Analysis of the Effects of U.S. National Security Controls on U.S.-Headquartered Industrial Firms (1986) / Chapter Skim
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V. Summary of Interviews with U.S. Firms on the Operation of the Licensing System
V. Summary of Interviews with U.S. Firms on the Operation of the Licensing System
Pages 57-69
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From page 57... ...
What is not evident in these statistics, but became clear from the interviews, was that the denial rate 62Extensive interviews were conducted with over 20 U.S.-based companies randomly selected from the questionnaire respondents who indicated they were willing to be interviewed about the control system in detail. The firms selected varied with respect to size of the parent, size of foreign sales, experience with the U.S.
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From page 58... ...
In addition, some of the larger companies that are well versed in dealing with the system stated that if their application runs into difficulties, they will often ask for their applications to be RWAd rather than denied,63 or the firm will modify the scope of the application to take into account various objections raised by the licensing officials. Another reason why the denial rate does not indicate the true restrictiveness of the system is what can be called a de facto denial when applications are approved too late -- the sale is lost or the trade show is over.
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From page 59... ...
Appendix B presents an analysis of analytic instruments trade which directly links changes in trade to changes in the license rules. This approach bypasses the problems associated with measuring lost sales.
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From page 60... ...
The discussion on the denial rate and lost sales demonstrate both the complex nature of the effects of the U.S. export control system and the difficulty in measuring its competitive effects.
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From page 61... ...
Larger firms, while in some instances also incurring penalties due to being stopped by Operation Exodus indicated no such discrete decision to comply or withdraw. Returning to the issue of how the export license system creates entry costs, the up-front cost of compliance for a firm comes in the form of training employees, learning the regulations, developing channels of communication with the DOC, changing marketing procedures, collecting proper documentation and even educating -61
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From page 62... ...
The reasons are straightforward -- firms report that the phone lines at the Export Administration are often clogged and the use of the mail slows communication. The advantage of the larger firms that can afford the investment needed to closely monitor their license applications manifests itself most obviously in shorter processing times for license applications.
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From page 63... ...
Companies typically trade at one of these levels based on the compliance cost they are able to accept.66 In turn, the level Dictates which markets are available, marketing procedures, delivery schedules and so forth. The resultant company approach toward exporting influences the different potential competitive effects created by the export control system.
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From page 64... ...
The interviewed firms that were new to the system indicated even these basic tasks were difficult because the regulations are extraordinarily difficult to understand without outside assistance. The on-going resource commitment at this basic level is relatively low because processing time for licenses is fairly predictable and therefore does not require extensive follow up once the firm successfully understands the basic way the system operates.
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From page 65... ...
Most of the companies interviewed stated they received very little information on the status of a license once it entered the interagency review stage. One exporter described the interagency review process as a "black hole." Companies said that information on the status of a license was important since they needed to coordinate a complex set of activities related to production, shipment, and distribution as well as maintain communication with their customers if a license application is delayed.
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From page 66... ...
Not only are status checks difficult to get, but processing time can vary significantly for different applications with nearly identical characteristics. As the processing time increases beyond standard times, all companies increase their resource commitment towards a given application.
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From page 67... ...
Foreign customers want supply schedules they can plan around and to that end some interviewed companies report their customers are beginning to put contingency statements for license approvals into contracts. The benefits associated with engaging in trade at this level depend to a significant degree on a firms' potential volume of foreign business.
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From page 68... ...
Companies consistently report that East-West trade is very different from West-West trade. When asked about processing times, experiences with the license system or customer relations, they specify that their response depends on whether the question applies to East-West or West-West trade.
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From page 69... ...
free-worId applications and only a third of the respondents export to the Bloc. These responses confirm information obtained from the interviews that the potential volume of trade to the East Bloc is too small for many firms to support the cost of engaging the control system at this level.
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