                                             See Executive Guide: Improving Mission Performance Through Strategic Information Management
                                            and Technology (GAO/AIMD-94-115, May 1994).



                                            Page 18                                           GAO/NSIAD-98-5 Automated Export System
                  B-278136




                  accommodated by AES and what distinct licensing and/or reporting
                  requirements must remain.


                  The quality of export data has been a long-term problem. AES represents a
Conclusions       major initiative to improve the quality of export data that is used to
                  negotiate trade agreements and enforce export laws and regulations.
                  While the trade community believes export data needs to be automated,
                  the reluctance of U.S. companies to participate and the uncertainty that
                  other agencies will be able to interface with AES raise serious questions
                  about the system’s viability. In addition, Customs’ planned use of AES as an
                  enforcement tool is limited because AES is not currently linked to other law
                  enforcement databases, and AES-PASS allows approved exporters to file
                  almost all of their export data post-departure. We question whether AES
                  will be able to meet its objectives without greater involvement of top
                  management in resolving the operational and implementation problems
                  we have identified. We believe the Commissioner of the U.S. Customs
                  Service and the Director of the U.S. Census Bureau need to devote
                  sustained management attention to AES. Specifically, these officials need to
                  expeditiously assess the extent to which the export community’s concerns
                  can be addressed, the likely amount of participation in AES, the likely
                  usefulness of AES in enhancing enforcement, and the extent to which other
                  agencies will be able to use AES. In making this assessment, attention
                  needs to be given to determining whether

              •   predeparture filing of export data is critical to improved export statistics
                  and enforcement of U.S. laws and regulations and, if so, how far in
                  advance inspectors need the information for AES to be an effective
                  enforcement tool;
              •   a link between AES and the databases of law enforcement agencies can be
                  achieved;
              •   allowing some exporters to file SEDs after departure would undermine the
                  objective of achieving improved export data and/or render AES ineffective
                  as an enforcement tool; and
              •   the requirements of other agencies can be modified or otherwise
                  accommodated to permit their use of AES.

                  Once this assessment is done, we believe the agencies need to consider
                  how or whether to proceed with implementing AES. If these problems are
                  not resolved in the near future, we are concerned that Customs will
                  continue to invest significant monies in a system that is likely to be of
                  limited benefit.



                  Page 19                                 GAO/NSIAD-98-5 Automated Export System
                  B-278136




                  We recommend that the Secretaries of the Treasury and of Commerce
Recommendations   direct the Commissioner of the U.S. Customs Service and the Director of
                  the Bureau of the Census to delineate the concrete actions needed to
                  improve AES’ potential, and, after doing so, assess the costs and benefits of
                  continuing to implement AES.


                  A draft of this report was provided to Customs and Census. While Customs
Agency Comments   agreed that AES should interface with other enforcement and export data
                  bases and that AES-PASS should be reevaluated in light of its potential
                  adverse effect on enforcement efforts, both agencies said that they
                  believed our assessment of the level of participation in AES was premature.
                  They said that early in the system’s development, they decided to use a
                  phased implementation approach. They also noted that participation in AES
                  has increased since it was expanded to all modes of transportation in
                  July 1997 and they expect participation to be greater in the future.
                  However, they did not address our recommendation or specify the actions
                  they plan to take to overcome obstacles to AES’ success.

                  We disagree with Census and Customs view that our assessment of AES is
                  premature. We believe our work provides important insights into issues
                  that will affect AES’ success and that Customs and Census need to develop
                  a strategy to address these issues. On the critical issue of participation, our
                  survey revealed strong resistance among the export community that has
                  serious implications for future participation. Unless AES achieves high
                  participation and provides an interface among agencies with enforcement
                  and export responsibilities, it is difficult to envision how the system can
                  meet its objectives. We, therefore, continue to believe that Customs and
                  Census should identify the specific actions needed to improve AES’
                  potential, and, after doing so, assess the cost and benefits of continuing to
                  implement AES.

                  Census also expressed concern that the results from our surveys and
                  interviews were not presented in such a way that the reader can determine
                  the significance of the responses and that our work does not reflect the
                  views of the entire export trade community. We used a variety of
                  techniques to obtain the export community’s views regarding AES,
                  including a nationally representative sample survey of 400 ocean freight
                  forwarders. Our survey was necessarily limited to ocean freight
                  forwarders because AES had not been extended to other modes of
                  transportation. We believe that the results from this survey when
                  combined with those from our survey of the top 80 exporters that file



                  Page 20                                  GAO/NSIAD-98-5 Automated Export System
B-278136




paper SEDs, as well as in-depth interviews with 30 exporting companies
and 14 of the top AERP filers, provides a reasonable basis on which to
assess the views of a broad cross section of the export community
regarding AES. We did not suggest that our assessment was based on a
survey of the entire export community. Moreover, Census did not offer any
studies that produced results that were inconsistent with what we found.
(See app. IV for specific details on our scope and methodology.)


As agreed with your office, unless you publically announce the contents
earlier, we plan no further distribution of this report until 2 days after its
issue date. At that time, we will provide copies of the report to appropriate
congressional committees and the Commissioner of the U.S. Customs
Service and the Director of the Bureau of the Census. We will also make
copies available to other interested parties on request.

This review was done under the direction of JayEtta Z. Hecker, Associate
Director. If you or your staff have any questions concerning this report,
please contact Ms. Hecker at (202) 512-8984. Major contributors to this
report are listed in appendix VII.

Sincerely yours,




Benjamin F. Nelson,
Director, International Relations
  and Trade Issues




Page 21                                  GAO/NSIAD-98-5 Automated Export System
Contents



Letter                                                               1


Appendix I                                                          24

Six Other Countries’
Export Data
Collection Systems
Appendix II                                                         29

The Automated
Export System
Process
Appendix III                                                        31

Results of Freight
Forwarder and
Exporter Surveys
Appendix IV                                                         62

Objectives, Scope,
and Methodology
Appendix V                                                          66

Comments From the
Department of
Commerce
Appendix VI                                                         73

Comments From the
U.S. Customs Service




                       Page 22   GAO/NSIAD-98-5 Automated Export System
                        Contents




Appendix VII                                                                                       81

Major Contributors to
This Report
Table                   Table I.1: Characteristics of Six Countries’ Export Data                   26
                          Collection Systems

Figures                 Figure 1: Freight Forwarders’ Plans Regarding AES                           9
                        Figure 2: Exporters’ Plans Regarding AES                                   10
                        Figure 3: Freight Forwarders’ and Exporters’ Status of                     11
                          Involvement With AES
                        Figure 4: Freight Forwarders’ and Exporters’ Knowledge of AES              12
                        Figure 5: Status of Customs’ Agreements With Export-Related                18
                          Agencies
                        Figure II.1: The AES Process                                               30




                        Abbreviations

                        ABI          Automated Broker Interface
                        AERP         Automated Export Reporting Program
                        AES          Automated Export System
                        AES-PASS     Automated Export System Post-Departure Authorized
                                          Special System
                        DEA          Drug Enforcement Administration
                        FOB          free on board
                        IOU          “I owe you”
                        MOU          memorandum of understanding
                        NVOCC        Non-Vessel Operating Common Carrier
                        SED          Shipper’s Export Declaration


                        Page 23                                 GAO/NSIAD-98-5 Automated Export System
Appendix I

Six Other Countries’ Export Data Collection
Systems

               We obtained information from officials in six countries—Australia,
               Canada, Japan, South Korea, Mexico, and the United Kingdom—on their
               export procedures and systems for collecting export data. (The
               information we collected from these countries was self-reported by these
               countries—we did not independently verify any information we obtained.)
               Almost all of these countries reporting having implemented automated
               systems for collecting export data, and most countries reported that nearly
               100 percent of their export data is collected via their automated systems.
               Most countries’ automated systems are voluntary and were automated
               within the last 5 years. These countries require that at least some export
               information be filed prior to departure. Further, almost all of the countries
               use their automated system in some way as a targeting tool to help with
               the control and enforcement of the countries’ export laws.

               Five of the six countries from which we obtained information have
               implemented an automated system to collect their export data (Australia,
               Japan, South Korea, Mexico, and the United Kingdom); Canada is
               currently piloting an automated system to collect export data (see
               table I.1). With the exception of Mexico,1 all countries’ automated systems
               are voluntary (including Canada’s new system). As an alternative to
               electronic filing, exporters in Australia, Canada, Japan, and the United
               Kingdom can file paper export declarations. Most of these countries’
               automated systems were implemented in the 1990s, although Australia and
               Japan have had at least a partially automated system in place since the
               mid- to late-1980s.

               Most countries require that exporters or their agents file at least some
               information prior to departure. Japan requires that all export data be
               submitted prior to departure. Australia, Canada, South Korea, Mexico, and
               the United Kingdom, however, allow approved exporters to wait to file
               some of their information after departure. Australia requires that approved
               exporters file an export report as soon as the information is available;
               Canada requires that exporters file a report up to 5 days after the month of
               departure; South Korea requires that a report be filed within a day of
               departure; Mexico generally requires that a report be filed within a week
               of departure; and the United Kingdom requires exporters to file a
               completed report within 14 days of departure.

               All of the countries, with the exception of the United Kingdom, use their
               automated system to help control exports and target goods for inspection

               1
                Mexico requires that exporters use agents, called Customs brokers, to file export data on exporters’
               behalf. The Customs brokers must submit all export data electronically.



               Page 24                                               GAO/NSIAD-98-5 Automated Export System
Appendix I
Six Other Countries’ Export Data Collection
Systems




(Canada plans to use its system for this purpose). Some countries, such as
South Korea and Japan, use pre-set criteria for targeting goods for
inspection. Mexico’s automated system, on the other hand, randomly
selects shipments for inspection.




Page 25                                       GAO/NSIAD-98-5 Automated Export System
                                            Appendix I
                                            Six Other Countries’ Export Data Collection
                                            Systems




Table I.1: Characteristics of Six Countries’ Export Data Collection Systems
Characteristics                      Australia                       Canada                         Japan
Method of data collection (paper    Paper and voluntary automated Paper and currently piloting      Paper and voluntary automated
 or automated system)               system                        voluntary automated system        system
Year of automation                  1988                              Not available                 Air cargo: 1985; sea cargo:
                                                                                                    1992
Percent of export data captured     98 percent                        Not available                 Over 90 percent
  via system or percent of export
  community using automated
  system
Time frame for data filing          Predeparture, with optional       (1) Paper: air, truck, rail -  Predeparture
                                    post-departure filing for         predeparture; ocean - pre- and
                                    approved exporters (this option   post-departure;
                                    generally open only to certain    (2) Automated system:
                                    bulk and agricultural shippers,   predeparture, with optional
                                    but requires some information     post-departure filing for
                                    be filed predeparture)            approved exporters
                                    a                                 b                             c
Required export information
Use of automated system for         Yes, system used to monitor       Yes, system’s plans include   Yes, system used to help
 targeting                          exporters’ compliance and as      targeting shipments for       select goods that should be
                                    targeting tool                    examination                   examined or inspected
Deadline for goods to be at port    No Customs requirement for        None                          None
                                    goods


Annual value of exports             (1995-96)                         (1996)                        (1995)
                                    $59 billion                       $202 billion                  $443 billion




                                            Page 26                                        GAO/NSIAD-98-5 Automated Export System
                                            Appendix I
                                            Six Other Countries’ Export Data Collection
                                            Systems




Characteristics                     South Korea                      Mexico                           United Kingdom
Method of data collection (paper    Voluntary automated system       Mandated automated system        Paper and voluntary automated
 or automated system)                                                                                 system
Year of automation                  1996                             1992-93                          1992

Percent of export data captured     Almost 100 percent (export       100 percent                      20 percent
  via system or percent of export   community participation level)
  community using automated
  system
Time frame for data filing          Predeparture, with optional      Predeparture, with optional      Predeparture, with optional
                                    post-departure reporting for     post-departure filing program    post-departure filing for
                                    bulk cargo and perishable        (requires that invoice           approved exporters (this option
                                    goods (requires some             information still be presented   is open to both paper and
                                    information be provided prior    upon export)                     electronic filers but requires
                                    to departure)                                                     some information be filed
                                                                                                      predeparture)
                                    d                                e                                f
Required export information
Use of automated system for         Yes, system designed for         Yes, system randomly selects     No
 targeting?                         targeting; improvements being    shipments for inspection, as
                                    made to targeting ability        well as inspectors to examine
                                                                     shipments
Deadline for goods to be at port    Goods required at warehouse      Shipments must arrive to         Deadlines set locally at
                                    24 hrs. before loading           Customs within 24 hours after    Customs ports
                                                                     automated system validates
                                                                     transaction
Annual value of exports             (1996)                           (1996)                           (1996)
                                    $130 billion                     $96 billion                      $113 billion g

                                                                                                              (Table notes on next page)




                                            Page 27                                        GAO/NSIAD-98-5 Automated Export System
Appendix I
Six Other Countries’ Export Data Collection
Systems




a
 (Australia) Reference number; type of export, establishment code; owner’s name; owner’s phone
number; consignee’s name; consignee’s city; country of destination; port of loading; port of
discharge; invoice currency; total free-on-board (FOB) value; intended date of export; number of
F.C.L. containers, if applicable; mode of export; ship/aircraft identity; number of packages;
commodity classification code; origin code; goods description; net quantity; gross weight;
container type; coal, thermal use indicator; assay details; container number and seal number, if
applicable; permit details, including permit number and encryption code; information on whether
goods are subject to certain export concession arrangements, FOB value; and signature.
b
 (Canada) Information required for paper filing generally includes exporter name and address;
consignee name and address; exporter’s business number; country of final destination; province
and country of origin of goods; export permit number; description of goods; harmonized tariff
system code of goods; quantity and unit of measure; value; signature of responsible party; mode
of transportation; and reason for export. Goods exported by sea can be reported in a
predeparture interim report that must include the following information: exporter name, address,
and business number; consignee name and address; country/province of origin of goods, country
of final destination; number of packages; description of goods; and, if containerized, container
number.
c
 (Japan) User code; exporter code, name, and address; trading pattern code; airway bill or bill of
lading number; description, number, quantity, value, and statistical code numbers of goods;
destination and its code number; loading and storage place code; airline code, or name and
nationality of vessel; and scheduled departure date.
d
 (South Korea) Forty-four items, including declarant; manufacturer; exporter name; buyer;
value/quantity of goods; destination; consignee; letter of credit number; and weight.
e
 (Mexico) Sixty-two data items, including information on the exporting company and its location;
goods’ quantity, value, and classification; transport company name and location; and data of the
foreign trade transaction. Invoice information that must be provided upon export in paper form
must contain the name of the exporting company; taxpayer identification number; date and
number of the invoice; a general description, quantity, and value of the goods; information on the
vehicle transporting the merchandise; number of the consolidated entry; name and signature; and
number and license of the Customs broker.
f
 (United Kingdom) Filing requirements depend on the procedure being used, but a completed
declaration via the automated system generally includes consignor/exporter; number of items
declared; total packages; reference number; name and address of person or company making
the declaration; code for country of ultimate destination; information on shipment container, if
appropriate; identify and nationality of active means of transport crossing the border; mode of
transport at the border; place of loading; location of goods; packages and description of goods,
including marks and numbers, container numbers, and number and kind of goods; item number;
tariff classification commodity code; net weight; any additional information, documents produced,
certificates and authorizations; and value of goods. Participants in the U.K. automated system
post-departure filing program generally must file the following information predeparture: name
and address of exporter or agent; brief commercial description of goods; number and kind of
packages/goods; marks and numbers on packages; net weight; and any additional information,
documents produced, certificates, and authorizations.
g
Excludes exports to other members of the European Community.

Source: Data provided by Australia, Canada, Japan, South Korea, Mexico, and the United
Kingdom.




Page 28                                              GAO/NSIAD-98-5 Automated Export System
Appendix II

The Automated Export System Process


              As currently implemented, the Automated Export System (AES) allows
              exporters or their agents to electronically transmit Shipper’s Export
              Declaration (SED) information directly to Customs. The process begins
              when either the exporter or agent transmits commodity data directly into
              AES or when the carrier transmits a receipt of goods message. (AES
              participants can transmit their commodity data either by developing their
              own software, using software from various AES-certified software vendors,
              via the Internet, or using facilities of a port authority or service center.) If
              the carrier transmits data via AES before the exporter, an “I owe you” (IOU)
              is established noting that the exporter has not yet transmitted commodity
              data. The commodity data passes through built-in edits that check for
              accurate and complete information and match it against U.S. agency
              requirement files. The system also matches commodity data sent by the
              exporter with transportation data (such as the name and flag of the vessel)
              sent by the carrier. The carrier is free to load the cargo unless it receives a
              “hold” message. AES will reject the shipment if core information, such as
              the commodity code, country name, or exporter name is invalid or
              incomplete. These “fatal errors” must be corrected before merchandise is
              exported. (See fig. II.1.)




              Page 29                                   GAO/NSIAD-98-5 Automated Export System
                                                                            Appendix II
                                                                            The Automated Export System Process




Figure II.1: The AES Process




                                            or

                                                                                           Carrier transmits receipt
     Exporter/agent transmits                                                               of goods message and
     predeparture commodity                                                                 an IOU is established
           data to AES                                                                         for exporter data

                                                                                                                                                                 AES will reject the shipment if core
                                                                                                                                                                 information is invalid or incomplete.
      If error,                                                                                              If error,                                           These errors are "fatal." Fatal errors must
      message                                                EAS U RY
                                                                                                             message                                             be corrected before merchandise is
                                                        TR

       sent to                                                                                                sent to                                            exported. AES will also generate warning
                                                                                                                                                                 messages that will not reject the shipment,
                                                                            E
                                             U. S




      exporter                                                                                                carrier
                                                                        IC




                                                                                                                                                                 but warnings must be corrected within
                                              . C




                                                                        V




                                                    U
                                                                    R




                                                        ST          E
                                                             OM S S
                                                                                                                                                                 4 days after departure.




                        AES screens data for validity and completeness and
                             checks against U.S. agency requirements




                                                                             AES sends status notification                               TR
                                                                                                                                              EAS U RY


                                                                             to exporter/agent and carrier
                                                                                                                                                             E
                                                                                                                              U. S




                                                                                                                                                         IC




                                                                                "OK to load" message
                                                                                                                               . C




                                                                                                                                                         V




                                                                                                                                     U
                                                                                                                                                     R




                                                                                                                                         ST          E
                                                                                                                                              OM S S
                                                                                     is optional




      If carrier does not receive
        "hold" message, goods
            can be exported                                                                                           AES matches commodity
                                                                                                                     data with transportation data



                                                                                                                                                                                                               E A S U RY
                                                                                                                                                                                                          TR
                                                                                                                                                                                                                                E
                                                                                                                                                                                               U. S




                                                                                                                                                                                                                            IC
                                                                                                                                                                                                .




                                                                                                                                                                                                                            V




                                        Shipment departs and                                              Exporter/agent transmits post-departure
                                                                                                                                                                                                  C




                                                                                                                                                                                                      U
                                                                                                                                                                                                                        R




                                                                                                                                                                                                          ST         E
                                                                                                                                                                                                               OMS S
                                            carrier sends                                                  data elements to AES; carrier transmits
                                         departure message                                              outbound manifest within 4 days of departure


                                                                            Source: U.S. Customs Service.




                                                                            Page 30                                                                      GAO/NSIAD-98-5 Automated Export System
Appendix III

Results of Freight Forwarder and Exporter
Surveys

               Provided in the following section are questions and responses for our
               surveys of 400 U.S. freight forwarders and Non-Vessel Operating Common
               Carriers (NVOCC) and 80 U.S. exporting companies that file paper SEDs. All
               results are reported as percentages, and for each question, we present the
               number of respondents answering the question. (Certain questions were
               only to be answered by a subset of respondents, that is, those possessing a
               certain characteristic or giving a particular answer to a previous question.)
               For questions requesting a numerical answer (such as the number of
               employees) we present descriptive statistics, such as the median and the
               range of responses. In addition, for several questions where we report in
               the letter on the subset of respondents who plan to use AES, we provide
               results both for this subset group and for all respondents.




               Page 31                                 GAO/NSIAD-98-5 Automated Export System
         Appendix III
         Results of Freight Forwarder and Exporter
         Surveys




                                         GAO
                      Computer-Assisted Telephone Interview System

                               Automated Export System
                              Survey of Freight Forwarders



    Introduction

    Hello, this is [STATE YOUR NAME], calling from the U.S. General Accounting
    Office. Senator Orrin Hatch, Chairman of the Senate Judiciary Committee, has
    asked us to obtain the views of the export community regarding the Customs
    Service's new Automated Export System, AES, and to collect information on
    company export practices which may be affected by AES.

    Your company has been chosen as part of a nationally representative sample of
    freight forwarders and NVOCCs for this study. The survey should take about 5
    to 10 minutes of your time. We will need to speak with the individual in your
    company most familiar with your company's current and future export
    documentation procedures for the survey.

    Confirmation of Sample Eligibility

    We need some basic company background information in order to describe the
    kinds of companies we talked with in our survey report for the Congress. So,
    before we discuss AES, I'd like to ask some questions about the levels and
    kinds of export activities your company engages in and the approximate size of
    your company.


    1.      At any time from the beginning of 1996 through the present, did your
            company provide freight forwarding services to companies exporting
            products from the U.S.?

            Yes    91.21
            No      8.8




1
All results are reported as percentages.




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            N2 = 329

    2.      At any time from the beginning of 1996 through the present, did your
            company also provide Non-Vessel Operating Common Carrier (NVOCC)
            services to companies exporting products from the United States?

            Yes    64.3
            No     35.7

            N = 328

    All respondents who answered "No" to Q.1 must answer "Yes" to Q.2 to proceed
    with the survey. Those who answered "No" to both questions 1 and 2 were
    routed out of the survey and do not appear anywhere in this report.)

    3.      About what percentage of your company's export business, if any, would
            you say currently involves goods exported to Canada? Your best
            estimate will suffice.

            MEDIAN3                                  0
            RANGE (Minimum and Maximum)              0 - 100
            INTERQUARTILE RANGE4                     1

            Don't know 0

            N = 329

    Company Activities and Characteristics

    4.      In addition to exporting products by sea, does your company also
            provide services to clients exporting by air?




2
Number of companies responding to the question.
3
 The median is the middle measurement when the items are arranged in order of size, or
if there is no middle one, then the average of the two middle ones. If five students make
the grades of 15, 75, 80, 95 and 100, the median is 80.
4
 The interquartile range is the distance between the first and third quartiles of a
distribution. It covers the middle half of the values in the frequency distribution.




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        Yes    84.5
        No     15.5

        N = 328


Company Size and Composition

5.      I'd also like some information about the size of your company. About
        how many employees (full-time equivalents) does your company have?
        Your best estimate will suffice.

        MEDIAN                          6
        RANGE                           1 - 60,000
        INTERQUARTILE RANGE             12
        SUM                             86,879

        Don't know 1.2

        N = 329

6.      And approximately what would you say your company's gross revenues
        (or sales) were for 1996? Your best estimate will suffice.

        MEDIAN                          $1.25 million
        RANGE                            7,000 - 1.8 billion
        INTERQUARTILE RANGE              4.5 million
        SUM                              4.64 billion

        Don't know 35.0

        N = 329

7.      About what percentage of your company's total business is involved in
        the EXPORT trade?

        MEDIAN                          80
        RANGE                           0 - 100
        INTERQUARTILE RANGE             55

        Don't know 0.9




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            N = 329

    8.      About how many companies (clients) did your company provide export
            services for during 1996?

            MEDIAN                          50
            RANGE                           1 - 50,000
            INTERQUARTILE RANGE             130
            SUM                             132,033

            Don't know 14.9

            N = 329

    1Ag     Since the beginning of 1996, did your company export goods that
            required an export license?

            Yes    30.75
            No     69.3

            N = 329


    2Ag     Aside from export license and Census Bureau and Customs Service
            paperwork, did any of your exported goods involve reporting
            requirements to any other federal agencies since the beginning of 1996?

            Yes    19.6
            No     80.4    (GO TO Q. Ins)

            N = 326

    3Ag     Which agencies had reporting requirements?

            Agriculture Department       42.2
            State Department             25.0
            Commerce Department          14.1
            Nuclear Regulatory Commission 0




5
The confidence interval width for question 1-Ag is + 5.1 percent.




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            Other (List below)               67.2

            N = 64

    Ins     During the last 3 years, that is, since 1994, were any of your export
            shipments inspected by the Customs Service?

            Yes    49.5
            No     50.5

            N = 327

    Im1     Does your company also act as import broker for companies importing
            products into the United States?

            Yes    35.9
            No     64.1   (GO TO Q.9)

            N = 329

    Im2     Does your company use the Customs Service's Automated Broker
            Interface (ABI) system to submit your import data?

            Yes        84.7
            No         13.6
            Don't know 1.7

            N = 118


    AUTOMATED EXPORT SYSTEM (AES)

    9.      The Customs Service is now implementing the Automated Export System
            (AES) to collect and process data for all parties involved in export trade.
            Have you ever heard of this system?

            Yes    75.16
            No     24.9 (GO TO Q. 22)




6
The confidence interval width for question 9 is + 4.8 percent.




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          N = 329

    All respondents saying that they had not heard of AES and those expressing a
    desire for more information about AES were given Customs contact
    information.

    11.   Has anyone from the Customs Service or any other federal agency
          contacted your company regarding AES?

          Yes   26.7
          No    73.3

          N = 247

    12.   I'd like to know your company's plans, if any, regarding AES. Does your
          company plan to use AES to submit your required export data?

          Yes                    47.67
          No                     18.7 (GO TO Q. 21)
          Company hasn't decided 24.8
          Don't know              8.9 (GO TO Q. 14)

          N = 246

    13.   How would you describe the status of your company's involvement with
          AES?

          All Eligible Respondents

          Are you currently:

                Studying AES                                          53.98
                Planning to file a letter of intent with Customs      10.1




7
 The confidence interval widths for question 12 were the following: + 6.4 percent (yes); +
5.0 percent (no); + 5.5 percent (company hasn't decided); and + 3.6 percent (don't know).
8
 The confidence interval widths for question 13 were the following: + 7.5 percent
(studying AES); + 4.5 percent (planning to file a letter of intent with Customs); + 2.2
percent (have filed a letter of intent with Customs); and + 1.2 percent (currently testing
AES), + 6.4 percent (other), and + 4.4 percent (can't say/don't know).




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             Have filed a letter of intent with Customs           2.2
             Currently testing AES                                0.6
             Other (Specify)                                     23.6
             Can't say/Don't know                                 9.6

      N = 178


      Those That Plan to Use AES

             Studying AES                                        53.8
             Planning to file a letter of intent with Customs    14.5
             Have filed a letter of intent with Customs           3.4
             Currently testing AES                                0.9
             Other (Specify)                                     19.7
             Can't say/Don't know                                 7.7



      N = 117


14.   What incentives, if any, do you see for going on AES?
      (DO NOT read list. Click all that respondent volunteers)

      All Eligible Respondents

      None                              21.0   (GO TO Q. 15)
      One-stop filing                   15.5
      Cost savings for company           9.0
      Convenience of automation         45.5
      Better trade statistics            7.5
      Other (Specify)                   40.0

      N = 200



      Those That Plan to Use AES

      None                              17.1   (GO TO Q. 15)




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      Surveys




          One-stop filing                 19.7
          Cost savings for company         9.4
          Convenience of automation       45.3
          Better trade statistics          11.1
          Other (Specify)                 46.2

          N = 117



    15.   I'd like your views about incentives for using AES mentioned by others.
          Do you view [ASK FOR EACH LISTED BELOW] as an incentive for your
          company to go on AES or not? (Each item was asked of respondents
          NOT volunteering the item in Q. 14. Results displayed include those who
          volunteered the item in question 14.)

          A. One-stop filing

          Volunteered          15.5 9
          Yes                  55.5
          No                   12.5
          Don't know           16.5

          N = 200

          B. Cost savings for company

          Volunteered           9.010
          Yes                  43.5
          No                   26.0
          Don't know           21.5

          N = 200




9
 The confidence interval widths for question 15A were the following: + 5.1 percent (yes);
+ 7.0 percent (no); + 4.7 percent (company hasn't decided); and + 5.2 percent (don't
know).
10
  The confidence interval widths for question 15B were the following: + 4.0 percent (yes);
+ 7.0 percent (no); + 6.2 percent (company hasn't decided); and + 5.8 percent (don't
know).




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           C. Convenience of automation

           Volunteered          45.0 11
           Yes                  43.0
           No                    5.5
           Don't know            6.5

           N = 200

           D. Better trade statistics

           Volunteered           7.512
           Yes                  56.8
           No                   22.6
           Don't know           13.1

           N= 200

     16.   About how much would you estimate it would cost your company to
           implement AES, if you chose to do so? (Asked of those planning to use
           AES or whose companies had not yet decided whether to use AES.)

           All Eligible Respondents                Those That Plan to Use AES

           MEDIAN               $6,500             MEDIAN            $7,500
           RANGE                200 - 500,000      RANGE             200- 90,000
           INTERQUARTILE                           INTERQUARTILE
           RANGE                11,500             RANGE             16,000


           Don't know 67.0                         Don't know 66.4

           N = 178                                 N= 117




11
 The confidence interval widths for question 15C were the following: + 7.0 percent (yes);
+ 7.0 percent (no); + 3.2 percent (company hasn't decided); and + 3.5 percent (don't
know).
12
 The confidence interval widths for question 15D were the following: + 3.7 percent (yes);
+ 7.0 percent (no); + 5.9 percent (company hasn't decided); and + 4.8 percent (don't
know).




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     17.   About when do you plan to start using AES? (Asked of those planning to
           use AES.)13


           Date Given: 7/97 - 1/2000 49.6

           Don't know                 50.4

           N = 117


     18.   And about how long do you think it would take for your company to
           implement AES? (Asked of those whose companies had not yet decided
           whether to use AES.)

                                      Range of Responses

           MONTHS                     1-6
           YEARS                      1-5
           BY (DATE)                  9/97 - Sometime in 1998

           Don't know 52.5

           N = 61


     Automated Export System Post-Departure Authorized Special
     System (AES-PASS)

     19.   Are you familiar with AES-PASS? (Asked of those planning to use AES or
           whose companies had not yet decided whether to use AES.)

           All Eligible Respondents                Those That Plan to Use AES




13
 Two questions were asked about the timing of AES implementation: those planning to
use AES were asked to estimate a date (Q.17); those whose companies had not yet
decided whether to use AES were asked about how long it would take for their
companies to implement AES (Q.18).




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           Yes   15.314                            Yes   17.9
           No    84.7 (GO TO Q.22)                 No    82.1   (GO TO Q.22)

           N = 177                                 N = 117



     20.   Is your company likely to apply for AES-PASS status? (Asked of those
           who were familiar with AES-PASS and who plan to use AES or whose
           companies had not yet decided whether to use AES.)


           Yes   48.1   (GO TO Q.22)
           No    51.9   (GO TO Q.22)

           N = 27

     21.   Why does your company not plan to use AES?
           (DO NOT read list. Click all that respondent volunteers) (Asked of those
           who say they will not use AES.)

           Lack of knowledge about AES              10.9        (GO TO Q. 22)
     ______________________________________________
     (Reasons spontaneously volunteered)

           Predeparture filing requirement                             2.2
           Cost of automation                                         28.3
           Personnel cost                                              2.2
           Company hardware or software incompatibility with AES        0
           Concerns about the amount of information required by AES     0
           Concerns about how the information will be used by Customs   0
           Concerns about privacy protection of information             0

           Other (Specify)                                                  69.6

           N = 46




14
 The confidence interval width for question 19 (all eligible respondents) is + 5.4 percent.




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  Surveys




I'd like your views about some concerns mentioned by others in using AES.
(Each item was asked of respondents who did not mention lack of knowledge
above and who did NOT volunteer the item in Q. 21. Results displayed include
those who volunteered the item in question 21 above.)


21a    Are you concerned or not about the predeparture SED filing requirement
      of AES?

      Volunteered         2.6
      Yes                43.6
      No                 51.3
      Don't know          2.6

      N = 39

21b   Are you concerned or not about the cost of automation necessary for
      your company to get on AES?

      Volunteered        33.3
      Yes                30.8
      No                 28.2
      Don't know          7.7

      N = 39

21c   Are you concerned or not about the amount of information required by
      AES?

      Volunteered         0
      Yes                20.5
      No                 46.2
      Don't know         33.3

      N = 39

21d   Are you concerned or not about how the information will be used by
      Customs?

      Volunteered         0
      Yes                15.4




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      No                 79.5
      Don't know          5.1

      N = 39

21e   Are you concerned or not about privacy protection of information?

      Volunteered         0
      Yes                41.0
      No                 56.4
      Don't know          2.6

      N = 39


Shippers' Export Declaration (SED) Preparation and Filing

Next, we'd like to know how your company currently prepares some of its
export-related paperwork. There are a number of ways a company may prepare
and file the SED with the Census Bureau. I'd like to ask you about the methods
you used during the past year.

22.   First, about what percentage of your export shipments required the filing
      of an SED during 1996? Your best estimate will suffice.


      MEDIAN                          90
      RANGE                           0 - 100
      INTERQUARTILE RANGE             28

      Don't know 3.3

      N = 329

23.   Did your company submit all of the SEDs for those shipments to
      Customs or did someone else also submit SEDs for those shipments?

      We submitted all SEDs                        86.2 (GO TO Q. 25)
      Someone else submitted all or some of the SEDs 13.8

      N = 326




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  Surveys




24.   About what percentage of the SEDs for your shipments did YOUR
      company submit to Customs in 1996? (Results displayed include
      respondents who answered "We submit all SEDs" to Q.23, scored as
      submitting 100 percent.)

      MEDIAN                         100
      RANGE                          0 - 100
      INTERQUARTILE RANGE            0

      Don't know 0.6

      N = 329

25.   How did your company submit its SEDs during 1996: Using paper SEDs,
      the Automated Export Reporting Program (AERP), AES, or an
      Internet-based company linked to AES? (click all that apply) (Results
      displayed include only respondents who submit SEDs.)

      Paper       96.9
      AERP         3.1
      AES          0.6
      Internet     0

      N = 318


For AERP Users Only:


26.   The Census Bureau plans on phasing out the AERP system by the end of
      1999. How does your company plan to submit its SEDs once the AERP
      system is no longer available? (Click all that apply)

      Company will use AES                    50.0
      Company will use an Internet service     0
      No plans yet                            30.0
      Submit paper SEDs                       10.0
      Have the customer submit SEDs            0
      Other (specify)                         10.0

      N = 10




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     For Paper SED Filers Only:

     Business Computer Use

     27.   Does your company use a computer to manage any or all of its
           export-related record keeping? (Results displayed exclude paper filers
           who also file SEDs electronically.)

           Yes     76.4
           No      23.6

           N = 305

     And finally, we'd like to know about the filing of your export paperwork and
     the timing of your export shipments.

     28.   How difficult, if at all, was it for your company last year (1996) to file its
           paper SEDs with the carrier prior to departure of the goods?

           (Read each response option and click one)

           Of   very great difficulty      4.6
           Of   great difficulty           6.2
           Of   moderate difficulty       11.4
           Of   some difficulty           16.6
           Of   little or no difficulty   61.2

           N = 307

     29.   During the last year (1996), did your company deliver ANY SEDs to the
           carrier following departure of the goods? Do not include any submitted
           through AERP.

           Yes     43.015
           No      57.0

           N = 307




15
 The confidence interval width for question 29 is + 5.7 percent.




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30.   About how many of your SEDs were delivered after departure of the
      goods?

      MEDIAN                           10
      RANGE                            0 - 100
      INTERQUARTILE RANGE              45

      Don't know 4.6

      N = 130


Ask All:

That concludes our interview. Thank you for your time and your cooperation.
If there is any other aspect of AES you'd like to comment on, please feel free to
do so now.




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     Surveys




                                   GAO
               Computer-Assisted Telephone Interview System

                                   AES
                            Survey of Exporters



Introduction

This is [STATE YOUR NAME], of the U.S. General Accounting Office. Senator
Orrin Hatch, Chairman of the Senate Judiciary Committee, has asked us to
obtain the views of the export community regarding the Customs Service's new
Automated Export System, AES, and to collect information on company export
practices which may be affected by AES.

Your company has been chosen as part of a study of exporters who have filed
export documentation with the Census Bureau in paper form. The survey
should take about 5 to 10 minutes of your time. We need to speak with the
individual in your company most familiar with your company's current and
future export documentation procedures for the survey.

Company Activities and Characteristics

We need some basic company background information in order to describe the
kinds of companies we talked with in our survey report for the Congress. So,
before we discuss AES, I'd like to ask some questions about the kinds of export
activities your company engages in and the approximate size of your company.

1.      First, we'd like to know how your company exports products. Does your
        company export products by air?

        Yes     76.2
        No      23.8

        N = 63

2.      Does your company export products by sea?

        Yes     77.8
        No      22.2




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        N = 63

3.      Does your company export products by means other than air or sea,
        such as truck or rail?

        Yes    76.2
        No     23.8

        N = 63

5.      Next, I'd also like some information about the size of your company.
        About how many employees (full-time equivalents) does your company
        have? Your best estimate will suffice.

        MEDIAN                          2,200
        RANGE                           6 - 647,000
        INTERQUARTILE RANGE             7,205
        SUM                             1,610,598

        Don't know 11.1

        N = 63

6.      And approximately what would you say your company's gross revenues
        (or sales) were for 1996? Your best estimate will suffice.

        MEDIAN                          $1.65 billion
        RANGE                           100,000 - 164 billion
        INTERQUARTILE RANGE             7.6 billion
        SUM                             424 billion

        Don't know 39.7

        N = 63

7.      About what percentage of your company's total business is involved in
        the EXPORT trade?

        MEDIAN                          51
        RANGE                           1 - 100
        INTERQUARTILE RANGE             40




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      Don't know 20.6

      N =63

1Ag   Since the beginning of 1996, did your company export goods that
      required an export license?


      Yes     52.4
      No      47.6

      N = 63

2Ag   Aside from export license and Census Bureau and Customs Service
      paperwork, did any of your exported goods involve reporting
      requirements to any other federal agencies since the beginning of 1996?

      Yes     39.7
      No      60.3   (GO TO Q. Ins)

      N = 63

3Ag   Which agencies had reporting requirements?

      Agriculture Department           24.0
      State Department                 44.0
      Commerce Department              36.0
      Nuclear Regulatory Commission     0
      Other (List below)               44.0

      N = 25

Ins   During the last 3 years, that is, since 1994, were any of your export
      shipments inspected by the Customs Service?

      Yes     46.8
      No      53.2

      N = 62




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Im1     Does your company also import products into the United States?

        Yes     90.5
        No       9.5   (GO TO Q.9)

        N= 63

Im2     Does your company use the Customs Service's Automated Broker
        Interface (ABI) system to submit import data?

        Yes        31.6
        No         42.1
        Don't know 26.3

        N = 57

AUTOMATED EXPORT SYSTEM

9.      The Customs Service is now implementing the Automated Export System
        (AES) to collect and process data for all parties involved in export trade.
        Have you ever heard of this system?

        Yes     77.8
        No      22.2   (GO TO Q. 22)

        N = 63

All respondents saying that they had not heard of AES and those expressing a
desire for more information about AES were given Customs contact
information.

11.     Has anyone from the Customs Service or any other federal agency
        contacted your company regarding AES?

        Yes     40.8
        No      59.2

        N = 49




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  Surveys




12.   I'd like to know your company's plans, if any, regarding AES. Does your
      company plan to use AES to submit your required export data?

      Yes                    40.8
      No                     22.4      (GO TO Q. 21)
      Company hasn't decided 20.4
      Don't know             16.3      (GO TO Q. 14)

      N = 49

13.   How would you describe the status of your company's involvement with
      AES?

      All Eligible Respondents

      Are you currently:

            Studying AES                                       50.0
            Planning to file a letter of intent with Customs   16.7
            Have filed a letter of intent with Customs          3.3
            Currently testing AES                               0
            Other (Specify)                                    23.3
            Can't say/Don't know                                6.7

      N = 30


      Those That Plan to Use AES

      Are you currently:

            Studying AES                                       45.0
            Planning to file a letter of intent with Customs   20.0
            Have filed a letter of intent with Customs          5.0
            Currently testing AES                                  0
            Other (Specify)                                    25.0
            Can't say/Don't know                                5.0



      N = 20




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14.   What incentives, if any, do you see for going on AES?
      (DO NOT read list. Click all that respondent volunteers)

      All Eligible Respondents

      None                            23.7    (GO TO Q. 15)
      One-stop filing                 18.4
      Cost savings for company         7.9
      Convenience of automation       55.3
      Better trade statistics          0
      Other (Specify)                 36.8

      N = 38


      Those That Plan to Use AES

      None                            15.0    (GO TO Q. 15)
      One-stop filing                 15.0
      Cost savings for company         5.0
      Convenience of automation       55.0
      Better trade statistics            0
      Other (Specify)                 40.0

      N = 20

15.   I'd like your views about incentives for using AES mentioned by others.
      Do you view [ASK FOR EACH LISTED BELOW] as an incentive for your
      company to on go on AES or not? (Each item was asked of respondents
      NOT volunteering the item in Q. 14. Results displayed include those who
      volunteered the item in question 14.)

      A. One-stop filing

      Volunteered          18.4
      Yes                  42.1
      No                   18.4
      Don't know           21.1

      N = 38




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      B. Cost savings for company

      Volunteered             5.3
      Yes                    39.5
      No                     15.8
      Don't know             39.5

      N = 38

      C. Convenience of automation

      Volunteered            55.3
      Yes                    34.2
      No                      2.6
      Don't know              7.9

      N = 38

      D. Better trade statistics

      Volunteered             0
      Yes                    60.5
      No                     15.8
      Don't know             23.7

      N = 38


16.   About how much would you estimate it would cost your company to
      implement AES, if you chose to do so? (Asked of those planning to use
      AES or whose companies had not yet decided whether to use AES.)

All Eligible Respondents              Those That Plan to Use AES

MEDIAN              $15,000           MEDIAN            $57,500
RANGE               2,000 - 750,000   RANGE             2,500 - 750,000
INTERQUARTILE                         INTERQUARTILE
RANGE               95,000            RANGE             495,000

Don't know 70.0                       Don't know 70.0




  Page 54                                        GAO/NSIAD-98-5 Automated Export System
       Appendix III
       Results of Freight Forwarder and Exporter
       Surveys




           N = 30                                  N= 20

     17.   About when do you plan to start using AES? (Asked of those planning to
           use AES.)16

           Date Given: 7/97 - 1/99      42.1

           Don't know                   57.9

           N = 19


     18.   And about how long do you think it would take for your company to
           implement AES? (Asked of those whose companies had not yet decided
           whether to use AES.)

                               Range of Responses

           MONTHS              1 - 11
           YEARS               2
           BY (DATE)           ---

           Don't know          60.0

           N = 10

     AES-PASS

     19.   Are you familiar with AES-PASS? (Asked of those planning to use AES or
           whose companies had not yet decided whether to use AES.)


           All Eligible Respondents                Those That Plan to Use AES

           Yes   36.7                              Yes     40.0




16
 Two questions were asked about the timing of AES implementation: those planning to
use AES were asked to estimate a date (Q.17); those whose companies had not yet
decided whether to use AES were asked about how long it would take for their
companies to implement AES (Q.18).




       Page 55                                             GAO/NSIAD-98-5 Automated Export System
  Appendix III
  Results of Freight Forwarder and Exporter
  Surveys




      No    63.3   (GO TO Q.22)               No   60.0   (GO TO Q.22)

      N = 30                                  N = 20

20.   Is your company likely to apply for AES-PASS status? (Asked of those
      who were familiar with AES-PASS and who plan to use AES or whose
      companies had not yet decided whether to use AES.)

      Yes   100.0 (GO TO Q.22)
      No        0 (GO TO Q.22)

      N = 11


21.   Why does your company not plan to use AES?
      (DO NOT read list. Click all that respondent volunteers) (Asked of those
      who say they will not use AES.)

      Lack of knowledge about AES              36.4       (GO TO Q. 22)
______________________________________________
(Reasons spontaneously volunteered)

      Predeparture filing requirement                                 36.4
      Cost of automation                                               0
      Personnel cost                                                   0
      Company hardware or software incompatibility with AES            0
      Concerns about the amount of information required by AES         0
      Concerns about how the information will be used by Customs       0
      Concerns about privacy protection of information                 0
      Other (Specify)                                                 36.4

      N = 11

I'd like your views about some concerns mentioned by others in using AES.
(Each item was asked of respondents who did not mention lack of knowledge
above and who did NOT volunteer the item in Q. 21. Results displayed include
those who volunteered the item in question 21 above.)


21a   Are you concerned or not about the predeparture SED filing requirement
      of AES?




  Page 56                                          GAO/NSIAD-98-5 Automated Export System
  Appendix III
  Results of Freight Forwarder and Exporter
  Surveys




      Volunteered        42.9
      Yes                14.3
      No                 42.9
      Don't know          0

      N=7

21b   Are you concerned or not about the cost of automation necessary for
      your company to get on AES?

      Volunteered         0
      Yes                42.9
      No                 42.9
      Don't know         14.3

      N=7

21c   Are you concerned or not about the amount of information required by
      AES?

      Volunteered         0
      Yes                42.9
      No                 28.6
      Don't know         28.6

      N=7

21d   Are you concerned or not about how the information will be used by
      Customs?

      Volunteered         0
      Yes                28.6
      No                 71.4
      Don't know          0

      N=7

21e   Are you concerned or not about privacy protection of information?

      Volunteered         0
      Yes                57.1




  Page 57                                        GAO/NSIAD-98-5 Automated Export System
  Appendix III
  Results of Freight Forwarder and Exporter
  Surveys




      No                 42.9
      Don't know          0

      N=7

SED Preparation and Filing

Next, we'd like to know how your company currently prepares some of its
export-related paperwork. There are a number of ways a company may prepare
and file the Shippers Export Declaration form with the Census Bureau. I'd like
to ask you about the methods you used during the past year.

22.   First, about what percentage of your export shipments required the filing
      of an SED during 1996? Your best estimate will suffice.


      MEDIAN                          95
      RANGE                           50 - 100
      INTERQUARTILE RANGE             15

      Don't know 12.7

      N = 63

23.   Did your company submit all of the SEDs for those shipments to
      Customs or did someone else also submit SEDs for those shipments?

      We submitted all SEDs                       28.6    (GO TO Q. 25)
      Someone else submitted all or some of the SEDs      71.4

      N = 63

24.   About what percentage of the SEDs for your shipments did YOUR
      company submit to Customs in 1996? (Results displayed include
      respondents who answered "We submitted SEDs" to Q.23, scored as
      submitting 100 percent.)

      MEDIAN                          19.5
      RANGE                           0 - 100
      INTERQUARTILE RANGE             100




  Page 58                                          GAO/NSIAD-98-5 Automated Export System
  Appendix III
  Results of Freight Forwarder and Exporter
  Surveys




      Don't know   1.6

      N = 63

25.   How did your company submit its SEDs during 1996: Using paper SEDs,
      AERP, AES, or an Internet-based company linked to AES? (click all that
      apply) (Results displayed include only respondents who submit SEDs.)

      Paper        92.1
      AERP          5.3
      AES           0
      Internet      0
      Unknown      5.3

      N = 38

For AERP Users Only:


26.   The Census Bureau plans on phasing out the AERP system by the end of
      1999. How does your company plan to submit its SEDs once the AERP
      system is no longer available? (Click all that apply)

      Company will use AES                      75.0
      Company will use an Internet service       0
      No plans yet                               0
      Submit paper SEDs                         25.0
      Have an agent or the customer submit SEDs 0
      Other (specify)                           50.0

      N=4

For Paper SED Filers Only:

Business Computer Use

27.   Does your company use a computer to manage any or all of its
      export-related record keeping? (Results displayed exclude paper filers
      who also file electronically.)

      Yes   94.1




  Page 59                                         GAO/NSIAD-98-5 Automated Export System
  Appendix III
  Results of Freight Forwarder and Exporter
  Surveys




      No       5.9

      N = 34

And finally, we'd like to know about the filing of your export paperwork and
the timing of your export shipments.


28.   How difficult, if at all, was it for your company last year (1996) to file its
      paper SEDs with the carrier prior to departure of the goods?

      (Read each response option and click one)

      Of   very great difficulty     11.8
      Of   great difficulty           2.9
      Of   moderate difficulty       17.6
      Of   some difficulty            5.9
      Of   little or no difficulty   61.8

      N = 34

29.   During the last year (1996), did your company deliver ANY SEDs to the
      carrier following departure of the goods? Do not include any submitted
      through AERP.

      Yes     38.2
      No      61.8

      N = 34

30.   About how many of your SEDs were delivered after departure of the
      goods?

      MEDIAN                                70.5
      RANGE                                 1 - 100
      INTERQUARTILE RANGE                   97

      Don't know 8.6

      N = 35




  Page 60                                             GAO/NSIAD-98-5 Automated Export System
  Appendix III
  Results of Freight Forwarder and Exporter
  Surveys




Ask All:

That concludes our interview. Thank you for your time and your cooperation.
If there is any other aspect of AES you'd like to comment on, please feel free to
do so now.




  Page 61                                           GAO/NSIAD-98-5 Automated Export System
Appendix IV

Objectives, Scope, and Methodology


                              To determine whether AES is likely to achieve its objectives of improving
                              export data, enhancing enforcement efforts, and streamlining export data
                              collection, we interviewed Customs and Census headquarters officials and
                              representatives of 12 government agencies with export-related
                              responsibilities. We also visited 13 Customs ports, including air, sea, and
                              land border ports, where we observed export processing and enforcement
                              operations and where we interviewed numerous supervisory and line
                              inspectors involved in these operations. We conducted interviews with
                              over 30 potential users of AES, including 12 ocean and air carriers and all
                              AES participants as of April 1997. We also interviewed over 10 of the top 16
                              AERP users in terms of value and volume of AERP filers. We also met with
                              several trade groups representing various segments of the export
                              community. In addition, we analyzed Customs’ and Census’ AES planning
                              documents and Customs’ strategic plans regarding its process for checking
                              goods to be exported. We also reviewed data provided by both Customs
                              and Census regarding their actual and projected costs for AES
                              development. We did not independently verify the validity of their cost
                              estimates.

                              As part of our effort to determine the trade community’s plans for using
                              AES, we conducted two surveys of potential AES users—U.S. ocean freight
                              forwarders and exporters. A detailed summary of our methodology for
                              these two surveys follows.


Freight Forwarder Survey
Methodology
Study Population and Sample   The freight forwarder study population consisted of active licensed ocean
                              freight forwarders and NVOCCs listed in the Federal Maritime Commission’s
                              December 1996 Regulated Persons Index. The 1,939 freight forwarder
                              headquarters and 2,341 NVOCC listings were merged and duplicates were
                              eliminated, resulting in a total population of 3,209. A simple random
                              sample of 400 cases was selected from the combined list.

                              Twelve cases, although listed in the index, had not or were not currently
                              providing freight forwarding or NVOCC services and therefore were
                              considered ineligible for the survey. An additional six companies were
                              found to be subsidiaries of others on our list. In these instances, a single
                              respondent was chosen to respond on behalf of both companies.




                              Page 62                                  GAO/NSIAD-98-5 Automated Export System
                           Appendix IV
                           Objectives, Scope, and Methodology




                           We sent certified letters to companies we were unable to contact by
                           phone. We received confirmation from the Postal Service that three of
                           those cases were not located at the listed address, nor did the Postal
                           Service have forwarding address information for those cases. The bonds
                           and tariffs of two cases were cancelled by the Federal Maritime
                           Commission. The population was adjusted to reflect these inactive cases.
                           Applying the same adjustment to the sample resulted in a final sample size
                           of 376.1

Data Collection            Telephone interviews were completed with 3312 freight forwarders and
                           NVOCCs, for a response rate of 88 percent. Forty-five sample members
                           either refused to participate (30), could not be scheduled for an interview
                           during the study’s time frame (4), or could not be contacted to confirm
                           eligibility (11).

Sampling and Nonsampling   Because this study is based on a probability sample, our estimates involve
Error                      some statistical uncertainty. Percentages and other estimates contained in
                           the report are the midpoints of the 95-percent confidence intervals for the
                           value being estimated. The results present intervals for items quoted in the
                           letter.

                           To minimize nonsampling sources of error, such as question wording or
                           sequencing effects and interviewer differences, the survey was pretested
                           with 16 active freight forwarders and NVOCCs following intensive
                           interviewer training and practice. The item nonresponse rate (the rate of
                           interviewers not recording an answer to a question that should have been
                           answered) for reported items ranged between 0 and 2 percent for
                           questions asked of all respondents and between 0 and 5 percent for
                           questions asked only of those not planning to use AES.

Nonresponse Analysis       We examined the Federal Maritime Commission’s database to determine
                           whether systematic differences held between our sample and the parent
                           population as well as whether systematic differences distinguished
                           nonrespondents from our respondents. We examined each group in terms
                           of number of branch offices, as an approximate measure of size, the
                           mixture of cases from the freight forwarder or NVOCC listings, and the
                           region of the country in which they operated. All nonrespondents are
                           listed as having single offices, and about 6 percent of respondents are
                           listed as having two or more offices. Respondents and nonrespondents

                           1
                            One additional case was removed from the sample because its representative was a participant in
                           discussions of AES with GAO in another capacity.
                           2
                            Includes two cases for which the data were lost due to computer malfunction.



                           Page 63                                              GAO/NSIAD-98-5 Automated Export System
                        Appendix IV
                        Objectives, Scope, and Methodology




                        alike were equally divided between the freight forwarder and NVOCC source
                        listings. No difference was found between respondents and
                        nonrespondents in terms of their geographic location nor between the
                        sample and its parent population.

Summary of Respondent   The freight forwarders we interviewed are predominantly small
Characteristics         companies. The great majority (94 percent) have single offices and few
                        employees. Nearly one-half have 5 or fewer full-time employees, and
                        74 percent have fewer than 15. Collectively, our respondents employ a
                        total of about 87,000 people, and they have a total of 490 office locations.
                        Their home offices are located in 25 states and Puerto Rico. They served
                        an estimated 132,000 clients during 1996 and had gross revenues of about
                        $4.6 billion.

                        We did not attempt to verify the accuracy of information, such as the cost
                        of implementing AES, supplied by businesses during our interviews and
                        surveys.


Exporter Survey
Methodology
Study Population        The study population for the exporter survey consisted of the companies
                        responsible for the greatest number of paper SEDs and/or those of the
                        highest value filed with the Census Bureau in September 1996.
                        Collectively, these companies filed or had their agents file 34,340 SEDs for
                        exports worth $3.9 billion. The number of SEDs filed by individual filers
                        ranged from 2 to 2,293, and the value of goods exported ranged from about
                        $2.4 million to about $492 million.

                        We obtained from the Census Bureau the names of the top 49 filers in
                        terms of volume of SEDs filed and the top 49 filers in terms of the value of
                        SEDs filed in September 1996. The two lists were combined and purged of
                        duplicates. In addition, foreign embassies and U.S. foreign military sales
                        units were removed from the list. The resulting list contained 80 filers
                        located in 22 states. During the course of the study, we learned that for
                        some companies, a single individual was responsible for one or more
                        additional filers. Multiple cases for a single respondent were combined
                        into a single case, leaving a final study population of 72 filers. Sixty-three
                        of these companies responded to the survey, a response rate of 88 percent.
                        Responding companies accounted for 92 percent of the SEDs filed by the
                        total study population and 88 percent of their total value.



                        Page 64                                  GAO/NSIAD-98-5 Automated Export System
                       Appendix IV
                       Objectives, Scope, and Methodology




Nonresponse Analysis   To determine whether systematic differences distinguished
                       nonrespondents from respondents, the two groups were compared in
                       terms of the value and number of SEDs filed as well as their geographic
                       location. Independent sample t-tests of the means of SED value and volume
                       revealed no difference between the groups on either dimension.

                       Because the distributions of these variables were nonnormal, a second
                       test, which grouped cases according to whether they fell in the top or
                       bottom half of each distribution, was performed. The comparison revealed
                       no difference between the two groups. The geographic distribution of
                       nonrespondents also paralleled that of respondents. Item nonresponse for
                       reported items ranged from 0 percent to 2 percent for questions asked of
                       all respondents in this survey and from 0 to 5 percent for questions asked
                       only of those planning to use AES.

                       We did our work between November 1996 and August 1997 in Washington,
                       D.C., and in various Customs port locations across the United States, in
                       accordance with generally accepted government auditing standards.




                       Page 65                                GAO/NSIAD-98-5 Automated Export System
Appendix V

Comments From the Department of
Commerce

Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.




                             Page 66   GAO/NSIAD-98-5 Automated Export System
Appendix V
Comments From the Department of
Commerce




Page 67                           GAO/NSIAD-98-5 Automated Export System
Appendix V
Comments From the Department of
Commerce




Page 68                           GAO/NSIAD-98-5 Automated Export System
                          Appendix V
                          Comments From the Department of
                          Commerce




See comment 1.




Now on pp. 2, 5, and 6.




See pp. 20-21.




                          Page 69                           GAO/NSIAD-98-5 Automated Export System
                      Appendix V
                      Comments From the Department of
                      Commerce




Now on pp. 5 and 7.




See comment 2.




See comment 3.

Now on pp. 16-17.




See comment 4.




Now on p. 4.




                      Page 70                           GAO/NSIAD-98-5 Automated Export System
                 Appendix V
                 Comments From the Department of
                 Commerce




Now on p. 13.




See pp. 20-21.




                 Page 71                           GAO/NSIAD-98-5 Automated Export System
               Appendix V
               Comments From the Department of
               Commerce




               The following are GAO’s comments on the Department of Commerce’s
               letter dated October 30, 1997.


               1. Our draft report stated that predeparture filing is a major concern for
GAO Comments   some segments of the export community, including certain industry
               groups, airlines and air couriers, and companies that export bulk goods or
               grain commodities. However, we do not state that most companies we
               interviewed cited the requirement for predeparture filing as the main
               reason for not participating in AES.

               We note that nearly 40 percent of both the freight forwarders and
               exporters we surveyed reported that they have at least “some” to “very
               great” difficulty filing SEDs predeparture. In addition, about 40 percent of
               both groups said they filed SEDs late in 1996. Among companies that
               reported little or no difficulty filing SEDs predeparture, 28 percent of all
               ocean freight forwarders and 19 percent of exporters we surveyed said
               they filed SEDs late in 1996.

               2. In commenting on the percent of companies that report only to Census
               and Customs, Census did not take into account those companies that
               reported having licensing requirements. Therefore, the statistics they cite
               are inaccurate. About 61 percent of all ocean freight forwarders, and, of
               the exporters we surveyed, 32 percent have no license or other agency
               reporting requirements.

               3. We note in our report that AES was designed to serve as a source of
               export data for agencies with export requirements and reduce
               redundancies in filing and paperwork associated with various export
               control requirements. This paperwork includes license application data.
               We revised the text to make clear that AES was not designed to replace an
               agency’s authority to regulate exports.

               4. We do not suggest that paper filers need to automate their procedures in
               order to file via AES. Rather, our report lists various options available to
               companies that want to convert from filing paper SEDs to filing via AES
               (see p. 4).




               Page 72                                  GAO/NSIAD-98-5 Automated Export System
Appendix VI

Comments From the U.S. Customs Service


Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.




See comment 1.




                             Page 73   GAO/NSIAD-98-5 Automated Export System
                 Appendix VI
                 Comments From the U.S. Customs Service




Now on p. 4.




See pp. 20-21.




                 Page 74                                  GAO/NSIAD-98-5 Automated Export System
                 Appendix VI
                 Comments From the U.S. Customs Service




Now on pp. 3-4
and 14.




                 Page 75                                  GAO/NSIAD-98-5 Automated Export System
Appendix VI
Comments From the U.S. Customs Service




Page 76                                  GAO/NSIAD-98-5 Automated Export System
Appendix VI
Comments From the U.S. Customs Service




Page 77                                  GAO/NSIAD-98-5 Automated Export System
                 Appendix VI
                 Comments From the U.S. Customs Service




See comment 2.




Now on p. 16.




                 Page 78                                  GAO/NSIAD-98-5 Automated Export System
Appendix VI
Comments From the U.S. Customs Service




Page 79                                  GAO/NSIAD-98-5 Automated Export System
               Appendix VI
               Comments From the U.S. Customs Service




               The following are GAO’s comments on the U.S. Customs Service’s letter
               dated October 27, 1997.


               1. Our report does not state that the majority of the trade community
GAO Comments   supports full automation or that a majority recognizes the benefit of
               one-stop filing. Instead, our survey shows that 45 percent of all ocean
               freight forwarders and 55 percent of the exporters we surveyed cited the
               convenience of automation as an incentive to use AES. Only 16 percent of
               ocean freight forwarders and 18 percent of the exporters we surveyed
               cited one-stop filing as an incentive to use AES. Similarly, our work does
               not validate that 80 percent of the information required predeparture is in
               fact available predeparture. We note in our report that representatives
               from some companies participating in Customs’ 1996 evaluation of AES
               stated that they believe that 80 percent of the time they have information
               needed to complete the SED prior to predeparture of the vessel. We did not
               attempt to determine whether this was an universal view among
               companies in the exporting community. Conversely, our surveys show that
               nearly 40 percent of both the freight forwarders and exporters we
               surveyed reported that they have at least some to very great difficulty
               filing SEDs predeparture. About 40 percent of both groups said they filed
               SEDs late in 1996.


               2. We note in our report that AES was designed to serve as a source of
               export data for agencies with various export control requirements and to
               reduce redundancies in filing and paperwork. This paperwork includes
               license application data. However, we also state that AES is unlikely to
               achieve its objective of providing exporters with “one-stop shopping”
               because most agencies’ export requirements cannot be fully satisfied
               through AES. We also note that AES will not reduce or eliminate agency
               paperwork or the electronic filing associated with the issuance of export
               licenses, certificates, or permits. However, we have revised the text to
               make clear that AES was not designed to replace an agency’s authority to
               regulate exports.




               Page 80                                  GAO/NSIAD-98-5 Automated Export System
Appendix VII

Major Contributors to This Report


                        Elizabeth J. Sirois, Assistant Director
National Security and   Elizabeth Morrison, Evaluator-in-Charge
International Affairs   Carolyn Black-Bagdoyan, Senior Evaluator
Division, Washington,   Sara B. Denman, Senior Evaluator
                        Mary M. Park, Evaluator
D.C.                    Olivia L. Parker, Evaluator
                        Rona H. Mendelsohn, Senior Communications Analyst
                        Waverly E. Sykes, Assistant Director
                        Marilyn C. Mauch, Assistant Director
                        Kathleen M. Joyce, Senior Social Science Analyst
                        Arthur L. James, Jr., Senior Statistician


                        Mark C. Speight, Senior Attorney
Office of the General
Counsel
                        Daniel R. Garcia, Senior Evaluator
Los Angeles Regional    Edward J. Laughlin, Senior Evaluator
Office                  Larry S. Thomas, Senior Evaluator




(711238)                Page 81                                GAO/NSIAD-98-5 Automated Export System
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