[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
CREATION OF HOMELAND SECURITY DEPARTMENT
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
JUNE 26, 2002
__________
Serial No. 107-74
__________
Printed for the use of the Committee on Ways and Means
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81-233 WASHINGTON : 2002
___________________________________________________________________________
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, Georgia
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania XAVIER BECERRA, California
WES WATKINS, Oklahoma KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona LLOYD DOGGETT, Texas
JERRY WELLER, Illinois EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
Allison Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
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C O N T E N T S
Page______
Advisory of June 19, 2002, announcing the hearing................ 2
WITNESSES
U.S. Department of the Treasury, Hon. Jimmy Gurule,
Undersecretary for Enforcement................................. 7
______
Joint Industry Group, and JBC International, James B. Clawson.... 30
National Treasury Employees Union, Colleen M. Kelley............. 38
Port of Tacoma, Timothy Farrell.................................. 25
Sara Lee Branded Apparel, Jerry Cook............................. 35
SUBMISSIONS FOR THE RECORD
American Apparel & Footwear Association, Arlington, VA, Stephen
Lamar, letter.................................................. 63
American Civil Liberties Union, Timothy H. Edgar, statement...... 64
American Petroleum Institute, Charles E. Sandler, letter......... 70
American Textile Manufacturers Institute, statement.............. 72
Border Trade Alliance, San Diego, CA, statement.................. 73
National Customs Brokers and Forwarders Association of America,
statement...................................................... 74
CREATION OF HOMELAND SECURITY DEPARTMENT
----------
WEDNESDAY, JUNE 26, 2002
House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to notice, at 5:22 p.m., in
room 1100 Longworth House Office Building, Hon. Bill Thomas
(Chairman of the Committee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON OVERSIGHT
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
June 19, 2002
No. FC-20
Thomas Announces Hearing on
Creation of Homeland Security Department
Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways
and Means, today announced that the Committee will hold a hearing on
the President's proposal to create a U.S. Department of Homeland
Security including the transfer of all assets and authority of the U.S.
Customs Service to the new Department. The hearing will take place on
Wednesday, June 26, 2002, in the main Committee hearing room, 1100
Longworth House Office Building, beginning at 2:00 p.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses. Any
individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee or for
inclusion in the printed record of the hearing.
BACKGROUND:
Since 1789, the Customs has been a separate Federal agency under
the U.S. Department of the Treasury. Virtually all Federal Government
revenue was originally collected by Customs through duties. Today,
Customs collects about $20 billion of revenue and ensures that all
imports and exports comply with U.S. laws and regulations. Customs
collects and protects the revenue, guards against smuggling, and is
responsible for the following:
Assessing and collecting Customs duties, excise
taxes, fees, and penalties due on imported merchandise.
Interdicting and seizing contraband, including
narcotics and illegal drugs.
Processing persons, baggage, cargo and mail, and
administering certain navigation laws.
Detecting and apprehending persons engaged in
fraudulent practices designed to circumvent Customs and related
laws.
Protecting American business and labor and
intellectual property rights by enforcing U.S. laws intended to
prevent illegal trade practices, including provisions related
to quotas and the marking of imported merchandise; the Anti-
Dumping Act; and, by providing Customs Recordations for
copyrights, patents, and trademarks.
Protecting the general welfare and security of the
United States by enforcing import and export restrictions and
prohibitions, including the export of critical technology used
to develop weapons of mass destruction, and money laundering.
Collecting accurate import and export data for
compilation of international trade statistics.
Today, in addition to its own laws, Customs enforces well over 400
other provisions of law for at least 40 agencies. A number of these
statutes are quality of life issues that relate to the environment,
such as motor vehicle safety and emission controls, water pollution
standards, pesticide controls, Freon smuggling, and the protection of
endangered wildlife. Other laws safeguard American agriculture,
business and public health, and consumer safety.
On June 18, 2002, President Bush proposed to transfer all of the
authority and assets of Customs, as well as any other Federal agencies,
to a new Homeland Security Department. Specifically, Customs would be
placed under an Under Secretariat for Border and Transportation
Security along with the Immigration and Naturalization Service, the
Animal and Plant Health Inspection Service, the U.S. Coast Guard, and
the Transportation Security Administration.
In announcing the hearing, Chairman Thomas stated: ``Customs has
long performed the critical balancing act of assuring the security of
our ports and borders while also ensuring that vital international
commerce continues to flow. Our Nation's long-term defense rests
equally upon the protectors at our borders and the engine of our
economy. During this hearing, I hope we can examine how these dual
functions would continue to be performed if Customs were transferred
entirely to a new Homeland Security Department.''
FOCUS OF THE HEARING:
The President proposes to create a new Homeland Security
Department, the most significant transformation of the Federal
Government in over a half-century by transforming and realigning
current government activities into a single department whose primary
mission is to protect our homeland. The creation of the Department is a
key step in the President's national strategy for homeland security.
The hearing will focus on details of how this realignment will affect
Customs and its core functions such as collection of duties and trade
facilitation.
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noted above.
Chairman THOMAS. The hour of two having arrived----
[Laughter.]
Chairman THOMAS. For those of you who have not had a chance
to take a look at the document that is spread out on the table,
courtesy of the National Archives, to try to set the tone of
our discussion about the changes that may or may not be made in
creating a new Department of Homeland Security, dealing with
those areas that have traditionally been under the Committee on
Ways and Means jurisdiction, what you have in front of you is
the fifth act of Congress. That's correct. There were four
previous acts. This was the fifth act, which created the U.S.
Customs Service, the first agency of the U.S. Federal
Government to be created.
It was signed more than 220 years ago.
This fifth bill passed by Congress was to create the agency
to implement the first act of Congress, which was the Tariff
Act of 1789.
So when we talk about making some fundamental decisions,
the idea that the first and fifth act creating the Tariff Act
to produce revenue, which was the sustaining revenue source for
the U.S. Government for some time, along with excise taxes, and
the agency to carry it out, means that, since Alexander
Hamilton as the Secretary of the U.S. Department of the
Treasury, the Customs' mission has always been, primarily, to
collect revenue and to ensure that imports flow smoothly across
the border.
Perhaps one of the reasons we are holding the hearing today
is to examine the ``primarily'' aspect of it and to see what
might be done in creating a greater degree of security for our
homeland.
Today, Customs collects more than $20 billion in revenue
each year. However, obviously, Customs over the years has taken
on many other functions, because of its unique presence on the
border: fighting against illegal drugs; illegal transshipment
of T-shirts; illegal Rolex knockoffs; and you could go on and
on and on.
And one of the reasons we need this hearing is to
understand the changing priorities and the Administration's
current point of rethinking our border security.
I just thought, in engaging in this discussion of change,
it might be useful to reflect briefly on what has been
constant. Obviously, the fundamental questions, as we move into
the 21st century, are: What is Customs? What is the new role
for Customs? To what extent is it a continuation of the old
role? And to what extent, notwithstanding the fact of Customs
physically being relocated somewhere else, should it maintain
the long-term ties of revenue through Treasury and back to the
Committee on Ways and Means?
So some of the fundamental questions we should be looking
at are:
If we combine Customs with several more entities and have
them answer to a Homeland Undersecretary in some way, will
former Customs' inspectors start doing Coast Guard or
Immigration and Naturalization Service (INS) or other work that
is being pulled together under Homeland Security, or would they
be somewhat moved but essentially the same in terms of the
responsibility and the jurisdiction?
Are they going to be more specialized, more generalized?
Will they combine two or three different functions
currently performed by other agencies' inspectors at the
border?
Just how will the generation of information be shared
between these disparate groups now pulled together?
And I guess the bottom line for this Committee is: Give us
the vision that explains Customs first task, the collection of
revenue, in this new department and 21st century.
So I look forward to the testimony. My guess is that we
will have more questions than there are answers. But we have a
very tight schedule. The leadership on both sides of the aisle
have asked us to, by July 12, report the Committee's
reflections on what ought to be done, for the purpose of
putting a bill together to move it through the House. July 12
is our deadline.
And I now recognize the Ranking Member, the gentleman from
New York, Mr. Rangel, for any comments he may have.
[The opening statement of Chairman Thomas follows:]
Opening Statement of the Hon. Bill Thomas, a Representative in Congress
from the State of California, and Chairman, Committee on Ways and Means
In front of us today is a historic document courtesy of the
National Archives. It is the fifth Act of Congress creating the United
States Customs Service, the first agency of the United States Federal
Government ever to be created. It was signed more than 220 years ago by
President George Washington in 1789. Customs was empowered to implement
the first Act of Congress, the Tariff Act of 1789. Earlier this month
another AGeorge W.@ proposed changes, which the Congress and American
people welcome, to reorganize the government and create a Department of
Homeland Security by transferring other agencies, including Customs, to
that new department.
Since Alexander Hamilton first oversaw the fledgling Customs
Service, its mission has always been primarily to collect revenue and
to ensure that imports flow smoothly across the border. Today, Customs
collects more than $20 billion in revenue each year. Over time,
however, Customs has taken on many other functions because of its
unique border presence. Fighting against illegal drugs, illegal trans-
shipped t-shirts, and illegal Rolex knockoffs are just a few of these
other functions. This hearing is about how changing priorities have led
us to the point of rethinking our border security in a dramatic way. In
so doing we should remember why Customs was created in the first place.
This hearing will focus on fundamental questions as we rethink the
role of Customs in the 21st century, recognizing the historic and
significant role of the Customs Service while exploring options and the
effects of these options on a new department and the customers it
serves. A group of people, now at Customs, fulfills many missions,
often on an impromptu or ad hoc basis, that then become permanent. As
we examine this further, we should ask ourselves fundamental questions:
(1) If we combine Customs with several more entities and have them
answer to the same Homeland undersecretary, will former Customs
inspectors start doing Coast Guard or INS work or continue as they have
been doing? (2) Will it be more effective to have each specialize or
generalize? (3) Will the information generated by one entity more
easily be shared with the others? (4) And what will happen to Customs'
first task--revenue collection? (5) What do these changes mean to a
small or large American business that relies upon imported component
parts in order to manufacture something? (6) What do they mean to the
American retailers and consumers?
I look forward to the testimony of our witnesses today as we
consider legislation by our July 12 deadline.
The Chair would like to now recognize the Ranking Member, Mr.
Rangel.
Mr. RANGEL. Mr. Chairman, I do not like to talk about our
differences publicly, but you know that the minority has
pledged to the leadership and to the President to try to set up
this Homeland Security on a bipartisan basis as soon as we can,
and that is why I was so pleased that you were one of the first
to have hearings on this very important subject.
But I do not know how in the world you expect--is this the
only hearing we are going to have on this before we----
Chairman THOMAS. I will tell the gentleman, if it is
necessary to have additional hearings, we will. And I have put
a request in that Governor Ridge speak with us. As you might
imagine, he is very much in demand. I believe he has 18
different committees he is appearing in front of. He could not
be here today, but he said he would make himself available at a
future date.
And I do not think that it would be absolutely necessary,
unless the gentleman from New York believes it to be the case,
that we would need to meet in another public hearing. We could,
as we have done in the past, perhaps meet bipartisan in the
library or some other location to continue to ask questions
from someone who, if he is not named the Secretary following
the formation of the Cabinet, would certainly have most of the
precise information about how this Cabinet would be structured.
Mr. RANGEL. Well, I would assume that our responsibility is
not just to have a bipartisan meeting in the library but to get
answers to serious questions that Americans and the rest of the
House would have. They rely on us to a great deal. Customs is
such a very important part of Treasury. And it is kind of hard
for me to see why we do not have the Secretary of Treasury
here, we do not have the Customs Commissioner, or anyone
representing Customs. And, of course, I can see why we will not
have Tom Ridge, because, actually, we do not know what role he
is going to play with Homeland Security.
Chairman THOMAS. Will the gentleman yield briefly?
Mr. RANGEL. Yes, sure.
Chairman THOMAS. One of the things that we tried to do,
given the demands on everyone's time, is to get someone who
will be able to provide us with answers. The answers to the
gentleman's questions would perhaps be better responded to at
the end of the hearing, to see if in fact we have gotten some
questions answered. And to the degree we have, then we can make
additional decisions. To the degree that we have not, then I
think we can go forward.
But one of the things we need to do is to have the hearing.
And then we will decide if in fact the questions have been
answered or not. It is harder for me to do it a priori.
Thank the gentleman for yielding.
Mr. RANGEL. Let me ask you this, could you at least tell me
the thinking of the Chair in putting together the panel as to
how the questions that I would have for Secretary O'Neill or
the Customs Commissioner or a representative from Customs or
Tom Ridge--you know the questions that Republicans and
Democrats would want to ask. Just tell me the thinking of why
you put together this panel, that's all.
Chairman THOMAS. The answer is, you have to begin
somewhere. One of the things that I want to make sure there is
a public record on is exactly what Customs' officials do. There
is still a lot of failure to understand that diverse role. In
looking at the way in which the structure was initially
presented in discussions with a number of people who have
interactions with Customs' officials in many different
capacities, we thought it might be a pretty good idea to at
least lay on the record what Customs' folks do today.
I know the gentleman wanted the representative of the
Treasury employees, because we have had a number of discussions
about the work hours, the locations, some of the difficulties
in terms of the kinds of work hours that Customs'
representatives carry out. That I think also has to be
appreciated. I was pleased to have that individual on the panel
at the gentleman from New York's request.
Mr. RANGEL. Well, Mr. Chairman, these people have waited
for 3.5 hours, and if you are having this hearing in order to
find out what Customs does, and not ``where do we go from
here'' with Secretary O'Neill and the Customs Commissioner and
how they see the split-up, they could have sent us an official
document as to what Customs does. We want to find out what
impact the President's recommendation is going to have on
Customs when we make this move for them.
But let me thank the panel and everyone else for your
patience with us.
But I just wish, Mr. Chairman, that you would see your way
clear to have me to encourage more of my Members to be here to
participate in something like this, because they had every
reason to believe that, if we are talking about the Homeland
Security, the President's new Cabinet position, that this
Committee, just because of who we are, to be quite frank, would
have the Secretary in front of us to see how it impacts on
Internal Revenue Service (IRS) enforcement, on Alcohol,
Tobacco, and Firearms (ATF) on a variety of things.
But this is the hand that you dealt us, and I pass.
Chairman THOMAS. I will tell the gentleman, you asked me
about the panel that will follow the presentation of Mr.
Gurule, who is the Undersecretary for the Office of
Enforcement. At the time the Committee was structured, at 2
p.m., Mr. Ridge was scheduled to appear before the Judiciary
Committee. I perhaps would not dismiss the Undersecretary of
Treasury until you have heard his testimony.
And I understand that the gentleman would much rather be in
my seat than his, so I appreciate the concerns.
With that, the gentleman from Treasury, Mr. Gurule, if you
will give Mr. Rangel--and I will be listening very intently--an
understanding of the current vision and direction of Treasury
as this homeland security issue moves through, especially with
emphasis on Customs.
STATEMENT OF THE HON. JIMMY GURULE, UNDERSECRETARY FOR
ENFORCEMENT, U.S. DEPARTMENT OF THE TREASURY
Mr. GURULE. Thank you. Chairman Thomas, Members of the
Committee, thank you for the opportunity to testify. Let me at
the outset say that we want to work closely with you,
Congressman Rangel, and the Members of the Committee to address
your questions and concerns as we move through the legislative
process on this very important issue.
We appreciate the Committee's historical role on trade and
tariff matters, which, along with Customs itself, dates back to
1789. We also recognize the highly compressed schedule you are
operating under, and we will make every effort to be responsive
to you and do so in a timely manner.
I am proud to be here on behalf of the Administration to
discuss President Bush's proposal to create the Department of
Homeland Security. It includes moving the entire U.S. Customs
Service into the new department, which is the subject of
today's hearing.
Secretary O'Neill, Customs Commissioner Bonner, and I fully
support the President's proposal and strongly believe that the
new Homeland Security will play a key role in safeguarding the
American people.
In his June 6 address to the Nation, President Bush called
for the creation, and I quote, of ``a single, permanent
department with an overriding and urgent mission: securing the
homeland of America and protecting the American people.'' The
President also stated, and I quote, ``The reason to create this
department is not to increase the size of government, but to
increase its focus and effectiveness.''
Two days ago, President Bush toured Port Elizabeth, New
Jersey, and commended employees of Customs, the Coast Guard,
and the New York/New Jersey Port Authority for their vital work
in keeping dangerous cargo from entering our country. The
President told the employees that his proposed Homeland
Security would make their jobs easier. President Bush said, and
I quote, ``It'll make our Federal Government more responsive.
It will allow us to communicate better, to more effectively
secure the homeland.''
Since September 11, at the direction of the President, the
top priority bar none at Customs has been responding to the
continuing terrorist threat at our land border, seaports, and
airports. The Customs is working diligently to protect homeland
security by keeping terrorists and terrorist weapons from
entering the United States, while at the same time enhancing
our economic security by moving goods and people efficiently
across the borders.
The Customs has implemented several key programs since
September 11, and I just want to touch on a few of them
briefly. These are initiatives that respond to the new threat
our country faces.
First there is Operation Green Quest, a Customs-led multi-
agency initiative that targets terrorist financing. This task
force has already initiated hundreds of investigations,
aggressively moved against terrorist funding sources, and led
to the seizure of suspected terrorist assets.
Then there is the Container Security Initiative, CSI.
Customs is entering into partnerships with foreign seaports to
conduct prescreening and more effective risk targeting of sea
containers before--and I stress ``before''--they are shipped to
our ports.
And there is Project Shield America, where Customs' agents
monitor exports of strategic weapons and materials from the
United States to prevent international terrorist groups from
obtaining sensitive U.S. technology, weapons, and equipment
that could be used in a terrorist attack on our Nation.
On April 16 of this year, Secretary O'Neill, Governor
Ridge, and Commissioner Bonner launched the Customs-Trade
Partnership Against Terrorism, or C-TPAT, in Detroit. The C-
TPAT is a unique partnership with U.S. importers, carriers,
brokers, and others to improve security along the entire supply
chain, while expediting the flow of legitimate commerce into
the United States.
The success of programs like CSI and C-TPAT demonstrates
how Customs seeks to balance its important dual missions of
security enforcement and trade facilitation, dual missions that
are inextricably linked.
With C-TPAT, for example, Customs has been successful in
recruiting companies to join the program and make additional
investments in supply chain security solely because Customs is
able to offer those companies the benefit of expedited
clearance at the borders.
Another example of how Customs' trade and enforcement
functions are intertwined can be seen in the way Customs'
inspectors, import specialists, and special agents currently
work closely with each other to enforce trade and anti-
smuggling laws. I cannot stress enough the importance of these
dual missions and the interconnectedness with respect to the
duties and functions of these important components of Customs.
When Customs' inspectors make a substantial bulk cash
seizure at the border using resources such as canine
enforcement teams and non-intrusive inspection equipment, they
hand the case over to Customs' special agents. These agents
then conduct a follow-up investigation, such as an
investigation into the source of the funds or the destination
of the funds. This cooperative effort between inspectors and
special agents is a seamless one precisely because of Customs'
dual missions. The same is true with other border-related
enforcement matters, such as intellectual property piracy. What
begins as an infringement identification is often directly
turned into an investigative effort.
There are three additional points that may be self-evident
but cannot be overlooked in describing the link between
Customs' dual missions. First, many trade enforcement functions
are carried out by the same Customs' personnel who ensure
border security. Second, Customs uses the information it
receives from trade compliance examinations and manifests also
to assess security risks for shipments; this information is the
cornerstone of many of Customs' anti-terrorism efforts. And
third, Customs relies on the expertise of its trade enforcement
personnel to recognize anomalies in their review and processing
of commercial transactions information associated with the
admissibility and entry of imported goods that assist law
enforcement in developing targeting criteria as well as
targeting suspect shipments and initiating investigations.
Mr. Chairman, Treasury is proud of the vital role the men
and women of Customs have played and will continue to play
under the President's plan in defending our homeland.
Thank you again, Mr. Chairman and the Members of the
Committee, for this opportunity to testify. And at this time, I
would be happy to answer any questions you might have.
[The prepared statement of Mr. Gurule follows:]
Statement of the Hon. Jimmy Gurule, Undersecretary for Enforcement,
U.S. Department of the Treasury
Chairman Thomas, Members of the Committee, thank you for this
opportunity to testify. Let me at the outset say that we want to work
closely with you, Congressman Rangel, and the Members of the Committee
to address your questions and concerns as we move through the
legislative process on this important issue. We appreciate the
Committee's historical role on trade and tariff matters which, along
with Customs itself, dates back to 1789. We also recognize the highly
compressed schedule you are operating under, and we will make every
effort to be responsive to you and do so in a timely manner.
I am proud to be here on behalf of the Administration to discuss
President Bush's proposal to create a Homeland Security Department. As
you know, President Bush's proposal includes moving the entire U.S.
Customs Service into the new Department, which is the subject of
today's hearing. Secretary O'Neill, Customs Commissioner Bonner and I
fully support the President's proposal and strongly believe that the
new Department of Homeland Security will play a key role in
safeguarding the American people.
In his June 6th address to the Nation, President Bush called for
the creation of ``a single, permanent department with an overriding and
urgent mission: securing the homeland of America, and protecting the
American people.'' The President also stated, ``The reason to create
this department is not to [increase] the size of government, but to
increase its focus and effectiveness.''
After the President's announcement on June 6th, Treasury Secretary
O'Neill applauded President Bush for his bold plan to concentrate our
homeland security resources in a single Cabinet department. The
Secretary said, ``The President has demonstrated real leadership,
recognizing the new challenges we face and redesigning our system to
rise to those challenges. I fully support for this plan to integrate
our resources into one collaborative, efficient and nimble structure to
focus solely on protecting the American people.''
Two days ago, President Bush toured Port Elizabeth, New Jersey, and
commended employees of the Customs Service, Coast Guard, and the New
York/New Jersey Port Authority for their vital work in keeping
dangerous cargo from entering our country. The President told the
employees that his proposed Homeland Security Department would make
their jobs easier. President Bush said, ``It'll make our Federal
Government more responsive. It will allow us to communicate better. It
will allow all of you to make sure that the hard hours you're putting
in are able to more secure the homeland.''
For over 200 years, the U.S. Customs Service has defended our
country's borders and facilitated legitimate international trade and
travel. Since September 11th, at the direction of the President, the
top priority of Customs has been responding to the continuing terrorist
threat at our land borders, seaports, and airports. The Customs Service
is working diligently to protect homeland security by keeping
terrorists and terrorist weapons from entering the United States, while
enhancing our economic security by moving goods and people efficiently
across the borders.
The Customs Service has implemented several key programs since
September 11th that respond to the new threat our country faces.
``Operation Green Quest,'' a Customs-led multi-agency initiative that
targets terrorist financing, has already initiated hundreds of
investigations, aggressively moved against terrorist funding sources,
and led to the seizure of suspected terrorist assets. With the
Container Security Initiative (CSI), Customs is entering into
partnerships with foreign seaports to conduct pre-screening and more
effective risk targeting of sea containers, before they are shipped to
our ports. Under ``Project Shield America,'' Customs agents monitor
exports of strategic weapons and materials from the U.S. to prevent
international terrorist groups from obtaining sensitive U.S.
technology, weapons, and equipment that could be used in a terrorist
attack on our nation.
On April 16th of this year, Secretary O'Neill, Governor Ridge and
Commissioner Bonner launched the Customs-Trade Partnership Against
Terrorism (C-TPAT) in Detroit. C-TPAT is a unique partnership with U.S.
importers, carriers, brokers, and others to improve security along the
entire supply chain, while expediting the flow of legitimate commerce
into the United States.
The success of programs like CSI and C-TPAT demonstrates how
Customs seeks to balance its important dual missions of security
enforcement and trade facilitation, dual missions that are inextricably
linked. With C-TPAT, for example, Customs has been successful in
recruiting companies to join the program and make additional
investments in supply chain security solely because Customs is able to
offer those companies the benefit of expedited clearance at the
borders. The same is largely true for CSI, which offers expedited
processing at U.S. ports for pre-screened cargo from its partner ports.
These programs underscore how Customs is capable of effectively
increasing security at the borders while facilitating the critical flow
of trade into and out of the United States. These programs also reflect
how Customs has effectively established partnerships with private
industry to work together to protect our borders.
Another example of how Customs' trade and enforcement functions are
intertwined can be seen in the way Customs inspectors, import
specialists, and special agents currently work closely with each other
to enforce trade and anti-smuggling laws. When Customs inspectors make
a substantial bulk cash seizure at the border using resources such as
canine enforcement teams and non-intrusive inspection equipment, they
hand the case over to Customs special agents. These agents then conduct
a follow-up investigation, such as an investigation into the source of
the funds or the destination of the funds. This cooperative effort
between inspectors and special agents is a seamless one precisely
because of Customs' dual missions. The same is true with other border-
related enforcement matters, such as intellectual property piracy. What
begins as an infringement identification is often directly turned into
an investigative effort.
There are three additional points that may be self-evident, but
cannot be overlooked in describing the link between Customs' dual
missions. First, many trade enforcement functions are carried out by
the same Customs personnel who ensure border security. Second, Customs
uses the information it receives from trade compliance examinations and
manifests also to assess security risks for shipments. This information
is the cornerstone of many of Customs' anti-terrorism efforts. Third,
Customs relies on the expertise of its trade enforcement personnel to
recognize anomalies in their review and processing of commercial
transactions information associated with the admissibility and entry of
imported goods that assist law enforcement in developing targeting
criteria as well as targeting suspect shipments and initiating
investigations.
Recognizing these links, the President has proposed that the
Customs Service as a whole be transferred intact into the new
Department of Homeland Security. In the legislation for the new
Department, the President noted that the Department will ``ensur[e] the
speedy, orderly, and efficient flow of lawful traffic and commerce.''
Therefore, under the President's plan, Customs will continue to
administer and enforce our Customs laws, protect our borders from
terrorists, and facilitate the flow of legitimate commerce. The
President's plan strikes the appropriate balance between enforcement
and trade facilitation that is so critical to our nation's economy and
security.
Mr. Chairman, the Department of the Treasury is proud of the vital
role the men and women of the Customs Service have played, and will
continue to play under the President's plan, in defending our homeland.
Thank you again, Mr. Chairman and the Members of the Committee, for
this opportunity to testify. I would be happy to answer any questions
you may have.
Mr. CRANE. [Presiding.] Thank you very much, Mr.
Undersecretary.
Governor Ridge has stated that the Homeland Security will
have a single mission, the most important job of the Federal
Government, namely to protect the American people and our way
of life from terrorism, and it will have a single, clear line
of authority to get the job done. It will bring together
everyone under the same roof, working toward the same goal, and
pushing in the same direction.
In what way do you see Customs and, in particular, the
collection of duties by Customs, fitting into the overall
mission of the new agency?
Mr. GURULE. That is a very important question. And, again,
I think it goes to the decision the President has made to move
the entirety of Customs to this new department, this proposed
Homeland Security.
First, it is clear that the enforcement efforts of Customs
are inextricably linked with its trade and revenue functions.
It is very difficult to split out those responsibilities. If
you have Customs' inspectors at the border on the one hand
inspecting cargo and conveyances for contraband, these same
inspectors are likewise looking to determine trade compliance,
looking to follow up on issues involving evaluation and
certification of goods. And this information is shared both
with Customs' agents and offices such as the Office of
Regulations and Rulings. It is shared with import specialists.
So, again, this dual mission of Customs cannot be
overstressed, overemphasized. And, again, it is very difficult
to simply just carve out the trade and revenue collection
function, because it is so closely linked to what Customs does
on the enforcement side.
Mr. CRANE. Will there be a reorganization within Customs
after the move?
Mr. GURULE. Well, the President's proposal, as you know,
provides for the transfer of the entirety of Customs. It does
provide, however, for a transition period after the legislation
is enacted, with respect to when different functions of Customs
or any of these other border security agencies would be
transferred over. So there is some time there for looking at
some of these complex issues and evaluating them and deciding
when these functions will be transferred over.
And at the same time, the new Secretary of Homeland
Security would have the authority to reconfigure or consolidate
in a unique way or a different way, I should say, some of these
agencies. But those decisions with respect to any
reconfiguration or consolidation have not been resolved at this
point in time. But at the same time, because these are complex
issues, complex questions, we certainly welcome the opportunity
to work with Members of this Committee, and we are certainly
open to considering any concerns that you have.
Mr. CRANE. Can you describe how Treasury reviews revenue
regulations and rulings prepared by Customs now and how that
will change when Customs goes to Homeland Security?
Mr. GURULE. Well, it is envisioned that when Customs is
transferred over to this new department, that its mission will
be transferred intact as well. So there is not any sense, at
least at this point, that there is going to be some major
change with respect to its mission involving, for example, the
promulgating of regulations for Customs that the Office of
Regulations and Rulings is engaged in, or the issuing of
binding rulings on matters such as classification valuations
and such.
So the same mission transfers over as well.
Mr. CRANE. What can and will Treasury do if it disagrees
with Customs' post-reorganization on such matters as
classification, revenue collection, or transshipment?
Mr. GURULE. Well, I think that the President's bill is
clear on this point. Those responsibilities transfer over.
Those responsibilities become the responsibility of the
Secretary of Homeland Security. So these operational functions
that the Secretary of Treasury currently maintains would
transfer over to the new Secretary of Homeland Security.
Mr. CRANE. Thank you, Mr. Undersecretary.
Mr. Rangel?
Mr. RANGEL. Thank you.
Mr. Undersecretary, the exchange I had with the Chairman in
no way meant to infer that you and the panel that follows you
are not qualified to do what you do.
But I love the work of this Committee, and I have worked
very closely, for 35 years, with the oversight of Customs. And
it just seemed to me that we should have the Secretary of
Treasury before us, or the Commissioner of Customs, since we
are very sensitive as to what is going to happen, not what is
going to be envisioned or what you hope is going to happen. But
we cannot protect these line outfits as Members of Congress
unless we really know the concerns of the people who work every
day with Customs.
And with all due respect, you have not worked with Customs,
have you?
Mr. GURULE. Well, I have. In fact----
Mr. RANGEL. How long have you?
Mr. GURULE. My oversight responsibility includes oversight
responsibility for Customs. The Commissioner of Customs reports
to the Undersecretary for Enforcement. I, in turn, report to
the Deputy Secretary, and the Deputy Secretary reports to
Secretary O'Neill. So I work very closely with Customs, and
have worked very closely with Customs since I was confirmed in
August. Granted, that is a----
Mr. RANGEL. August of last year?
Mr. GURULE. That is true. In that sense, it is a short
time.
I would add one other point. My relationship with
Commissioner Bonner goes back 15 years, when he and I worked
together in the U.S. Attorney's office in Los Angeles. I have
great respect for him. We have a very good working
relationship, and we have worked very closely, shoulder to
shoulder, on important issues involving terrorism, especially
post-September 11.
Mr. RANGEL. I am not challenging your commitment. I am
challenging the fact that I think the Commissioner of Customs
could do a better job in terms of telling us the concerns that
he may or may not have as we work our way through this
legislation than you who he reports to.
But having said that, I have a chart that came from the
Secretary of Treasury's office on the organization of Homeland
Security, and Customs is not even on it. One of my staff wrote
in ``Customs'' next to ``Border Security.''
Something like this, a table of organization, are you
familiar with that?
[The chart follows:]
[GRAPHIC] [TIFF OMITTED] T1233A.001
Mr. GURULE. I cannot see the chart.
Mr. RANGEL. No, but it says, ``Organization of Homeland
Security.'' On top is ``Secretary.'' There is a ``Deputy
Secretary.'' Then to the left of it is ``Secret Service.'' To
the right is ``State, Local, and Private Sector Coordination.''
Then it goes down and the umbrella has four departments under
it, and one of the departments is ``Border and Transportation
Security.'' Another is ``Emergency Preparedness and Response.''
Another is ``Chemical, Biological.'' And the other is
``Information Analysis.''
And under all of these hangars, all of these nice,
rectangular boxes, the list that I am looking under is ``Border
and Transportation Security.''
Under that hangs ``Border Security,'' ``Transportation
Security,'' ``Coast Guard,'' ``Immigration and Visa
Processing.''
Mr. GURULE. I do have it in front of me now.
Mr. RANGEL. And Customs is not even in a box.
Mr. GURULE. Well, it is envisioned certainly that the
border security function, that Customs would fall in the box
here for border security. And as I have stated, Customs plays a
very important, crucial role.
Mr. RANGEL. No matter how important the role is, it was not
important enough even to give them a box. And we do not have
the Secretary of Treasury to reaffirm the fact that, if they
have every reason to believe that the Committee on Ways and
Means that provides oversight over Treasury and over Customs,
that if we are not going to be certain that in this transfer,
that they do not have someone to look after their interests,
besides just hoping that we do the best by the them--I do not
think it is fair for us not to have the Customs Commissioner or
the Secretary of Treasury or Tom Ridge here before us.
Do you know when this change is supposed to take--how many
employees are there in Customs?
Mr. GURULE. In Customs, there are--let me tell you exactly.
Mr. RANGEL. Roughly.
Mr. GURULE. I will tell you exactly. There are 19,628, so
approximately 20,000 employees.
Mr. RANGEL. When do they move over to the Homeland
Security?
Mr. GURULE. The bill that the President has submitted to
Congress provides that within--there is a transition period.
After the legislation is enacted and signed into law, there is
a transition period of up to 12 months. And within that 12-
month period of time, the President has discretion to decide
which particular functions and offices and agencies transfer
over during that period of time.
I think that is a very important point to highlight,
because it does provide time for addressing some of the more
complex issues that are implicated by the creation of this new
department. And it does afford an opportunity to work closely--
--
Mr. RANGEL. I am on a clock, and my time is about to run
out.
Will we have a Customs Commissioner under the new program?
Will that be his title?
Mr. GURULE. Again, the entirety of Customs would go over--
--
Mr. RANGEL. Will the union status and civil service status
of the Customs' office as it exists now be the same?
Mr. GURULE. Yes. At this point, it is envisioned that----
Mr. RANGEL. No, no.
Mr. GURULE. They will transfer with the union status, with
their----
Mr. RANGEL. It's a mean gavel. ``Yes'' is good for me.
Mr. CRANE. Thank you.
Mr. RANGEL. I have time. Don't I have a little time? Just
one last question.
Can you say with some degree of accuracy that Customs, as
we know it, with all the functions as we now know it, will be
transferred intact with the Commissioner under the present
setting without any changes that we should be concerned about?
Mr. GURULE. The initial transfer, it is intended that it be
transferred over in its entirety and with the same mission,
with the same responsibilities that it currently possesses.
Mr. RANGEL. Could you write and tell me why Customs just
didn't make the organizational chart?
[The information follows:]
Under the proposed bill, the new Department would continue
to fulfill all of the existing functions of the Customs
Service. While not specifically designated by name in the
organization chart, as you point out, the President proposes to
transfer the entire Customs Service--its border security,
trade/revenue, and investigative missions--into the new
Department of Homeland Security.
To recognize the importance of Customs' functions, section
401 of the proposed legislation specifically includes within
the jurisdiction of the Under Secretary for Border and
Transportation Security a number of ``primary
responsibilities,'' including: ``(1) preventing the entry of
terrorists and the instruments of terrorism into the United
States; (2) securing the borders, territorial waters, ports,
terminals, waterways, and air, land, and sea transportation
systems of the United States. . . . (4) administering the
customs laws of the United States; and (5) in carrying out the
foregoing responsibilities, ensuring the speedy, orderly, and
efficient flow of lawful traffic and commerce.''
Certainly, the new Secretary will consider how to best
organize the new Department in order to maximize efficiencies
and synergies and minimize redundancies and overlapping
missions. It is anticipated that there will be integration of
many of the border security functions--particularly when it
comes to headquarters bureaucracies and duplicative inspection
activities at our ports of entry. The President wants to create
the most efficient structure possible to ensure that our ports
of entry and other critical assets are protected and combining
key components will help do so.
Mr. GURULE. Sure. It may not have a separate box, but
certainly what is most important is in the President's bill
that has been submitted to Congress, it is very clear that the
entirety of Customs is transferring to this new department, to
address and to enhance security at the border.
And then lastly, I would just like to comment with respect
to Commissioner Bonner's absence, and he does send his regrets.
He is in Europe working on a very important initiative, the
CSI. And he is presently, as we speak, negotiating agreements
with the governments of the Netherlands and Belgium to
implement this important initiative with respect to containers
and, in essence, moving our border back to the point of origin
with respect to containers, so that the inspections can be
conducted in those foreign ports.
So it is a very important trip that he is on at this time.
Mr. CRANE. Thank you. Ms. Dunn.
Ms. DUNN. Thank you very much, Mr. Chairman.
And, welcome, Secretary. It is good to have you here,
because I think a lot of us are seriously interested in exactly
how this whole situation will work. And as you told our Ranking
Member, in fact in the legislation covering homeland security,
there is a statement that the entire operation of Customs and
its responsibility to the Secretary of Treasury will be
transferred over to Homeland Security. That is helpful.
I have been hearing from numerous carriers, people from my
hometown, which is a port city, Seattle, Washington--shippers,
truckers, express air service--about Customs' efforts to
require more information on their manifests for security
reasons that are obvious to all of us. Many of the carriers
are, though, very concerned about the information they have to
provide, the degree of it, the depth of it, as well as when
they have to provide this information.
The additional requirement applies to both outbound and
inbound flow of products, and we are, of course, looking for a
balance between security and trade, because we do not want to
slow down the passage of product and want very careful security
to come out of this new relationship that we are forming.
Let me ask you a couple of questions that perhaps you can
provide either general answers to or maybe even something more
particular.
Is the Administration intent to collect information on the
manifests of all types of carriers before the cargo is loaded
or submission of the manifest prior to departure? If so, how
will you accommodate carriers like trucking lines and air
couriers who are often delivering within hours of receipt of
cargo?
Airborne Express is an example of the kind of company that
I represent that does overnight mail. I am sure that FedEx and
others are in this same category.
Can you tell me how this is going to work? Are they going
to have to measurably change their way of doing business?
Mr. GURULE. I would say that since September 11, we have
certainly learned and appreciate the value and importance of
information. I think that perhaps information is the most
valuable weapon against terrorism and terrorist attacks. And it
is information that must be shared if we are to prevent future
terrorist attacks. It must be information that is shared on a
real-time basis.
But at the same time, we have to be sensitive to this
important balance of security and the facilitation of trade. I
have had numerous conversations with Commissioner Bonner on the
subject, as well as Secretary O'Neill. And they both feel
strongly, as I do, that we must maintain that balance.
With respect to the sharing of information on a timely
basis, and, as you stated, in some cases it is literally within
hours, we want to get that information in advance. I think that
the Automated Commercial Environment (ACE) system certainly is
very important to achieving that end in terms of facilitating
the easy collection of information, because when ACE is up and
running, we will have an electronic filing system, where
businesses can file electronically, not in paper form, but
electronically, information with respect to manifests and goods
that are being shipped.
So, again, that emphasizes the importance of the ACE system
and its value both to trade facilitation as well as security.
Ms. DUNN. Would the Administration support a staggered
implementation of data collection based on the type of carrier?
And would, for example, the Administration support different
implementation periods for outbound and inbound traffic?
Mr. GURULE. I think on that point, certainly we would be,
and we always are, interested in your views and concerns on
these types of issues. And so if there is a particular issue or
concern here, we would like to hear it. We want to work with
you.
We, obviously, want to do this right. We want to do it in a
way that, again, addresses these important dual missions of
Customs.
Ms. DUNN. That sort of consultation would be very useful. I
would like to take you up on that offer.
There seems to be unanimity among carriers and importers
that information that Customs needs should be shared directly
with the government rather than requiring that importers send
sensitive commercial information to a carrier which then sends
the information on to Customs. Do you support allowing
importers and shippers to deal directly with the government?
Mr. GURULE. That is a question, if I might, I would prefer
to get my response back to you in writing, so that I am
accurately communicating the Commissioner's views on that
particular issue.
[The information follows:]
This issue involves the level of reporting detail which is
required on cargo manifest reports--the reports which carriers
file to notify Customs of the cargo they are bringing to the
United States. For security targeting it is desirable to have
the most detailed information that can be practicably provided
in the manifest report. The issue you raise is that it is not
the carriers that have the most detailed information about the
cargo, but their clients, importers and exporters who do not
necessarily want to share those details with the carriers
because the details involve confidential business information.
One method to address this issue, and the method that is
embodied in the G-7 standardized electronic customs messages
that the U.S. Customs Service is incorporating in its ACE
design, is to build links between the carriers' manifest report
and the importers' and the exporters' reports that would allow
the government to combine the information received from both.
This approach can provide detailed information to the
government while shielding confidential information, and not
requiring carriers to report information that the government
can obtain from another source. In the interim, it is critical
that the carriers improve the level of detail above that which
had been provided in the past. Descriptions such as ``freight,
all kinds'' are no longer acceptable.
Ms. DUNN. Thank you, Mr. Undersecretary.
And last, on the function of Customs, it sounds to me like
you are envisioning a new Homeland Security that pays very
careful attention to balancing the agency's core functions
relating to trade and their new law enforcement functions, and
that pleases me. I hope we can continue to stay in touch with
you and make sure that it ends up that way.
I have great regards for Customs, because it was a very
alert Customs' agent who was able to catch for us Ahmed Ressam,
who you recall is the foreign terrorist who moved from Canada
to the United States through one of our ports in Washington
State, with a trunk loaded with potential bomb materials that
he was going to transport down to blow up the LA airport.
And so, it is very important to us that we continue to
operate very well in the areas of security with Customs on our
borders and on our two ports in Washington State. But also, our
State depends on trade for one out of three of its jobs these
days. And so it also very important to us that that balance
take place, because we want the transport of people and product
to continue in the way that it has so successfully in the past.
Mr. GURULE. Well, I am here to reassure you and every
Member of this Committee that the Administration is committed
to that balance of responsibilities. And that commitment will
carry over with equal vigor to this new Homeland Security.
Ms. DUNN. Thank you for being here.
Mr. CRANE. Mr. McCrery.
Mr. McCRERY. Thank you, Mr. Chairman.
Mr. Gurule, you talked about the ACE computer system. Can
you give us an update on the status of that, and tell us if it
is going to follow Customs into the new Homeland Security? And
will Customs have control over that computer system once the
transfer is made?
Mr. GURULE. First, the Administration strongly supports
ACE. Again, there are many things that we have learned
following the terrorist attacks of September 11. And as I
stated before, the importance of information and information-
sharing is certainly one of those.
And I think ACE is even more important today than it was
prior to September 11, because of the enhanced ability that we
will have to engage in better targeting of high-risk shipments
and high-risk containers.
So we see ACE as being important to identifying high-risk
cargo on the one hand, and expediting low-risk trade on the
other hand.
Yes, it will carryover. That responsibility will remain
within Customs, as Customs is transferred to the new
department. And it is our intent to work aggressively to get
ACE up and running as quickly as reasonably possible.
Mr. McCRERY. So there is no danger that the funding is
going to be delayed during this transfer?
Mr. GURULE. Absolutely not. The Administration remains
fully supportive of ACE.
Mr. McCRERY. Let's talk about one of the specific functions
of Customs, and that is revenue-raising functions. It seems to
me that this is a function unique to Customs, unique among
those departments that are to be transferred to the new
Homeland Security. Aren't there some offices within Customs
that do nothing but raise revenues?
Mr. GURULE. Well, there are certainly some offices that are
more heavily engaged in trade functions and trade revenue-
related functions than enforcement. But having said that, at
the same time, there is a strong nexus between those office
functions and the enforcement function, the sharing of
information for dual purposes.
And one example of that, if I might, is the Office of
Strategic Trade, or OST. It has two principle purposes. One is
to analyze trade data for trans-anomalies in compliance, and
second, it oversees the regulatory audit function. So it
engages in onsite audits of companies to make sure that they
are in compliance.
Well, that certainly has a revenue-related function, to
ensure that these audits are not highlighting anomalies or
revenue that should be collected that is not being collected.
But at the same time, once these anomalies and trends are
identified, this information is shared with Customs'
inspectors. And a Customs' inspector may be asked, ``Well, with
respect to this particular company, there is a shipment coming
across the border on this date, and we want you to target it
for close inspection.'' Or the information may be shared with a
Customs' agent to conduct an investigation into possible trade
fraud.
So, again, there is a very strong synergy between these
enforcement functions and trade revenue-collection functions.
Mr. McCRERY. Well, while there may be a synergy, still,
those functions seem to me to be unique, again, among the
departments that are going to be transferred. So I just wish
that you all consider the special needs and circumstances of
those offices within Customs that are primarily if not wholly
trade-related or revenue collecting-related, and make sure that
those functions get all the resources they need in that new
department.
Mr. GURULE. I certainly do not want to suggest that
anything in my comments that we would do other than that. In
fact, we recognize, certainly, the importance of the Office of
Strategic Trade, the importance of the ORR, the Office of
Regulations and Rulings. And it is certainly envisioned that
those functions will continue. They will continue with Customs.
They will transfer over with Customs. And we need to preserve
them. We need to preserve the work that they are currently
engaged in.
Mr. McCRERY. Thank you.
Mr. CRANE. Mrs. Johnson.
Mrs. JOHNSON OF CONNECTICUT. Thank you, Mr. Chairman.
In your work on this matter, and I assume that you have
been in on some of the discussions about the development of the
new department, what exactly do you think might be the
consequences of having Customs, the Coast Guard, and
Immigration in the same department?
Mr. GURULE. Well, certainly, it is envisioned that the
consolidation, bringing together these different agencies that
have related functions, will enhance cooperation with respect
to border security, and will enhance information-sharing and
coordination.
Mrs. JOHNSON OF CONNECTICUT. I can generally see that.
Could you give us examples? I can see that there might be some
good cross work there, but can you give some examples of INS at
the border, of you guys at the border? How will these missions
complement one another so that actually you could each do your
job more effectively? Or will it make any difference, you will
just be side-by-side?
Mr. GURULE. No, I think it definitely will make a
difference. And I think one way is that there is accountability
here. There is a streamlining of the chain of command. So
instead of these different agencies reporting to different
departments with different secretaries, different leadership,
now we have these agencies that are in the same department. And
in the case of the division for border and transportation
security, they will report to a single Undersecretary. And the
single Undersecretary will be overseeing the coordination of
these important functions and responsibilities.
So it is a streamlining of the information chain, if you
will, and the complementing and the targeting and concentrating
of resources.
Mrs. JOHNSON OF CONNECTICUT. Do you foresee cross-training
at any level?
Mr. GURULE. Well, it is certainly a possibility. And it
could be that it would make sense to have that done. But that
is a decision that the new Secretary for Homeland Security will
make and I think will certainly make with the objective of
enhancing security and enhancing good government, because,
again, that is another important objective of the President's
bill, to reduce the redundancies, reduce the overlapping of
responsibilities, to make these agencies work more effectively
and efficiently. So certainly, I could envision that happening.
Mrs. JOHNSON OF CONNECTICUT. Thank you.
Mr. CRANE. Ms. Thurman.
Ms. THURMAN. Thank you, Mr. Chairman.
Mr. Undersecretary, we welcome you and thank you for being
here today.
And I think as you know, all of us are wanting to see the
Homeland Security Bill passed and implemented. But I do also
think that we need to be concerned.
And I would kind of want to pick up a little bit on what
Mr. Rangel and this box thing. I do not know if you had an
opportunity to look at Colleen Kelley's testimony that she is
going to be giving today. She really does make some very good
points as to having Customs kind of as their own entity instead
of being folded in as one large entity, because we are not
doing it with Coast Guard, we are not doing it in some other
areas, but just talking about what they have to do and what
they have been doing in protecting our borders, interdiction of
drugs, all of the other kinds of things. And so I am a little
bit concerned that they are going to lose identity.
And you can respond to that, and I hope that you will get a
chance to look at this and give us some response back to what
they have said. And hopefully, as we go forward, we do in fact
take into consideration those that know the job out there every
day and why they feel so strongly in their commitments to their
jobs. On the security issue, I think we do need to be listening
to those people that are on the frontlines.
The second thing that I would bring up, and I do not know
if you remember this, but last year we had a Customs' bill
before this Committee, and we had a huge fight over the benefit
issue, particularly as it dealt with how they were paid and the
differential pays that they received for nighttime work and
those kinds of things. And according to some work that has been
done by our staff, one of the things that they looked at is
saying that section 730 of the proposal appears to remove all
Homeland Security employees from the existing statutory
framework governing employment of Federal employees.
Specifically, section 730 removes all employees transferred to
the new Homeland Security from existing Title 5, which governs
the employment of Federal workers by creating new chapter
within the title. So section 730 then leaves it to the
discretion of the Secretary of Homeland Security and the
Director of the Office of Personnel and Management (OPM) to
decide what rules and regulations to apply to Homeland Security
employees.
What comfort can you give us here today, as those Members
of this Committee who have been through this fight over the
last couple of years, and certainly was taken out of the bill
in changing it, what comfort can we get that these employees
will be treated as they have been and certainly considered and
given the rights that Federal employees are given?
Mr. GURULE. First, let me publicly state what I have stated
personally and directly to Customs' employees, and that is that
this country owes a great deal of thanks and gratitude to the
hard work, the dedication, and the professionalism of Customs'
employees who have worked tirelessly, certainly since September
11, who are working 12 hours and in some cases longer----
Ms. THURMAN. Absolutely.
Mr. GURULE. And 6 days a week and so on. It is remarkable,
and we owe them a great debt of gratitude.
I think it is interesting to note that the important
contribution that Customs' inspectors are making to make this
country safer for all Americans was recently recognized by
Commissioner Bonner when he went ahead and changed or upgraded
their GS status from a GS-9 to a GS-11.
Ms. THURMAN. But could that change if they were transferred
over?
And let me ask, before my time runs out, second, and being
recognized and doing that is great, but in the development of
this plan, how much have we counted on those people on the
frontlines to give us input into this, into the President's
proposal?
Mr. GURULE. Let me respond to your first question. You
asked about the change of status and such. It is envisioned
that these Customs' employees, when they would transfer over to
the new Homeland Security, would carry with them their current,
present GS status, their pay status, their benefits, even
including their union status. What this bill seeks to do is
provide the new Secretary of Homeland Security with some
flexibility to retain employees, to promote employees, to make
sure that we have the right people with the right expertise to
ensure that this new department gets up and running effectively
and as quickly as possible. That is the objective. And I think
that, if anything, Customs' employees seek to benefit and
benefit in a very significant way from this legislation.
And second, I'm sorry, was?
Ms. THURMAN. And how much input have we used from those
employees on the front line, in putting this together?
Mr. GURULE. Well, I think certainly, in kind of a
democratic process, it is the senior staff that obviously have
been engaged, and extensively, in discussions about this
proposal. And then it is dependent upon the senior staff to
engage their supervisors and such. And so in that way, I think
that has been an opportunity for input.
Mr. CRANE. Mr. Portman.
Mr. PORTMAN. Thank you, Mr. Chairman.
And thank you, Mr. Gurule, for being here today and getting
us started on what will be a major undertaking, but one that we
are all committed to, because it is so critical to try to
better protect, in the case of Customs, our borders and ports
and ports of entry, many of which are inside the United States,
including Cincinnati, Ohio, that I represent, from terrorism.
I guess a couple quick questions. One would be, if you were
arriving in the greater Cincinnati airport and going through
Customs and Homeland Security was in charge of Customs rather
than Treasury, what difference would it make?
Mr. GURULE. Well, that, in terms of what difference it
would make, is a decision that ultimately is going to be
decided by the new Secretary of this new department. And as I
stated, there is this 12-month transition period that the
legislation provides, with respect to the functions being
transferred over. But at the same time, there is a transition
period--and, actually, beyond that 12-month period, for the new
Secretary to decide how these agencies are going to be
configured or reconfigured or how they are going to complement
one another.
And so I think it is a very thoughtful and a very
deliberate plan, because I think it does three things that are
very important. I think, first, it advances the President's
goal with respect to consolidating quickly these very important
border agencies. Second, I think it does so in a way that is
least disruptive to the border security functions, because it
transfers over Customs intact. And then, third, it provides for
this transition period to work through some of the more
difficult and complex issues, issues that, again, we welcome
input and consultation with the Members of this Committee in
resolving and working out.
Mr. PORTMAN. A couple of quick questions.
One, do you all have a sense that you have lost any
employees to the new Transportation Security Administration?
Mr. GURULE. Oh, we have. It is not even a question of--I
mean, clearly, clearly we have. There have been Secret Service
Uniformed Division officers that have been----
Mr. PORTMAN. How about Customs?
Mr. GURULE. That have left.
Less so. Less so with Customs. I think for me, and I have
oversight responsibility not only for Customs but Secret
Service, I have seen the exit more so with Secret Service.
There have been some instances with Customs, but I do not think
the numbers have been all that high.
Mr. PORTMAN. I ask that because we have seen that here with
Capitol Hill police, and you have seen that with the UD guys at
Secret Service, and other law enforcement. And I think it just
makes the point that there are different rules that now pertain
to the roughly 100 agencies and departments and offices that
would be consolidated.
And getting to the earlier question about flexibility, it
would seem to me that there would be the need not just to give
the Secretary some flexibility on hiring and firing, to be sure
that he is able to retain good people and attract the kind of
people we need for this function, but also that there be some
leveling of some of the pay and benefits so that you don't have
one agency robbing another, robbing Peter to pay Paul, within
the same department. It would be particularly acute within the
same department, I would think, given that your goals will now
be to work together.
I have read your legislation, and you do not have much
specificity with regard to your personnel issues, but you do
ask for some flexibility, which I hope that you will have, in
part to be able to level out some of these issues, so that you
don't have that kind of competition.
Mr. GURULE. I think that is important. It is certainly
important for continuity of operations, for enhancing
efficiencies, and for these agencies to work even more closely.
Mr. PORTMAN. Do you have pay bands at Customs?
Mr. GURULE. Well, that is an issue that--there has not been
a decision reached on that. I think the legislation provides
some flexibility. We are seeking flexibility there. But with
respect to pay banding, that is a decision that is better left
and will be left for the new Secretary.
Mr. PORTMAN. Do you provide intelligence information from
Customs currently?
Mr. GURULE. Do we provide intelligence? Certainly there is
intelligence information that is being shared on a regular
basis between Customs and the intelligence communities. We see
that through Operation Green Quest. Operation Green Quest is
collecting information, enforcement information, intelligence
information, and sharing it regularly with the FBI and working
closely with the intelligence community.
So I think we have made some significant and substantial
progress to breaking down stovepipes and engaging in a free
flow or certainly a much freer flow of information and
information exchange.
Mr. PORTMAN. I think that is an important point to make,
that part of the advantage of this agency is not just FBI and
CIA information that can now be more readily collected,
synthesized, and hopefully matched with vulnerabilities or
risk, but that many of these entities, including Customs, have
valuable information, some of which may be integrated already,
some of which may not. And the same would go for the INS, even
the inspections and the Coast Guard. And this could be a
valuable advantage to us and a more efficient way to get that
information where it needs to go.
Mr. GURULE. And I would add that this is one other
important reason for moving forward and moving forward
aggressively with ACE, because ACE has the potential of being
the IT platform for multiple law enforcement agencies that are
involved in tracking goods and personnel across the U.S.
borders. So they would be able to access this information,
including the INS. And in a very expeditious way, it would be
accessible.
Mr. PORTMAN. Thank you, Madam Chair.
Mrs. JOHNSON OF CONNECTICUT. [Presiding.] Thank you. Mr.
Doggett.
Mr. DOGGETT. Thank you very much.
Mr. Secretary, the President has of course urged the
Congress to move swiftly in enacting this legislation. If that
occurs, how soon after enactment is it realistic to expect that
these Customs' employees will be over working as a part of the
new Homeland Security?
Mr. GURULE. Well, there is no question that, first of all,
the legislation is very specific on this point. These
functions, these agencies and responsibilities, will transfer
over within a 12-month period of time, so within that period of
time. Twelve months is the outside limit. But it is certainly
envisioned that these agencies could transfer over sooner than
that. But, again, the actual timing will be decided by the
Secretary working closely with the President.
Mr. DOGGETT. But the outside limit is not more than a year
after it is signed.
Mr. GURULE. That's correct.
Mr. DOGGETT. It was quite natural, of course, to see
Customs transferred. I was surprised that the agency within
your department that has principle responsibility for keeping
tabs on explosives and guns that could fall into the hands of
terrorists, that that agency was not transferred. Does the
department oppose the transferring of the ATF agency to this
new department?
Mr. GURULE. Well, the President made the decision based on
what needs to be done quickly to secure the homeland. I
recognize that there are other ideas out there about other law
enforcement agencies and whether they should be included as
part of this new department. But this proposal is designed to
cover the changes that need to be made now to enhance security.
Mr. DOGGETT. And the President does not think that dealing
with explosives is something that needs to be done now?
Mr. GURULE. No. Certainly, dealing with explosives not only
is something that needs to be done now, it is being done now.
And it is being done quite effectively by ATF. In fact----
Mr. DOGGETT. Does ATF have a key role in the war on
terrorism?
Mr. GURULE. They are playing a very important role,
especially with respect to inspection of facilities that house
and store explosives. So the answer is yes.
Mr. DOGGETT. The department does not oppose their being
transferred there, the Treasury Department?
Mr. GURULE. The Administration has not made a decision with
respect to ATF.
Mr. DOGGETT. I guess it has made a decision not to transfer
it in that it is not included in the bill.
Mr. GURULE. It is not included. That is correct.
Mr. DOGGETT. But Treasury has taken no position itself of
opposing the transfer?
Mr. GURULE. The position that Treasury has taken is to
support fully the Administration's position at it stands.
Mr. DOGGETT. And what reason is there to separate out the
key role that ATF plays in opposing terrorism from this
Homeland Security?
Mr. GURULE. The only thing that I can say is that this was
certainly considered by Homeland Security, considered by
Governor Ridge, and the President. The decision was made to not
include ATF. A decision was made that the current
organizational structure that is proposed is sufficient to
provide the enhanced security that the President is seeking.
Mr. DOGGETT. Thank you.
Mrs. JOHNSON OF CONNECTICUT. Thank you very much, Mr.
Gurule.
Mr. Rangel, do you have any additional questions?
Mr. RANGEL. No, but I really did not understand the last
answer, as to why ATF was not included in Homeland Security. I
mean, if we all agree that they are doing a terrific job in
terms of protecting our great Nation, and if this is Homeland
Security, get them all under the same umbrella, what was the
thinking in not just automatically including them as a part of
that? Just what is the thinking? We support you, and we support
the President, just why did you not do it?
Mr. GURULE. Again, as I stated, there are certainly
different views with----
Mr. RANGEL. Just give us one.
Mr. GURULE. Respect to which agencies should be included,
should be excluded. The President made a decision with respect
to these particular agencies and believes that including these
particular agencies in this new department will enhance
security and will enable us to do so, enable the Administration
to do so in a very timely, very timely way.
Mr. RANGEL. So it doesn't matter how many different ways I
ask the question, you will not tell me why they reached that
conclusion, right?
Mr. GURULE. I believe I responded to the question the best
that I am able to.
Mr. RANGEL. Thank you.
Mrs. JOHNSON OF CONNECTICUT. Thank you very much for your
testimony. We apologize for keeping you so late. And we will
move on to the next panel.
Mr. GURULE. Thank you. It was a pleasure. Thank you.
Mrs. JOHNSON OF CONNECTICUT. I would like to welcome
Timothy Farrell, Deputy Executive Director of the Port of
Tacoma in Washington; James Clawson, the Chief Executive
Officer of JBC International and Secretariat of the Joint
Industry Group; Jerry Cook, Vice President of International
Trade, Sara Lee Branded Apparel, Winston-Salem, North Carolina;
and Colleen Kelley, National President of the National Treasury
Employees Union.
Welcome to all of you.
And thanks very much to our national Archives for bringing
this fine document for our observation today. Thank you.
Mr. Farrell, if you will proceed?
STATEMENT OF TIMOTHY FARRELL, DEPUTY EXECUTIVE DIRECTOR, PORT
OF TACOMA, TACOMA, WASHINGTON
Mr. FARRELL. Thank you. I would like to thank the Committee
for the opportunity to speak with you this evening.
As you mentioned, my name is Tim Farrell. I am the Deputy
Executive Director of the Port of Tacoma, Washington.
Among the responsibilities that I oversee at the port is
the integration of security into the free flow of trade through
our port. And since September 11, we have dedicated more
resources and greater vigilance to that task. And certainly we
have had great partnership and help from the Federal Government
and its various agencies, including Customs, as well as our
private sector customers and partners.
I want to focus on three messages tonight. First, as you
know, Customs is a very important player in both international
trade and border security and, as such, has a major role to
play in the economic vitality of the United States. As you
heard earlier from Representative Dunn, Washington State is the
most trade-dependent State in the Union, with one in three jobs
related to international trade.
Second, as Customs integrates new security programs and
standards into its operations at border crossings and ports,
Customs needs to take care to assure that uniform application
of these procedures at all border crossings and ports takes
place. A non-level playingfield, from a regulatory standpoint,
impacts both security and commerce, as I will explain a little
bit later.
And third, continued cooperation and coordination with
Canadian Customs to assure comparable security protocols is
essential in averting the risk of diversion of U.S.-bound
cargoes from U.S. ports to Canadian ports.
Let me give a little bit of background on the Port of
Tacoma, which operates on 5,000 acres of tide lands on Puget
Sound about 30 miles from Seattle.
Tacoma along with Seattle comprises the third largest
container gateway in the United States. The two combine to
handle nearly 3 million containers each year. Most of those
containers move through our ports into other parts of the
country. In fact, 70 percent of imported containers move on to
places such as the U.S. Midwest and Northeast. The Port of
Tacoma handled $20 billion in international trade in 2001, and
$3 billion in domestic trade as the gateway to Alaska.
The Port of Tacoma is also one of the U.S. Maritime
Administration's 13 strategic ports, based on its proximity to
major military installations and its ability to load military
cargoes out from those installations.
As I mentioned, Tacoma is close to the Canadian border, and
that has an impact on our activities and on the regulatory
framework in which we operate.
Finally, the port generates directly and indirectly over
100,000 jobs within the State of Washington. And as such, we
take regulation and security matters very seriously because
trade is a major part of our economy in Washington State.
A little bit about what we have done in the ports,
particularly in Puget Sound, about security since September 11:
Ports of Seattle, Everett, and Tacoma jointly filed an
application for Federal funding under the grant program that
came out earlier this year. As far as we know, we were the only
port range that submitted a joint application. We work closely
together because you are only as secure as your neighbor. That
grant program focuses much on target hardening, as it is
called, fencing, barriers, cameras, officers, lighting, that
sort of thing.
In addition, the Ports of Seattle and Tacoma are working
together on a version of Operation Safe Commerce; Secure
Maritime Asian Routes for Trade, SMART is our acronym for it,
but essentially, it is similar to what you have heard about
going on in the Port Authority of New York and New Jersey.
This program is designed as a way to determine best
practices in securing the container logistics chain from the
point of origin to the point of destination. It is based on the
principle that if we find a weapon of mass destruction in a
container in a U.S. port, it is too late. And so the critical
information that we need to know is whether or not a container
is loaded in a secure environment. And then from that point to
its destination, is it secure, has it stayed en route, has it
stayed on scheduled, has it been tampered with? And the Ports
of Seattle and Tacoma, along with the other two major gateways
for containers in the country, Los Angeles and New York-New
Jersey, are working to determine some best practices for how we
might consider and determine that containers are loaded and
moving in a secure fashion.
We are looking forward to Federal assistance and
partnership in making that process go forward.
With regard to Customs, it is critically important that in
this time, where we consider changes to Customs and where its
reporting relationships lie, that we do not compromise the non-
security-related functions of Customs while at the same time we
pay very close attention to security.
Customs, as you heard earlier from the Undersecretary, does
have trade and revenue functions, as well as security
functions.
I would call on the Congress to assure that, as we go
forward in this security environment, that not only do we pay
very close attention to security but that those things that
Customs does to help the flow of commerce, including the
development of the ACE system, be continually funded and
supported.
I mentioned briefly in my introductory statement about our
proximity to Canada and balanced implementation of regulation.
There is a concern in our part of the country, in the Pacific
Northwest, as well as some other places, including New York-New
Jersey and Boston, that implementation of security regulations
could have the negative impact of diverting cargo to foreign
ports, foreign in this case being Canada.
This is an instance where we want to be very careful not to
do the terrorists' jobs for them and use our security system to
slow down commerce to the extent that commerce chooses to go in
other directions.
Should that happen, two things occur. One is the obvious,
immediate economic impact. I mentioned 100,000 jobs rely on the
Port of Tacoma. The second is security. If cargo moves through
another country, then we face the potential of a lower level of
scrutiny in that Nation. So Customs has a very delicate
balancing act that it accomplishes quite well, and that is the
movement of trade, the facilitation of trade, as well as
safeguarding our country from that trade.
One of the impacts that we could see, if we do not do this
quite right, is steamship lines and other entities that report
to Customs reporting to multiple agencies for their
information. And we do not want to see that. That is a way of
creating greater work for our customers in terms of reporting
their information. If we keep Customs in its singular grouping
with both sides of the house, we can serve those companies that
generate trade and keep our economy flowing.
I want to commend Customs on its new programs: the CSI and
the C-TPAT program. I think those are both strong initiatives,
creative initiatives, in the direction of securing trade while
continuing to make it happen. I think it is incumbent upon us
and Congress to make sure that those programs are properly
funded.
So just to summarize, I would like to issue a couple of
challenges. One is to Customs, and that is to maintain balanced
application of the regulations that it puts forth to the
business community; and second, to Congress, to oversee Customs
to ensure that, again, the focus on security doesn't overshadow
the commercial functions of Customs, and also to support
Customs in each of those areas, to make sure that it is
properly funded to do so.
So I thank you for the opportunity again. And I am happy to
take any questions you may have.
[The prepared statement of Mr. Farrell follows:]
Statement of Timothy Farrell, Deputy Executive Director, Port of
Tacoma, Tacoma, Washington
Good afternoon, Chairman Thomas and Members of the committee. My
name is Tim Farrell and I am here today representing the Port of
Tacoma. As the Port's Deputy Executive Director, balancing security
with the efficient flow of cargo across our docks is one of my
paramount responsibilities and concerns. Though ports have always
devoted resources to safety and the protection of cargo, the industry
now shares an especially keen sense of responsibility with Congress and
other governmental entities in these challenging days since September
11th, 2001.
Before I begin my formal remarks, let me first put my comments into
context by describing some of the Port's key attributes. The Port of
Tacoma moved more than 1.3 million containers across its docks in 2001
and, when combined with the Port of Seattle, represents the nation's
3rd largest intermodal gateway. Each year, the Port of Tacoma handles
more than 15 million tons of cargo, amounting to more than $20 billion
in international trade. Seventy percent of these international
containers--holding products ranging from shoes to machinery--are
transferred from ships to trains and are headed for markets in the
Midwest and East Coast. Additionally, the Port of Tacoma handles an
additional $3 billion worth of trade as the Gateway to Alaska, with
more than 75 percent of all consumer goods bound for Alaska transported
through Tacoma on the CSX and TOTE ships.
Another important distinction Tacoma has is serving as one of the
U.S. Department of Transportation Maritime Administration's 13 national
``strategic ports''--a designation based on the load-out capabilities
the Port of Tacoma provides to Fort Lewis. With nearly 102,000 jobs in
Washington State related to activities at the Port of Tacoma, the Port
serves as a major economic engine for the Pacific Northwest.
The Port of Tacoma appreciates the opportunity today to share its
perspectives on the proposal to incorporate the U.S. Customs Service
into a new Department of Homeland Security. The U.S. trade policies are
built on democratic principles of free and fair trade, and competition.
The U.S. Customs Service capably faces the daunting responsibility of
safeguarding this free flow of trade and has embraced the elevated
challenge of allowing trade to continue to be free and fair in a
heightened security environment. Ports also recognize the trade
landscape has been forever altered, and that we must find new ways to
continue doing business while integrating enhanced security. The Port
of Tacoma is engaged in several initiatives on this front, including
development of a ``Operation Safe Commerce'' model program called SMART
(Secure Maritime Asian Routes for Trade) that would ultimately track
containers from the point of origin and through the United States.
Though the need for including U.S. Customs in the proposed Homeland
Security Department is logical, Congress should not let this enhanced
focus on security compromise the traditional responsibilities of U.S.
Customs. It is imperative that Customs' activities such as: tracking
merchandise entering the country, air and sea surveillance and
interdiction, and fighting drug smuggling continue to receive ample
priority and funding. In my brief time with you this afternoon, I would
like to convey three primary messages:
U.S. Customs is an integral link in our nation's
economic chain of commerce. Ensuring the secure, legal and
expedited movement of goods into and out of our country is
essential to our economic vitality.
As U.S. Customs integrates new security standards
into its traditional cargo inspection and tracking methods
through ports across the country, care must be taken to keep
procedures uniform and proportional from one port to another.
Continued cooperation and coordination with Canadian
Customs, in establishing comparable security protocols, is
essential in averting the risk of cargo diversion out of U.S.
ports.
Now, let me expand upon these points. As a port in the Pacific
Northwest, we are especially aware of the vital role U.S. Customs has
always played in protecting our country's land and sea borders. We
consider Customs to be a primary partner in safeguarding the flow of
trade through our port and we work closely with our local agency
officials. It must be recognized, though, that not only does Customs
have the power to ensure that cargo is legal and safe, it also has a
direct impact on a port's ability to be competitive. In these
challenging times for the world's economy, steamship lines are placing
even greater emphasis on doing business with ports that can accommodate
their need to move goods quickly onto and off of ships. If a port
cannot provide efficient service, our customers (steamship lines and
shippers), may decide to call elsewhere. In the case of ports along the
Canadian border, this may mean jobs that would have resulted from ships
calling at the ports of Seattle, Boston or New York/New Jersey, may
instead end up going to workers in Vancouver, B.C., Montreal or
Halifax.
These competitive and security realities require all ports to focus
on ensuring each step in the economic trade chain is operating
efficiently. For example, what we have long heard from our customers--
but even more pronounced since September 11th--is that the procedures
U.S. Customs is employing in Tacoma are more time-consuming and costly
than at other West Coast ports. There have been numerous instances
where steamship lines report cargo to and from Eastern Asia is
inspected at a much higher proportion in Tacoma than at other West
Coast ports.
Another recent concern expressed by our customers is whether
Customs is requiring a standard percentage for ``devan'' to be
consistently carried out at all ports. (The term devan refers to the
physical unloading process of the container's contents for inspection.)
If U.S. Customs officials devan 100% of a container at one port and
only 25% per container at another port, this would result in dramatic
differences in efficiency and the cost of moving cargo through ports.
For the shipper, this means lost revenue and time associated with
having the cargo wait a day or more on the docks for the inspection,
since a 25% devan typically takes 30-60 minutes and a full devan can
commonly require six or more hours. The shipper also bears the direct
expenses associated with labor's additional handling of this cargo
which can range per container from $287 for a 25% devan up to $673 for
a complete devan. By way of comparison, it is like an airline passenger
missing a flight because their luggage was searched and then receiving
a bill afterwards for the service.
We are working with Congresswoman Jennifer Dunn and other Members
of our congressional delegation to gather data from U.S. Customs
quantifying these assertions of disproportionate inspections and non-
uniform methods. I share these examples with you in order to illustrate
Custom's influence on the efficient handling of cargo through all
ports. The fine points of policy making in Customs, such as employing
consistent inspection methods, must not be lost in the much bigger and
important mission of Homeland Security.
Coordinating consistent inspection and security protocols with
Canada must also be a priority. Given our proximity to the Port of
Vancouver, B.C., the ports of Tacoma and Seattle have long been
sensitive to the threat of cargo diversion. Onerous policies like the
Harbor Maintenance Tax, which add extra charges to containers bound for
U.S. ports, create an incentive for steamship lines to offload their
cargo in Canada. Congress must be vigilant in making sure that cargoes
face the same level of scrutiny in Canada, as they would face if those
goods were shipped directly into our country. Should the perception
develop that it is easier to move goods into the U.S. through Canada,
not only would our nation's ports be disadvantaged, but our country
would face a greater security risk. We recognize the efforts that U.S.
Customs has taken thus far to work with Canadian Customs on programs
such as Smart Boarder and the innovative CSI (Container Security
Initiative) and the C-TPAT (Customs Trade Partnership Against
Terrorism) effort.
As Congress explores the inclusion of the U.S. Customs Service into
a Department of Homeland Security, we believe it is critical to not
lose sight of the importance of this agency's traditional mission. We
look forward to working with the Congress, Customs and other critical
U.S. agencies in integrating the enhanced requirements for security in
concert with maintaining our nation's efficient flow of trade. On
behalf of the Port of Tacoma, thank you for this opportunity to share
these issues before this Committee.
Chairman THOMAS. [Presiding.] Thank you, Mr. Farrell.
And since you were the first Member of the panel, prior to
going to Mr. Clawson, as we move across the panel, we would
like to get the horse before the cart, so it is my pleasure to
call on the gentlewoman from Washington to introduce you.
[Laughter.]
Ms. DUNN. Thank you, Mr. Chairman. I appreciate you letting
me step in here. We had a mixed message going on there, but you
have already heard from Tim Farrell.
Tim of course is the Deputy Executive Director for the Port
of Tacoma. These are two terribly important ports to us, not in
but near my district, the Port of Tacoma and the Port of
Seattle. In Washington State, one out of three jobs are related
to trade, so it is no coincidence that the Port of Tacoma plays
a vital role in our economic viability and in the
competitiveness globally of our region.
The Port of Tacoma, as Mr. Farrell has told you, handles
more than 15 million tons of cargo, amounting to about $20
billion a year in trade. Seventy percent of the containers that
arrive in the port are bound for markets in the Midwest or East
Coast, so you can see that we are a gateway to the rest of the
United States. And what is done under the Customs' jurisdiction
is, therefore, terribly important to us.
Tim has extensive experience in port management. He is
responsible for a variety of port departments there in Tacoma,
including finance, human resources, information technology,
security, and risk management. Before he came to us at the Port
of Tacoma, he worked for 7 years at the Massachusetts Port
Authority. He is a native of Massachusetts. He graduated from
Middlebury College. However, since he took his master's degree
at the University of Washington, we do consider him a native of
the Pacific Northwest.
Mr. Farrell has already brought out some very important
points that have to do with competition between our ports and
ports in other Nations. And I look forward to bringing some
more points out from him as we go through questioning.
Thank you, Chairman.
Chairman THOMAS. Thank the gentlewoman.
The next panelist, thank you for coming. James Clawson,
Chief Executive Officer of JBC International, who is here for
the Joint Industry Group. Your written statement, if you have
one, will be make a part of the record. You have 5 minutes to
address us in any way you see fit, Mr. Clawson.
STATEMENT OF JAMES B. CLAWSON, CHIEF EXECUTIVE OFFICER, JBC
INTERNATIONAL, AND SECRETARIAT, JOINT INDUSTRY GROUP
Mr. CLAWSON. Thank you, Mr. Chairman and Mr. Rangel and
Members of the Committee. As usual, it is a pleasure to be here
again.
Chairman THOMAS. Mr. Clawson, let me tell you, these
microphones are very unidirectional, so you need to really talk
directly into the end of it.
Mr. CLAWSON. Thank you very much. I just wanted to thank
you and Mr. Rangel and the Members of the Committee.
In the interests of time, you have my written testimony. I
thought that since I have been here enough on behalf of the
Joint Industry Group and others for the last 20-plus years, I
would like to just tell you some of our thoughts about where we
are.
We fully support the proposal. We recognize that there are
issues about it that are difficult to understand, and we are
still looking forward to clarification. But we do support it
for all of the reasons that have been described by the
Undersecretary.
We also think that Customs ought to be kept together. There
was discussion about splitting it. And, again, we support it
for the reasons that were given, that Customs' dual mission is
inextricably combined and cannot be separated.
Let me tell you the two things that I want to recommend to
this Committee and to Congress that I think are very important.
We have made the same recommendations to the Administration,
and we will see where it goes. We totally agree with those who
are concerned about the disappearance of Customs. We think
there ought to be created within that chart that has been
talked about a sixth Undersecretary for Customs Commercial
Operations, just like the U.S. Department of Commerce has an
Undersecretary and Commissioner for the Patent and Trademark
Office. There is absolutely no reason why there cannot be an
Undersecretary for the commercial work and the commercial side
of the Homeland Security, giving it the same stature as the
border security.
In the early seventies, I worked in Treasury. We tried then
to get a single border agency. It needs to be there, make no
mistake, for all the reasons that are described. But I think it
is critical that the commercial functions and all of the things
that we talk about, from quotas to intellectual property
protections, all the things mentioned in the Chairman's opening
remarks, that they not be subsumed under some Undersecretary
whose first priority has been given that of the security of our
Nation's borders from terrorists and other security issues. I
think that that is the critical nature of the recommendations
that we make, to have that level of visibility, if you will,
within the new department, reporting to the Deputy Secretary.
And then equally as important, we believe this Committee,
which has had oversight for many years over those issues, ought
to continue to have jurisdiction and oversight over that
portion of the work of Homeland Security, which would be the
Commercial Operations/Customs, if you would call it that.
And then there are some other suggestions that we are
concerned about that haven't been addressed in this discussion.
I am referring to ACE. We have been very active in getting the
funding for ACE. There are over $600 million that has already
been appropriated. We are way into it; 8 years after the
Customs Modernization Act (MODACT) and the trade is still
waiting for a lot of the implementation to be done. And I think
there is a real concern that ACE will be put on the back burner
again, even though all the assurance is to the contrary.
It is interesting that Customs has had 8 years to do ACE
and has not done it. But it has deployed and put into place in
less than 10 months enormous amounts of technology with regard
to the security of our country. And I think it speaks to our
concern over the fact that, when there is a priority--and I am
not arguing that we shouldn't be concerned about the security
our country. What we are concerned about is providing this
commercial role sufficient priority with the other functions
with regard to the economy of our country. And that is quite
important.
In closing, I think it is important that, for budget
discussions within the government in the future, and for the
whole idea of coordination, there ought to be equal standing
between the commercial side and the enforcement-security side,
from that dual role.
And I am happy to take any questions that you might have.
[The prepared statement of Mr. Clawson follows:]
Statement of James B. Clawson, Chief Executive Officer, JBC
International, and Secretariat, Joint Industry Group
INTRODUCTION
Mr. Chairman and distinguished Members of the House Ways & Means
Committee, my name is James B. Clawson and I am the Chief Executive
Officer for JBC International. I also serve as the Secretariat for the
Joint Industry Group (JIG), a coalition of more than one hundred and
sixty Members representing Fortune 500 companies, brokers, importers,
exporters, trade associations, and law firms actively involved in
international trade. The Joint Industry Group enjoys a close and
cooperative relationship with the U.S. Customs Service and frequently
engages Customs on trade-related issues that affect the growth and
strength of American imports and exports.
It is my honor to appear before this Committee to share with you
the comments of the Joint Industry Group and its Membership regarding
President Bush's proposal to create a U.S. Department of Homeland
Security. More specifically, I will address the transfer of all assets
and authority of the U.S. Customs Service to the new Department.
The JIG recognizes the daunting task that lies ahead in the
creation of the Department of Homeland Security. The architects of the
reorganization will need to take a careful approach to anticipate the
future needs of the agencies involved and the people they serve. They
should fully evaluate the effectiveness of including or excluding the
enforcement functions of additional agencies. In addition, they should
not rush to meet any deadline that is essentially chosen for the
purposes of public relations. It is essential that U.S. Customs and the
Administration not lose sight of their role to facilitate the flow of
trade during the reorganization. Customs should continue with their
efforts to develop and implement smarter tools for facilitation,
including the Automated Commercial Environment (ACE), and they should
continue to engage the support of the trade community in building
better business procedures.
For years, U.S. Customs has been the agency on the front line,
serving a dual role to defend our nation's borders and to facilitate
the flow of trade. Governor Ridge and Commissioner Bonner have taken
into consideration this dual mission as they look to move Customs out
of Treasury and into the new Department of Homeland Security. However,
many Members of the trade community continue to have concerns over how
this new department will balance Customs' commercial and enforcement
operations after being placed within a single ``Security Department.''
There are those Members of the JIG who feel that certain branches of
Customs would best remain with the Treasury Department while several
other agree with the opinion of Commissioner Bonner that Customs' dual
role is inherently inseparable.
We recognize that the trade will not make the ultimate decision to
incorporate Customs into the new agency or to leave it in one piece.
However, we are in a position to state our concern for the continuation
of attention to commercial interests, trade facilitation efforts and
continued funding of those activities.
CONTINUING EFFORTS TO FACILITATE TRADE
In recognition of the many dangers facing the nation, the U.S.
Customs Service has relied upon technology to keep pace with the volume
of trade and the threats posed by transnational criminal organizations.
The JIG has worked with Congress and the Administration to emphasize
the importance of the U.S. Customs Service and its efforts to modernize
its systems. Both Congress and the Administration have shown great
support for the development of the Automated Commercial Environment
(ACE). This system is not Customs' system alone but part of the
nation's border enforcement system. It is the FBI's system, the State
Department's system, the Food and Drug Administration's system, and the
system of every agency of government that has a responsibility to
protect our nation at its borders. Commissioner Bonner has repeatedly
assured the trade that ACE will be fully implemented within an
appropriate time frame. By arming U.S. Customs officials with
information, this modern and efficient system will not only facilitate
trade, but will also strengthen the government's ability to secure our
nation's borders.
We applaud the support that the Committee on Ways and Means,
specifically Chairman Crane and his Subcommittee, has demonstrated for
understanding that ACE facilitates U.S. exports and imports, while
enhancing Customs ability to protect America's borders from illicit
narcotics flows and terrorist activities. In light of the events of
September 11, the trade is fully assured by Members of this Committee,
Congress and the Administration that ACE will be successfully
completed. However, the committee must also recognize the importance
the trade places on other facilitation initiatives that are currently
underway at Customs.
It is the worst fear of many in the trade that trade facilitation
will be almost entirely neglected in a humongous department devoted
almost entirely to security and enforcement. Trade facilitation
includes an initiative to implement fully the Customs Modernization Act
(Mod Act) and simplify current trade procedures through technology or
procedural reform. ACE is just a piece of the puzzle. Trade
facilitation takes into consideration classification, valuation, data
harmonization and all other technical issues related to trade. While
not all trade facilitation initiatives fall under the direct
jurisdiction of Customs, most operate successfully within Treasury. In
a new Department of Homeland Security, Congress, Customs and Treasury
should continue to work on projects such as the World Customs
Organization's (WCO) Trade Data Harmonization initiative and should
continue current efforts to minimize the backlog of pending cases
within Customs' Office of Regulations and Rulings. Specifically, the
JIG acknowledges Commissioner Bonner for his initiative to deliver
rulings within ninety days. However, without sufficient budgetary
support, this promise cannot be met.
Trade facilitation also includes procedural reform to ease the
regulatory and administrative burdens posed on Customs and the trade.
For example, Commissioner Bonner has committed to investigate
mechanisms for duty drawback reform. We are committed to work with the
Commissioner in his efforts to simplify current drawback procedures.
The JIG believes that pending legislation will simplify and clarify
ambiguities and assist the U.S. Customs Service administer a
complicated program by making drawback procedures consistent with
continuing congressional changes to trade laws. In addition to drawback
reform, the new Department provides an additional opportunity to review
all laws that may be revoked, reworked, or reassigned to other
agencies. Any organizational changes should be done to simplify the
Customs administrative responsibilities.
We appreciate the promises made by Governor Ridge, Commissioner
Bonner, and other Members of the Administration regarding trade
facilitation and procedural reform. These gentlemen promise that the
necessary measures to expedite the legal flow of goods will be taken.
Unfortunately, the trade continues to patiently wait for the
fulfillment of commitments made after the passage of the Mod Act in
1993. While perhaps an unpopular or minority view, this committee
should continue to investigate mechanisms for insuring that the trade
facilitation function within Customs and Treasury is preserved and
receives adequate funding in the future.
CONTINUED SUPPORT FROM THE TRADE
The Department of Treasury and U.S. Customs continually engage the
trade in advisory roles and forums. For example, the Treasury
Department has engaged a smaller group of companies and trade
associations to participate in an Advisory Committee on the Commercial
Operations of Customs, more commonly known as the COAC. It is vital
that the branch that retains jurisdiction over Customs' commercial
operations maintain a contingent of representatives to provide advice
on trade facilitation measures and administrative reform. The COAC
currently provides regular, quarterly review of Customs. This body
advises Treasury and Customs on the implementation of programs that
directly affect their ability to do business. This includes partnership
initiatives such as the Importer Self Assessment (ISA) and Customs
Trade Partnership Against Terrorism (CTPAT). They also advise Customs
during implementation of trade agreements and legislative mandates.
While it is vital that the trade is continually engaged as advisors
to Customs, the Treasury and the future Department of Homeland
Security, it is also necessary for those who construct the rules of law
to evaluate the effectiveness of such industry working groups. Some
industry working groups are more effective than others, just as some of
these so-called ``partnership initiatives'' are more effective than
others. However, it is more important that Congress and the trade are
guaranteed a continued role in oversight as Customs is moved to the new
Department of Homeland Security. It is essential that Customs and the
trade continue to work together to guarantee that public and private
interests work in cooperation to facilitate global trade.
FUNDING FOR COMMERCIAL OPERATIONS
The JIG is concerned that money earmarked for Customs' commercial
operations and trade facilitation activities will be diverted to fund
enforcement activities. Fees imposed in the name of Customs' commercial
operations should only be dedicated to the programs that they claim to
support. This can be illustrated in the current debate over the
proposed extension of the Merchandise Processing Fee (MPF). Although
the MPF is not the topic of this hearing, many parallels can be drawn
from this debate. The MPF is a so-called ``user-fee'' paid by importers
to cover the cost incurred by Customs to process commercial imports.
The MPF money collected by Customs, however, does not directly fund
Customs operations. Instead it is placed in the general revenue fund
where it is used for any number of government programs that may or may
not be related to Customs operations.
The JIG supports current legislation that provides for revenue
generated by the Merchandise Processing Fee (MPF) to be used only to
fund programs related to the work of the commercial operations of the
U.S. Customs Service. On several separate occasions in the 107th
Congress, bills have been introduced which attempt to use this fee to
fund unrelated programs, such as the Patient's Bill of Rights. We
strongly oppose any extension of the MPF, or any user fee, that does
not earmark those funds exclusively to offset the costs of Customs
commercial operations. This also excludes the use of MPF funds for
Customs' Homeland Security activities.
In addition, the JIG supports provisions in the Trade Act of 2002
that require accountability for use of MPF funds. If the Customs
Service is to continue collecting this user fee in the name of
commercial operations, it MUST directly fund improvements to Customs
processing, specifically for ACE and other initiatives that are greatly
needed to improve the trade process. JIG is greatly optimistic that
this approach will allow user fees to be applied to the commercial
operations of the U.S. Customs Service for which they are intended and
needed.
Mechanisms should also be developed to guarantee that user fees and
appropriated funds are not included in legislation where de facto
justification or revenue neutrality is not used to siphon money away
from commercial activities into the security and enforcement
activities. This includes funds dedicated to trade facilitation
measures. Customs and the new Department of Homeland Security should be
held to a standard that aims to warn against the misuse of funds.
Mr. Chairman and Members of the Committee, we believe this
Committee must continue to have jurisdiction and oversight of the
commercial operations of the Customs function in the new department. I
believe one option for continuing the commercial activities in the new
Department is to establish an Under Secretary for Commercial Operations
whose office will ensure equal priority within the Department for those
functions.
It is also important for Members of this Committee to authorize
adequate funding for Customs commercial operations as well as their
trade facilitation activities. For example, Customs needs continued
funding to staff 301 ports of entry and to build its arsenal of tools
to aid in border inspections. Customs also needs funding to continue
development of smart tools, such as ACE, and to develop processes to
facilitate the flow of trade. This will allow Customs to defend our
physical and economic well being.
CONCLUSION
Mr. Chairman and Members of the Committee, the Joint Industry Group
supports the President's efforts to protect our nation's welfare. The
trade community views their role as standing side-by-side with U.S.
Customs officials, working as partners on the front lines to facilitate
the safe and secure flow of commerce. We ask the Committee to consider
the importance of the dual role of Customs and their efforts to
facilitate trade. Again, this will allow the Customs Service to better
fulfill its dual mission of protecting America's borders from foreign
threats, while facilitating the flow of trade through our air, sea, and
land ports.
I agree with Chairman Thomas when he stated, ``Our Nation's long-
term defense rests equally upon the protectors at our borders and the
engine of our economy.''
We thank you for your time and consideration of these issues.
Chairman THOMAS. Thank you very much, Mr. Clawson.
Jerry Cook, Vice President, International Trade, Sara Lee,
looking at trade from both inside the United States and
outside.
Mr. Cook, your testimony will be made a part of the record.
Address us in any way you see fit.
STATEMENT OF JERRY COOK, VICE-PRESIDENT OF INTERNATIONAL TRADE,
SARA LEE BRANDED APPAREL
Mr. COOK. Thank you, Mr. Chairman, Mr. Rangel, and Members
of the Committee. I will just summarize my written testimony,
for time's sake.
Most importantly, the focus for us with Customs has been
fairly successful, particularly this past year. Customs managed
23 million entries and related cargo, both from an enforcement
and from a commercial facilitation. Important to note, is
Customs maintain the primary data repository for over 40 other
government agencies, as well as enforcing 400 laws, ranging
from public health, safety, social, economic, environmental,
and transportation, and all in a very timely and sensitive
manner. The ability to execute these respective activities is
not only critical for our public safety but also in fostering
our economic security. With the advancement of the MODACT, the
essential ingredients of combining trade facilitation along
with the enforcement were critically linked to improve
security, compliance, and, for us, a very predictable business
solution. The successful trade programs that this Committee
crafted, and the subsequent legislation have created economic
opportunities in the United States and around our borders. The
economic development of trade has decreased security threats to
the United States, and the sustained economic development of
regions like the Caribbean basin and the Sub-Saharan have
placed an ongoing development of those regions totally
dependent on an efficient Customs. To delink the Customs'
enforcement from the business facilitation, in my mind, would
likely have unintended consequences to the business community
and to the respective agencies trying to manage the trade and
business.
While the full development and implementation of Homeland
Security is being contemplated, we need to ensure that the hard
work and the leadership of this Committee and others ensures
the timely implementation of ACE. The ACE system envisioned a
very robust environment that can both facilitate risk
assessment and reduce the cost burden of paper documents and
the repetitive reloading of data in our current trading
systems.
If the two roles were separated based purely on enforcement
versus commercial, the definition of what constitutes
enforcement versus commercial would likely lead to an endless
level of appeals while trade is idled. By adopting ACE as the
core platform for Homeland Security, the respective process
necessary to exchange commercial and enforcement data will be
incorporated on day one.
I believe trade advice to the senior management of Homeland
Security will be vital in assessing what is working and what is
not working going forward. The Customs receives valued input,
problem identification and problem-solving via the trade
support groups like the Commercial Operations Advisory
Committee and the Trade Support Network. The willingness of
Customs and the industry to jointly work together to identify
issues affecting the commercial sides of trade along with
enforcement and co-develop workable solutions is the
cornerstone that exemplifies Customs versus other customs'
services around the world.
The Customs provides valued input into other countries to
advance their management of risk to our country. The joint role
of enforcement and commercial facilitation is crucial to better
develop models of trade prior to arriving to the United States.
As me move forward in Homeland Security, we should consider
making some beneficial changes that would both enable the trade
and Customs to better achieve border and economic security: 1)
elimination of reconciliation for all entries that provide only
statistical updates but no impact on revenue, 2) simplify and
reduce the size of the harmonized tariff schedule; 3) provide
total electronic interface for all required data; 4) eliminate
any paper document requirements; 5) eliminate the releasing of
confidential and trade-sensitive data to nongovernment
agencies; 6) operate ports 24 hours, 7 days a week; and 7)
reduce the required data for exports and imports to a single
set as conceived under the ITDS model.
Mr. Chairman, Mr. Rangel, I want to thank you for the
opportunity and, most importantly, for your leadership on
fostering trade and fostering a modern trading system. I
appreciate the opportunity to comment on this transfer of
Customs to Homeland Security. In closing, the continued
advancement of Customs' role in Homeland Security can provide a
valuable baseline. Commercial success is achieved in concert
with enforcement via an efficient and balanced Customs'
process.
Thank you.
[The prepared statement of Mr. Cook follows:]
Statement of Jerry Cook, Vice-President of International Trade, Sara
Lee Branded Apparel
Introduction
Mr. Chairman and honored Members of the Ways and Means Committee,
my name is Jerry Cook and I am the Vice-President of International
Trade for Sara Lee Branded Apparel. Some of our better-known apparel
brands include Hanes, Champion, Bali, Wonderbra, Playtex and Just My
Size. I am an active member in various trade groups including AAEI,
JIG, AAFA, BACM and a former member of the Advisory Committee on the
Commercial Operations of U.S. Customs.
I am presently a member of the ISAC-15 as well as a member of the
Trade Support Network. Sara Lee Branded Apparel is a charter member of
the Customs-Trade Partnership Against Terrorism (C-TPAT) and a member
of BASC (Business Against Smuggling Coalition.) Thank you for this
opportunity to testify today on the proposal to create a U.S.
Department of Homeland Security and the transfer of all assets and
authority of the U.S. Customs Service to this new Homeland Security
Department.
Mr. Chairman, my remarks are based on my experiences working with
the U.S. Customs Service and the various regulatory agencies that
manage our exports and imports. It is my belief that the proposed
transfer of the U.S. Customs Service and consolidation of the border
security agencies into a new Homeland Security Department can only be
beneficial if enforcement and commercial operations remain together.
The U.S. Customs Service is an integral partner in our supply chain
strategy. In addition to the U.S. Customs mission to manage anti-
terrorism and drug enforcement along our nation's borders, Customs
successfully managed last year:
Over 23 million entries
Over 472 million passengers
Over 300 ports of operation
Over 142 million conveyances
The collection of over $23 billion in duties and fees
Customs achieved this milestone while seizing over 1.7 million
pounds of narcotics. Their achievement was accomplished with 19,000+
employees and in partnership with the business community. In addition,
Customs continued to forge ahead with the development of the ACE system
and to began building a new critical partnership with the business
community known as C-TPAT (Customs-Trade Partnership Against Trade.)
Additionally, the U.S. Customs Service maintained the primary data
repository for over 40 other government agencies and enforced over 400
laws ranging from public health, safety, social, economic,
environmental, and transportation in a time sensitive environment. The
ability to execute these respective activities is not only critical for
our public safety, but in fostering our economic security.
Critical to the Business Community--The Totality of the U.S. Customs
Service Must Be Transferred Together
With the advancement of the MODACT, the essential ingredients of
combining trade facilitation along with enforcement were critically
linked to improve security, compliance and predictable business
execution. The U.S. Customs Service has served for many years in this
dual role. During their 200+ years of operating, the U.S. Customs
Service has developed a series of rules, regulations, but most
importantly a process in which commerce is executed in a transparent
and predictable environment.
The successful trade programs that the Ways and Means Committee
crafted into legislation have created economic opportunities. The
economic development of trade has decreased security threats to the
United States beyond our borders. The sustained economic development of
regions like the Caribbean Basin, Mexico, Sub-Saharan Africa and the
Mid-East have placed the on-going development of those regions
dependent on an efficient Customs Service.
To delink Customs' enforcement from the business facilitation would
likely have unintended consequences to the business community and the
respective agencies involved in managing trade and managing
enforcement.
In short, the process of enforcing trade laws has advanced a hybrid
solution that both informs the trade community of the respective
programs and seeks joint ownership in critical areas. Given the
``hands-on'' management style required to manage the operational and
enforcement aspects of trade, I believe it is critical that those
respective missions stay together to provide the balance, insight and
agility necessary to work through issues we jointly encounter.
Accelerate and Insure A Robust And Fully Integrated Electronic Exchange
Solution--ACE (Automated Commercial Environment)
While the full development and implementation of the Homeland
Security Department is contemplated, we need to insure the hard work
and leadership of this Committee and others to develop the ACE system
in timely achieved. As a member of the Trade Support Network, Customs
repeatedly seeks insight and inclusion on the development of the new
Automated Customs Environment. U.S. Customs strives to insure that it
not only incorporates the trade community's needs, but to also insure
that ACE is able to facilitate the key roles of enforcement, risk
assessment, centralized data repository for the U.S. Government and
Account Management.
It is important to note that as the blueprints for the Homeland
Security Department are drafted, resources are provided to insure that
the vision of ACE is fully achieved and the benefits to trade are
incorporated. U.S. Customs has fostered a model to gain the voluntary
support of the trade community for key enforcement iniatives by their
genuine understanding and interest in assisting valid trade to enter
efficiently, challenge unknown shipments to determine their validity
and thwart illegal trade from gaining access to the USA.
The ability to rapidly move data within the agency begins with
source data populated once into one repository. The ACE program
envisioned a robust environment that can both facilitate risk
assessment and reduce the cost burden of paper documents and re-loading
data.
Within the trade role of Customs, the determining factors for
shipment admissibility are more often commercial related than anti-
narcotic or anti-terrorism. The ability to determine and advise correct
classification, valuation, country of origin, trade preference program,
trade mark and status of an entry or release are all aspects that
affect the same agent/inspector examining a shipment.
If the two roles were separated based purely on enforcement versus
commercial, the definition of what constitutes enforcement vs.
commercial would likely lead to an endless level of appeals while trade
is idled. The U.S. Customs Service has incorporated not only the
traditional law enforcement issues, but manages to understand the
complex commercial issues. The separation of these two roles will
likely leave trade in an unmanageable environment.
The advancement of the U.S. Customs systems and the associated
modernization efforts are critical to the new Homeland Security
Department. By adopting ACE as the core platform for the Homeland
Security, the respective process necessary to secure economic exchange
will be incorporated the first day. I realize that the ultimate
decisions will be decided jointly between Congress and the
Administration, but I encourage you to assure the full trade community
that the intended benefits of ACE are a high priority of the Homeland
Security Department.
Homeland Security Needs Trade Advisory Input to the Senior Level
Perhaps the single biggest issue facing Homeland Security would be
the unintended consequences of separation of the enforcement efforts
from the commercial role.
In the development and implementation of the Homeland Security
Department, input from the trade on trade specific issues and concerns
is crucial. As a former member of the COAC (Advisory Committee on the
Commercial Operations of Customs), I believe trade advise to senior
management of Homeland Security will be vital in assessing what is
working and what is not.
The U.S. Customs Service receives valued input, problem
identification and problem solving via trade support groups like TSN
(Trade Support Network). The willingness of the U.S. Customs Service
and industry to jointly work together to identify issues, opportunities
and co-develop workable solutions is one of the cornerstones that
exemplifies the U.S. Customs Service advancements versus other nations'
Customs Service. The ability to interface directly with the trade has
advanced the joint partnership programs vital to enforcement like BASC
and C-TPAT.
Customs has a successful record of engaging the trade community to
achieve enforcement, trade programs, issue identification and
development of effective problem solving solutions. The U.S. Customs
Service has facilitated our joint success in both enforcement and
commercial advancement.
The U.S. Customs Service provides valued input to other countries
to advance their management of risks to the USA. The U.S. Customs
provides assistance for other nations to develop their trading
solutions. The joint role of enforcement and commercial facilitation is
crucial to develop better models prior to trade arriving at the U.S.
borders.
As We Advance Homeland Security-We Need to Focus Our Efforts
We are facing this challenge together. Our ability to achieve
cross-border operational effectiveness will ultimately determine if we
succeed or fail. As design and functionality are developed, we should
consider making some beneficial changes that would enable both the
trade and Customs Service to better achieve border and economic
security.
1. LElimination of reconciliation for all entries that provide
statistical updates only and have no impact on revenue.
2. LSimplify and Reduce the Harmonized Tariff Schedule.
3. LProvide a total electronic interface for all required data
to eliminate paper documents.
4. LEliminate the releasing of confidential and trade sensitive
data to non-governmental agencies.
5. LOperate ports 24 hours/7 days a week.
6. LReduce the required data for exports and imports to a
single set of data to satisfy both transactions as conceived
under the ITDS model.
Closing
Mr. Chairman and Members of the Ways and Means Committee, I want to
thank you for your continued leadership on trade and fostering a modern
trading system. I appreciate the opportunity to comment on the transfer
of all of the U.S. Customs Service to the Homeland Security Department.
In closing, the continued advancement of the U.S. Customs Service role
into Homeland Security can provide a valuable baseline. Commercial
success is achieved in concert with enforcement.
Thank you.
Chairman THOMAS. Thank you very much, Mr. Cook.
Ms. Kelley, your written statement will be made a part of
the record. You can address us in any way as you see fit. And
you are here as the National President of the National Treasury
Employees Union. I am very interested in what you have to say.
STATEMENT OF COLLEEN M. KELLEY, NATIONAL PRESIDENT, NATIONAL
TREASURY EMPLOYEES UNION
Ms. KELLEY. Thank you very much, Mr. Chairman, Ranking
Member Rangel, and distinguished Members of the Committee. I
very much appreciate the opportunity to present NTEU's views on
the President's proposed Homeland Security and the impact on
Customs of that proposal.
As the President of the National Treasury Employees Union,
I have the honor of leading a union that represents over 12,000
Customs' employees who provide the front line of defense to our
country every day and trade facilitation. The Customs'
inspectors, canine enforcement officers, and import specialists
make up our Nation's first line of defense in the wars on
terrorism and drugs, as well as facilitating lawful trade into
the United States.
With a fiscal year 2002 budget of approximately $3.1
billion, Customs facilitates more trade and interdicts more
drugs than any other agency. The Customs also provides the
Federal Government with the second largest source of revenue.
As you noted, Mr. Chairman, Customs deposited over $22 billion
into Treasury this past year.
In 2001, Customs' employees seized over 1.7 million pounds
of cocaine, heroin, marijuana, and other illegal narcotics.
Customs also processed over 500 million travelers last year,
including 1 million cars and trucks. Over the last decade,
trade has increased by 137 percent.
In addition, there are increased threats of terrorism,
dramatic increases in trade resulting from the North American
Free Trade Agreement, and new drug smuggling challenges. And
yet, Customs has confronted its rapidly increasing trade
workload and homeland security mission with relatively static
staffing levels and resources.
Unfortunately, this situation is not like to change under
the President's Homeland Security proposal. The President has
stated that his proposal will not include any additional
funding that will enable Customs and its personnel to
successfully accomplish their missions of trade facilitation
and border security.
A number of these resource issues were addressed by this
Committee in H.R. 3129, the Customs Border Security Act of
2002, which is part of the trade package before Congress. This
legislation would authorize over $4 billion for a number of
Customs' priorities such as staffing, commercial and
noncommercial activities, narcotics detection equipment, child
pornography prevention, the ACE computer system, and the air
and marine interdiction units.
Both the American public and trade community expect the
borders to be properly defended while at the same time being
able to efficiently and safely facilitate trade across that
border. The government must show the public that it is serious
about protecting the borders and facilitating trade by fully
funding agencies such as Customs who are tasked with defending
the borders and enforcing the trade laws of the United States.
No organizational structure will be successful, no matter
how good it may look on paper, if the government does not
provide proper funding for its border agencies.
The President's Homeland Security proposal seeks to
consolidate Customs, INS, Border Patrol, Animal and Plant
Health Inspection Service, the Transportation Security Agency,
and the Coast Guard into one division entitled Border and
Transportation Security. Only the Coast Guard would be
maintained as a distinct entity under the President's proposal.
Each of these agency's missions are unique. Combining each
agency's field of expertise will lead to losing that expertise.
The fact that Customs would not be a distinct entity within
Homeland Security would deal severe blows to the distinct
missions in which Customs has world-class expertise: trade
facilitation, the collection of revenue, and as the first line
of defense in the wars on terrorism and drugs on our Nation's
borders.
In the last 5 years alone, Customs has witnessed a 60-
percent increase in trade entries processed, and this rate is
expected to grow an average of 8 to 10 percent a year.
Keeping Customs as a distinct entity within the department,
as it is proposed in both the Lieberman and the Thornberry
Homeland Security bills, would help to retain the emphasis on
the importance of Customs' trade-related duties.
In closing, the Administration has indicated that it wants
new flexibility in the legislation that will establish Homeland
Security. The President's proposal would allow two political
appointees, the Secretary of Homeland Security and OPM
Director, to set and to change the rules affecting pay,
benefits, whistleblower protection, collective bargaining, and
even merit principles. I urge Congress not to take away the
rights and the benefits that are currently available to the
employees who may be merged into this new department.
Before, during, and after September 11, front line
employees have acted heroically to protect our freedom. They do
not deserve to lose theirs.
Thank you for the opportunity to share NTEU's thoughts on
these very important issues. And I look forward to working with
the Committee on this and many other issues related to homeland
security, trade facilitation, and Customs.
[The prepared statement of Ms. Kelley follows:]
Statement of Colleen M. Kelley, National President, National Treasury
Employees Union
Chairman Thomas, Ranking Member Rangel, distinguished Members of
the Committee, I would like to thank the Committee for the opportunity
to comment on the President's proposed Department of Homeland Security
and its impact on the Customs Service.
As President of the National Treasury Employees Union (NTEU), I
have the honor of leading a union which represents over 12,000 Customs
employees who are stationed at 301 ports of entry across the United
States. Customs inspectors, canine enforcement officers, and import
specialists make up our nation's first line of defense in the wars on
terrorism and drugs as well as the facilitation of lawful trade into
the United States. In addition, Customs personnel are responsible for
ensuring compliance with import laws and regulations for over 40
federal agencies, as well as stemming the flow of illegal contraband
such as child pornography, illegal arms, weapons of mass destruction
and laundered money.
With a FY2002 budget of approximately $3.1 billion, the U.S.
Customs Service facilitates more trade, and interdicts more drugs than
any other agency. The Customs Service collects over $20 billion in
revenue on over 25 million entries involving over $1.3 trillion in
international trade every year. The Customs Service provides the
Federal Government with its second largest source of revenue. Last
year, the Customs Service deposited over $22.1 billion into the U.S.
Treasury.
The President's FY2003 budget requests a funding level of $3.18
billion for the United States Customs Service. This request represents
a token increase from last year's appropriations. NTEU feels that this
budget is simply inadequate to meet the needs of Customs personnel,
especially in light of the incidents surrounding September 11th.
In addition to appropriations, Customs also receives funds from the
COBRA account. This user fee account funds all inspectors' and canine
enforcement officers' overtime pay as well as approximately 1100
Customs positions across the country. This account is funded with user
fees collected from air/sea passengers except from the Caribbean and
Mexico, commercial vehicles, commercial vessels/barges and rail cars.
The COBRA fund will expire on September 30, 2003, unless it is
reauthorized by Congress before then. However, the President's FY2003
budget does not call for the reauthorization of COBRA. COBRA must be
reauthorized or Congress must appropriate additional funds to make up
for the loss of the user fees.
In 2001, Customs Service employees seized over 1.7 million pounds
of cocaine, heroin, marijuana and other illegal narcotics--including
over 9.5 million tablets of Ecstasy, triple the amount seized in 1999.
Customs also processed over 500 million travelers last year, including
1 million cars and trucks. These numbers continue to grow annually.
Over the last decade trade has increased by 137%.
Yet, despite the increased threats of terrorism, the dramatic
increases in trade resulting from NAFTA, and new drug smuggling
challenges, the Customs Service has confronted its rapidly increasing
trade workload and homeland security mission with relatively static
staffing levels and resources. In the last ten years, there simply has
not been adequate increases in staffing levels for inspectional
personnel and import specialists, the employees who process legitimate
trade, to successfully conduct their missions. Unfortunately, this
situation is not likely to change under the President's Homeland
Security proposal. The President has stated that his proposal will not
include any additional funding that will enable the Customs Service and
its personnel to successfully accomplish their missions of trade
facilitation and border security.
For example, traffic volume at U.S. land ports-of-entry has
steadily increased as our shared borders with Mexico and Canada have
become more open as a result of the NAFTA and other trade initiatives.
The steady increase of commercial and non-commercial traffic has led to
increased wait times at many land ports-of-entry, particularly those
along the Southwest border. Wait times along the Southwest border often
extend to 45 minutes or more during peak hours. Such lengthy delays can
be both irritating and costly to businesses and the traveling public.
The lack of resources at ports-of-entry is also a problem along the
Northern Border as well as seaports. The events of September 11 brought
attention to the fact that the Northern border, the nations' seaports,
and the Southwest border are still in urgent need of additional
personnel and resources. In fact, Customs' recent internal review of
staffing, known as the Resource Allocation Model or R.A.M., shows that
Customs needed over 14,776 new hires just to fulfill its basic mission
and that was before September 11.
For instance, with increased funding, modern technologies, such as
Vehicle and Cargo Inspection Systems (VACIS), which send gamma rays
through the aluminum walls of shipping containers and vehicles to
enable Customs inspectors to check for illegal drugs or weapons of mass
destruction, as well as decreasing the amount of time shipping
containers are out of the supply chain, could be acquired. However,
adequate and consistent funding to purchase, operate and maintain these
technologies has not been forthcoming. Other technologies, coupled with
proper personnel funding, such as portable contraband detectors (a.k.a.
Busters), optical fiber scopes and laser range finders can be
invaluable to Customs personnel protecting our borders from terrorists
and illegal drugs.
Included in the modern technology possibilities for Customs is the
Automated Commercial Environment or (ACE). ACE could be an integral
element for trade enforcement and in preventing cargo from becoming an
instrument of terrorists. The current Automated Commercial System (ACS)
is a 17 year old, outdated system that is subject to system crashes and
freezes that wreak havoc on trade facilitation and employees' ability
to do their jobs. Although a system upgrade is necessary for Customs to
meet its modernization efforts, NTEU would oppose funding a new system
that shifts funds away from critically important staffing needs.
A number of these resource issues were addressed by this Committee
in HR 3129--The Customs Border Security Act of 2002, which is part of
the trade package before Congress. This legislation would authorize
over $4 billion for a number of Customs priorities such as staffing,
commercial and non-commercial operations, narcotics detection
equipment, child pornography prevention, the ACE computer system and
the air and marine interdiction units.
As for the President's Department of Homeland Security proposal, it
seeks to consolidate the Customs Service, INS, Border Patrol, the
Animal and Plant Health Inspection Service (APHIS), the Transportation
Security Agency (TSA) and the Coast Guard into one division titled,
Border and Transportation Security under the jurisdiction of a newly
created Department of Homeland Security. I find this proposal to be
extremely troubling for a number of reasons, one of which is the fact
that the Customs Service would not be maintained as a distinct entity
within the proposed Department of Homeland Security. Each of these
agency's missions are unique and should remain as distinct entities in
any new agency. Combining each agency's fields of expertise will lead
to losing that expertise.
The fact that Customs would not be a distinct entity within the
Department of Homeland Security would deal severe blows to three
distinct missions in which the Customs Service has world class
expertise, trade facilitation, the collection of duty revenue, and drug
interdiction at our nation's borders. Each year more than 16 million
containers arrive in the United States by ship, truck and rail. In the
last five years alone, Customs has witnessed a 60 percent increase in
trade entries processed, and this rate is expected to grow an average
of 8 to 10 percent a year.
To consolidate the Customs Service with five other agencies, only
one of which remains a distinct entity, the Coast Guard, would be a
long-term mistake for Customs. Customs' trade facilitation mission
would clearly not be the highest priority for the Department of
Homeland Security. Keeping Customs as a distinct entity within the
Department as proposed in both the Lieberman and Thornberry Homeland
Security bills would help retain the emphasis on the importance of
Customs' trade related duties.
Other trade issues such as textile transshipment enforcement, trade
agreement circumvention, and the use of counterfeit visas to enter
inadmissible goods would simply fall farther down the priority list in
a newly created Department of Homeland Security. Many of these concerns
have been voiced by a number of trade groups such as the National
Foreign Trade Council and the Electric Industries Alliance.
Both the American public and the trade community expect the borders
to be properly defended while at the same time being able to
efficiently and safely facilitate trade across that border. The
government must show the public that it is serious about protecting the
borders and facilitating trade by fully funding agencies such as the
Customs Service who are tasked with defending the borders and enforcing
the trade laws of the United States. No organizational structure change
will be successful, no matter how good it may look on paper, if the
government does not provide proper funding for its border agencies.
On a final note, the Administration has indicated that it wants new
``flexibility'' in the legislation that will establish the Department
of Homeland Security. While it is unclear exactly what is meant by that
phrase, I urge Congress not to take away the rights and benefits that
are currently available to the employees who may be merged into this
new department. Before, during, and after September 11, front line
employees have acted heroically to protect our freedom. They do not
deserve to lose theirs.
I have attached to my statement an article from Newsday that
features Customs Inspector and NTEU member Diana Dean, who apprehended
Millenium Bomber, Ahmed Ressam in Port Angeles, Washington. It makes
the case more eloquently than I could, that she is the kind of person
we want in a new Department of Homeland Security. But I fear that the
``flexibilities'' proposed by the President will lead to many fewer
such dedicated people willing to work for the new Department. That
would be a shame and I hope Congress will not let that happen.
Thank you for the opportunity to share NTEU's thoughts on these
very important issues. I look forward to working with the Committee on
this and many other issues related to homeland security, trade
facilitation, and the Customs Service.
Chairman THOMAS. Thank you very much, Ms. Kelley.
If we focus on the language difference that the gentleman
from New York pointed out, in terms of the Coast Guard being a
distinct entity, I think most people could kind of rattle off,
``Well, they're the ones in the uniforms. They've got white
ships and planes with an orange stripe. And they do X,'' and so
on. So if you turn then to Customs and you use that same
yardstick in terms of Customs, if we want a distinct entity in
there, what would be the cement that would hold that distinct
entity together?
When we look at it historically, it was probably obviously
tied to those historical papers in terms of revenue. They
collect revenue, but they do so much more. But they do it in
conjunction with the collecting of the revenue.
So the line of questioning I would like--and some of you
will see Customs from only a particular viewpoint.
And I agree with you completely; if we really want to have
a secure border, Mr. Clawson, that getting ACE up and running
and facilitating the smooth across the border, so there are no
bottlenecks, hiccups, or problems, is significant and important
in terms of security. So getting ACE up and running is in fact,
as far as I am concerned, easily made a security argument.
But if we are going to try to argue that they are a
distinct entity, the question is, is revenue enough cement?
Could you actually look at Customs today, and notwithstanding
some people are virtually wholly revenue associated, others are
primarily revenue associated, some are somewhat revenue
associated, and some are not revenue associated at all, if you
used revenue as the cement, that is probably not a good
argument because people could go in and show divisions.
So if we are going to rally around ``keep Customs a
distinct entity,'' what is it that is tangible that we could
use to identify them?
And I guess the primary thrust of the question would go to
you, Ms. Kelley, because you get see all of them together.
These folks see pieces of them.
So that would be, I think, the first thing we would have to
ask. And then secondly, is the rationale for wanting to keep it
a distinct entity sufficiently strong to outweigh the
counterarguments, that if you really want a seamless,
integrated security approach, there are areas of Customs that
could be shifted, that make some sense, so that you just don't
parachute a distinct entity without ever doing some of the
merging and restructuring.
And then last, if you look at it, is there a way for us to
build a distinct entity out of a piece of Customs or most of
Customs or with slight modifications, which is not attackable,
because it is tied to revenue? Because this Committee's primary
concern would be to follow the money.
Ms. KELLEY. Well, I think that Customs' mission is distinct
from the other agencies, and I think that each of the pieces of
those, while maybe it could be argued that the revenue doesn't
touch each and every one employee, I believe that the mission
of Customs and the way they have delivered on it over these
past 200 years puts them in place as a very definable, distinct
entity. One of the risks, of course, is losing the expertise
that they have in each of these aspects of their mission.
And one of the things that concerns NTEU, and as I have
traveled around the country and watched the Customs' employees
do their work, is that there are some, I think, who believe
that Customs and the other agencies that they see working side-
by-side on the borders are interchangeable, and, therefore,
they can each do each others' jobs. And that just is not the
case.
They complement and supplement definitely, but they have
distinct skills and expertise, which will risk being diluted if
that distinction is not maintained.
The Customs as it operates today, with the different facets
of what it does, have all been linked and successfully linked
and delivered as a part of Treasury obviously for years, for
hundreds of years. And I see no reason why that should be
changed in the future, even in a new department.
Chairman THOMAS. I understand you don't see a reason. Some
of us may not see a reason. But that does not mean it is not
going to happen. And so I appreciate your 100-percent defense
of keeping it the way it is. We may need to look at how we
could create a core structure which is undeniably tied to
revenue, which maintains sufficiently a distinct entity, that
we could run the tie through Treasury because of the revenue,
and back to us.
We would not have had this discussion 2 years ago. We would
have been arguing about hours and why you pay time and a half
and that sort of thing, for 1 p.m. in the afternoon. Put that
behind us. We are under siege right now, in terms of coming up
with a rationale that keeps Customs, Customs, or most of what
Customs is Customs, rather than trying to present arguments to
keep it the way it is.
I think the momentum is not to keep it the way it is,
because somebody decided not to write in ``distinct entity.''
As my friend from New York was pointing out, they also didn't
bother to write in Customs on the flow chart. So it tells you
that some folk are not looking at it the way we think it should
be looked at. And if we cannot get them to completely, 180
degrees reverse their argument, we better be coming up with a
way in which we have a very strong argument that this is
something that makes sense and works and this is how we would
want it, and that we can defend it. That is all I am saying.
Ms. KELLEY. If I could say this, Mr. Chairman, it is not
clear to me why the Coast Guard was designated as a distinct
agency, from a policy standpoint. And I have not thought about
the question as you framed it, of cement running through it. I
will do that, and I will be glad to share those thoughts with
you within the next week or so, in writing, if that is
acceptable.
Chairman THOMAS. As soon as you can get back to me, because
to me our strongest argument we make is--that is why I brought
these documents--it started with money, it follows the money,
Treasury is money, we are the tax Committee, it is revenue.
That is, I think, our strongest argument. And let's see what
Customs looks like if we use that as the cement to build
whatever the new model is. And I appreciate some help on that,
because I do think that is an argument that I would very much
like to make.
Ms. KELLEY. Okay.
Chairman THOMAS. But I do not know that we can make:
``Don't touch a hair on the child's head. It is perfect the way
it is,'' because some folks have said it may be perfect.
We have a new problem, and we have to rethink the way we do
things.
Ms. KELLEY. I will be glad to provide you with my thoughts.
I appreciate the opportunity.
Chairman THOMAS. Thank you very much.
Anybody else have a reaction to that? You don't have to.
Mr. CLAWSON. I was going to say, we would like to also
supply something, because I agree with your analysis that we do
need--there are parts of Customs that I respectfully disagree,
that are very similar. There is a degree of interchangeability.
When you do a land border crossing, you do not see Immigration
and Customs at the land border crossing; they are doing each
other's work right now and have been for years.
So I guess what I am saying is, I agree totally with you.
We need to figure out a way to craft where we are, and we will
help you with that.
Chairman THOMAS. And interestingly, the involvement of
commerce I think would be, with the revenue collected by that,
would be one of those aspects. And then take a look at what
people in terms of enforcement, to what extent, is it primarily
enforcement, secondarily collection or primarily collection--
some discussion along that line.
And I will not share your thoughts with anyone, Ms. Kelley.
Let's see how much is left or not left.
Ms. KELLEY. Okay.
Chairman THOMAS. Because I think that is something we need
to do fairly quickly so this Committee can recommend a firm
position that we feel very comfortable defending, so that we
can make sure what all of us want is at least maximized under
the new structure.
Ms. KELLEY. Okay.
Chairman THOMAS. Thank you.
Mr. COOK. Mr. Chairman, one comment that is worth
considering. When you look at the composite of international
trade, a lot of it is component manufacturing moving about. And
you are looking at duty revenue, but there is a tax revenue on
the other side. The successful ability of U.S. corporations in
this country to be engaged in trade, if it stops, it impacts
our business and has a significant impact on the IRS side.
So if you are looking at the flow of the money, that
commercial viability becomes very important, being in this
country altogether, if you are going to have problems moving
products in and out. I would think from a policy perspective,
you would not want to lose vision of that in homeland security,
because it really is about securing our economic independence.
Chairman THOMAS. You are absolutely correct. And I think,
at least in the short run, we have not focused on the fact that
as fundamental as anything is the economic security and
viability, to be able to allow for some of the other activities
as well.
The gentleman from New York.
Mr. RANGEL. Mr. Chairman, I do not know if additions of
Customs over the years, it seems to me that they should be
protected intact unless there is reason why the flexibility
that the Secretary would have would require in our national
defense that it should be changed.
But if this is the hearing, all it has done is to raise the
questions. And clearly, the Undersecretary, who just got on
this job last summer, had indicated in his testimony that the
bill is the thinking of the President. But we do not know why
Customs was dropped off. We do not know what changes they
intend to have with Customs. And if Customs is dismantled, I
assume somewhere along the line, since we have congressional
oversight, we are going to have to explain why the changes were
made. I do not know how you intend to proceed, if this is it.
I know Ms. Kelley is going to send us a lot of questions,
but how are we going to have answers to her questions? And what
do we do? Ask Ms. Kelley to come back and have this exchange?
That is why I thought, since we have jurisdiction over the
Secretary of Treasury, that it is so important, one, to have
the questions raised by those people that believe that they may
be adversely affected, to lock in, as the other Committees
have--because I am convinced that is why some of these people
have their own rectangle and that is why Customs fell off at
the end, because someone insisted on it.
And I am not saying, in the final analysis, that whoever
drafted the legislation did not put a lot of thinking into it,
but how do we find out why they set it up as they did? How do
we know that role they intend for Customs to have in the
future?
It is one thing to say it is going to be intact. It is
another thing to say they want maximum flexibility.
Chairman THOMAS. If I might respond?
Mr. RANGEL. Yes, sure.
Chairman THOMAS. If the gentleman is coming to the
conclusion that this hearing perhaps raises more question than
it answers, then I think this will be a very valuable hearing,
because it is very difficult for this Committee to proceed
unless we get answers to those questions.
And if the gentleman assumes that those boxes were created
on that piece of paper with significant interaction by other
Committees, and the laxity of this Committee's involvement did
not get us a box, I can assure you, in my conversations with
other Committee chairmen, they do not believe that is the case.
I believe there is a significant amount of ``there but for the
grace of God'' in a number of Committee jurisdictions.
However that was created, I believe that we need to go
forward in an orderly fashion, ask the questions. And if we do
not get answers, then we are either going to have to have
another hearing or we will craft what we believe to be the
appropriate response based upon our attempts to answer the
questions that are created. And we will then move forward with
what we believe is our solution.
Frankly, without having Customs in a particular box and
already determined tells me we have an excellent opportunity to
offer a solution to the problem, because if they already
thought they had a solution to the problem, we would have to
talk them out of their solution into ours. So I do not see it
quite the same way the gentleman from New York does. I see this
as an opportunity to shape where and how Customs is placed in
this new structure far more than if they had told us they made
up their mind, here's the box, and that's where it is.
I thank the gentleman for the time.
Mr. RANGEL. Well, Mr. Chairman, I have the utmost respect
of the union representative of Customs, but it just seems to me
that the Customs Commissioner may have a lot of questions as
well, and as we heard those who use the services of Customs.
So, yes, we can draft and decide what we want to do, but then
where do we take it?
In other words, it just seems to me that you cannot do this
unless you have those people who work with Customs every day.
And clearly, the Undersecretary does not. They report to him.
But Ms. Kelley is on the frontline representing her Members.
The Customs Commissioner is someplace else. We have to do this
before the election, or whatever the President wants.
And so it just seems to me, and you know how reluctant I am
to get in the back room with you to work this thing out, which
you are suggesting, but----
Chairman THOMAS. No, I am not suggesting that. Does the
gentleman yield further?
Mr. RANGEL. Yes, but you said that we will have----
Chairman THOMAS. If the gentleman's concern is that he is
disappointed that middle management is not here, so they can
freely criticize upper management in the way in which this
project is moving forward, he is probably not going to be
happy.
One of the reasons that I was pleased that the minority
asked union representation is that I believe they could be a
bit freer about looking at the way in which structures could be
made. And I do believe there is, if the gentleman is serious
about why someone who is in a middle management position is not
here so they can criticize the structure under which they are
supposed to be moving, then we have a great gulf between us.
Mr. RANGEL. Mr. Chairman----
Chairman THOMAS. I believe the recommendation----
Mr. RANGEL. Mr. Chairman----
Chairman THOMAS. I just want to say this: I believe the
recommendation of this Committee as to how this is handled will
carry enormous weight with the leadership as they put the
package together. We should focus more on the way it ought to
be than the fact that we do not have somebody here that we can
embarrass because you know they cannot answer----
Mr. RANGEL. Mr. Chairman----
Chairman THOMAS. In a way that either they want to or they
won't.
Mr. RANGEL. It was you that brought the person here that
could not answer the questions.
Chairman THOMAS. I believe that is upper management, not
middle management.
Mr. RANGEL. Well, let me ask, Ms. Kelley, before you
testified, did you have the opportunity to share your views
with the Commissioner of Customs?
Ms. KELLEY. I spoke briefly with him last week on my
concerns about the fact that Customs is not a district entity,
does not have appropriate resources, and the risk of losing the
expertise.
Mr. RANGEL. I would like to see whether or not--I am going
to make a recommendation to the Chair that the Customs
Commissioner and you, Ms. Kelley, would get together, because
like any family, you can dispute with wages and hours and all
of those things, but then when you find out that Customs itself
may be under some type of attack, I am certain that you and the
Customs Commissioner might have more in common in terms of
making recommendations as to what would be effective than
somebody who is just including you in an organization chart.
If the Chair cannot find a way for that type of a meeting
to take place, so that we can be helpful to the Customs
Commissioner, so that we can be helpful to the rank and file,
then I might be reaching out to you and to the Customs
Commissioner in asking: what do you think about this idea; how
do you think it can be improved; what recommendations would you
make? I am certain that that would be more helpful to me than
what I have been able to get from this hearing.
So if there is no other scheduled hearing where I can ask
these questions, then I would ask, in a very informal way, on
behalf of the minority, that we can meet and meet with the
Customs Commissioner and see what we can do to be helpful to
our Nation, to the new department, and to Customs, that I think
deserves this type of oversight.
Ms. KELLEY. I will pleased do whatever I could to help.
Mr. RANGEL. Thank you, Mr. Chairman.
Chairman THOMAS. I thank the gentleman. Does the
gentlewoman wish to inquire?
Ms. DUNN. Thank you very much, Mr. Chairman.
I wanted to ask Mr. Farrell to clear up a couple of things
that have concerned me. In your testimony, Mr. Farrell, you
refer to concerns being raised by your customers, the folks
that you do business with at the Port of Tacoma, about the lack
of uniformity in the process of physically inspecting container
cargo, and I am assuming that is among the ports in the United
States. I am wondering if you could give us your thoughts on
this.
The concerns that I have heard have to do with the fact
that there are added costs and there are time delays that are
being experienced by shippers in dealing with ports where there
is, for example, 100-percent inspection of containers selected
out of the numbers that are shipped into the port. I am
wondering if you can just give us your thoughts on what is
happening.
Mr. FARRELL. I can indeed. In the various ports, Customs'
inspections take place at different levels and different
volumes. In other words, percentage of the cargo that comes
through the port and then percentage of the cargo in an
individual container that actually is inspected. I am given to
understand, from my conversations with Customs, that these
numbers are based on their own rules and determinations about
which cargoes to inspect and to what extent.
However, what we haven't been able to communicate is the
basis on which those decisions were made and gather actual data
from what those impacts are. What I can tell you is that we
have anecdotal evidence from our customers that there is a
difference in the intensity of enforcement of regulations
across the entire West Coast port range, and that when a
container is detained for an inspection, that container comes
offline, it may be delayed anywhere from a half day to 3 days,
and they carry additional costs for the actual physical
unloading and inspection of the cargo.
It is as if while getting on an airplane, or attempting to
get on an airplane, your bag is taken aside for inspection; you
miss your flight; and for the privilege, you are sent a bill at
the end.
The concern that we have, again, I mentioned diversion.
Tacoma and Seattle, as well as New York-New Jersey, Boston, and
others, are close enough to international borders to be
effected by this type of activity. And it is important that we
be able to communicate with Customs clearly and definitively
about what actually is happening, what is the data, and how are
these decisions being made.
We are the port are in close communication with our local
Customs' people, and I also have spent time with people here in
Washington at Customs, and have spent some time with Members of
our delegation to try to gather that data and try to improve
those communications in such a way that our anecdotal evidence
can either be shown to be correct or shown through the data to
be incorrect and why.
Ms. DUNN. Well, we are going to have to watch over that. Do
you feel that you have had adequate opportunity to share that
with the Customs Commissioner?
Mr. FARRELL. I have had opportunity to share it with the
higher levels of Customs, and I am optimistic that we may have
some results that come from that.
Ms. DUNN. Wonderful. Let me ask you a last question here,
and it has to do with your testimony that alluded the
competitive disadvantage that certain ports have with other
Nations. Of course, our being close to Canada means that the
ports in Washington State, but also those on the East Coast,
and actually along our whole western coast, are disadvantaged
by a number of things, including the payment of the harbor
maintenance tax, which affects several of us on this Committee,
where we believe we get very little out of the payment of that
tax. It is a tax on a container that does not occur at the Port
of Vancouver in Canada, for example.
I am now concerned because I am hearing regularly about the
threat of cargo diversion to ports in Canada, and I know also
that they have made major gains over the last few years in
market share, taking directly away from the ports that we have
on the West Coast.
I am wondering if you could quantify for us your view of
this growth for the Port of Vancouver that detracts from our
ports on the West Coast and the East Coast, and tell me if
there is something that we need to be doing about this, and how
it is exacerbated by the problems we are running into now with
the time delays.
Mr. FARRELL. Thank you for your question. I can give you a
couple of ways of looking at this question. The first and
clearest is the Port of Vancouver. In 15 years, since the
institution of the harbor maintenance tax, container volume at
the Port of Vancouver has increased by 414 percent. Over the
same period of time, the container growth in the Port of Tacoma
has been 98 percent, and in Seattle, 55 percent. So it is clear
to us that as the trade volume grows, we are seeing a share of
that cargo shifted north across the border as a result of the
tilting of the playing field by institution of that tax.
You mentioned earlier that I spent some time at the
Massachusetts Port Authority. We have the same issue there with
the Port of Montreal.
Ms. DUNN. Excuse me, Mr. Chairman, I really would like to
have us be an audience. This is so important, and I would
really like to have other Members of the Committee hear it.
Chairman THOMAS. I'll tell the gentlewoman that there is a
record being made, and there is a discussion going on, which is
fundamental to it. I apologize, and I will turn my attention to
the statements that are being made.
Mr. FARRELL. The harbor maintenance tax is an issue that
the Massachusetts Port Authority addressed by asking and
receiving from the Massachusetts State Legislature a State
rebate for the harbor maintenance tax to companies based in
Massachusetts that used Massachusetts ports to ship goods, as a
way to blunt the impact that the Port of Montreal was having in
that area due to the harbor maintenance tax.
So those are the two examples. Now, how does the security
environment that we currently find ourselves in relate to that
will certainly, as we look at enhancing security in our ports
and at our border crossings, and we look to the Customs' CSI to
partner with foreign ports, the first of which are the Canadian
ports of Montreal, Halifax, and Vancouver, B.C., it is
critically important that whatever security procedures we put
in place at U.S. ports be balanced with ports across our
borders, so that we do not have again a further slanted field,
which affects both the commercial aspects of our business, in
terms of the jobs related to moving of cargo, but also a
security perspective.
Again, you are only as safe as your neighbor. You are only
as secure as your neighbor. And that is why we have worked
together with the ports of Seattle and Everett to make sure
that our security initiatives are carried out jointly.
Ms. DUNN. Thank you very much. Thank you, Mr. Chairman.
Chairman THOMAS. Does the gentleman from California, Mr.
Becerra, wish to inquire?
Mr. BECERRA. Thank you, Mr. Chairman.
First, thank you to all of you for your testimony. And I
will try to contain myself to just a couple of questions.
If I could start with Ms. Kelley, I would like to see if I
can get you to give me a little more information about section
730 of the proposal to create this new Homeland Security. I
know that you have expressed concern that section 730 would not
carry with it or would allow the department not take with it
the various civil service protections--whistleblower
protection, retirement, health benefit protections--that you
currently receive as employees within Treasury or any
department of the Federal Government.
Is there any circumstance in which you think Treasury
employees or Customs' employees would accept a provision
similar to section 730, which is the current proposal that
President Bush has sent over to us?
Ms. KELLEY. I don't see how, because what the language
says, as I read it, is that, on the day of the transfer that
every thing stays intact. But whether it is 1 day, 1 week, or 1
month thereafter, that authority would lie with the Secretary
of the department and the OPM Director.
And I guess at the bottom of all this for me is that
employees of Customs, the employees of these agencies have done
the work that they do on the front line for our country for
decades as union Members, with these rights, and it has never
ever been an issue of their ability to do their jobs. So why a
flexibility like this is needed is not understood by me.
We have asked a lot of questions, and it has never been
made clear what the intent is to do with this. So the intent is
unclear, and it is hard to address any specifics that they
might have in mind.
Mr. BECERRA. On that point of having asked the questions,
can you give me a better sense of what type of consultation you
were afforded or NTEU was afforded with respect to the develop
or formulation of the proposal that the Administration
submitted to Congress?
Ms. KELLEY. Into the formulation, I would say zero. The day
after the President's announcement, before the language was
actually shared with anyone, I did have the opportunity to meet
at the White House with Clay Johnson, Kay Coles James from OPM,
and Mark Everson from the Office of Management and Budget. And
they wanted to hear our concerns, and this was one of the
concerns I clearly articulated.
So I guess from that standpoint, you could say they at
least knew. And the response I got ranged from a stare to: ``We
understand the issue.''
When the language was then finally made available, it was
clear that any input we had or any opportunity we had to
provide information was not included in the language.
Mr. BECERRA. And when you say you shared your concerns, it
was beyond just the issue of section 730?
Ms. KELLEY. Yes. At the time section 730 did not exist, but
we had a fear that this was going to happen, just from things
that the President said in his address and from media reports
later, in the next 48 hours or so, talking about flexibility.
And so that kind of sent up the signals that we should be
concerned.
So I was trying to anticipate what might happen and have a
conversation that hopefully would stop it from happening. But
that did not occur.
Mr. BECERRA. Other than the day before the proposal was
presented publicly, did you have any other opportunities to
comment to the Administration?
Ms. KELLEY. Actually, the conversation I just described was
the day after the President's announcement. And then the next
opportunity came the day before the language was made
available. And it was a meeting held at OPM for a large number;
employee organizations were invited.
I described that as a ``Q'' session, because they wanted to
hear our questions, but there were no answers that were
provided. But it was clear the next day, when it was published,
that the language had already been written, and it really
didn't matter.
I did reiterate that day everything I had said at the White
House, but to no avail.
Mr. BECERRA. Thank you.
A question about the ACE system, the new automated system
that hopefully we will have in place, anyone wish to comment
about how we integrate that new system into this broader or
larger agency, having to fulfill functions that go beyond what
we thought it would be used for, and whether or not you think
that we can accelerate it quickly enough?
So, can we use it still? Is there something we have to do
now to retool to make sure that we can use it for more than
just Customs, since it is going to be under this new Homeland
Security? And do you believe that we can try to accelerate its
implementation sufficiently to have a good system that will be
capable of meeting the needs that we have under this new
department?
Mr. CLAWSON. Yes, in answer to your question. I think that
it is currently structured in such a way with what is called
the International Trade Data System, ITDS, which is made up of
12 departments on a board, and that that is intended to provide
this service across the government as one point, so it is more
than just Customs. So that type of integration is already
anticipated and has already somewhat been underway. It will
have to be tweaked, obviously, in a new department, but I think
it can be done.
I think the bigger concern that we have, those of us who
worked on the coalition for automation funding and whatever
else, is that it is just taking too long. And I don't know what
that means, in the sense that I am not a programmer, I don't do
these kinds of things, but I know that enormous things happen
in this country, we have great people who are doing wonderful
things. It seems somehow that the team that is building this
with Customs, and I do not know all the ins and outs, because
they do not really tell you that, the behind-the-scenes stuff,
but I know that they have been at this for an awful long time,
in terms of concepts and whatever else.
And I think they are getting, finally, underway a bit. But
they have to figure out a way to accelerate it. I agree with
you.
Mr. BECERRA. But, Mr. Clawson, your sense is that the
infrastructure, the hardware, software, everything that makes
up ACE, is still applicable, given its heightened demand?
Mr. CLAWSON. Yes. The architecture was done initially in
such a way that it was modular and could be added on to,
because they did not want to go through what we have done, that
in 5 years or 10 years, it can be obsolete. So this was a
growing, viable kind of system, the way it is designed. And
maybe that is what is taking it so long to get off the ground.
But I have a comfort level with the architecture; I have a
discomfort level, very much, with the speed which it is being
built.
Mr. BECERRA. Thank you.
Mr. COOK. Congressman, a couple of comments on that. One, I
think the ACE design and the platform and the team that is
doing it is a very capable team. And I think where they are,
they have rightfully spent a lot of time to step back and
``let's not automate the paper process; let's really dig in and
now that we have a great tool that we are designing, let's
change that.'' I think to your point, it is probably more
important now to accelerate the development and implementation
of ACE, because in the absence, we are liable to build a
parallel system to fill some other need that may be coming up
because of security, and then we really will have a problem of
a bifurcated system.
The second one is that we in the trade community, to the
government, really need to mandate that the other government
agencies rely on ACE, because one of the problems we are facing
is that it is voluntary that other governmental agencies use it
as their data interface with trade. If it is not mandatory,
then you stand a great chance of building very redundant
systems that are very expensive and always trying to
synchronize those, which does complicate the development and
implementation of ACE.
And the third part is that we today in the trade arena
require an enormous amount of data that really serves very
little long-term use. A lot of it is for rounding up for
census, but doesn't really provide the core mission of ``what
do I need to collect revenue, what do I need for enforcement
and risk assessment?'' And I think, if we go back and spend
some more time to ferret out that, we can probably see ACE
become a much more dynamic--I see ACE as really being the
underlying system for all of homeland security, because it is
advanced data, it is arriving data, it is post-data, it is
identifying who shipped it, who is bringing it, and who is
receiving it, and what commodities are coming. And that gives
you the tool to do risk assessment and commercial clearance.
Mr. BECERRA. Thank you.
Mr. FARRELL. And I would second what both of these
gentlemen have to say, and say that regardless of the ultimate
disposition of Customs, the sooner we get this system in place,
the better.
Mr. BECERRA. And it can be done quicker, do you think?
Mr. FARRELL. I would think so, yes.
Mr. BECERRA. Thank you.
Chairman THOMAS. I would tell the gentleman from California
that it is probably misnamed if we call it ``ACE.'' It is
probably about a three of clubs.
[Laughter.]
Chairman THOMAS. And the problem is, it is well-financed;
therefore, given the changing technology in the area, as you
putter along, you are overtaken by new technology. If they
could simply pick up the SKU system at Home Depot, they would
really be on the cutting edge.
It has been underfinanced, and there is no integration in
the approaches you heard. And I think we have going to have
simply impose some requirements here to get it done. We have
this problem with Social Security interfacing with IRS and
everyone else. Now, that is a trillion dollar problem in other
parts of the government. This is a distinct area in which, if
we put mandatory requirements, minimum information, maximum
flexibility, and speed at getting it done, because a border
that is clogged up and is not moving is more insecure than a
border that moves smoothly and you know who is where doing
what.
This is a contribution that will come out of these hearings
as we go forward, because if we have billions of dollars for
homeland security, we ought to have a little bit for doing this
particular function, because they raise enough revenue to pay
for themselves, and that is not always the case in the other
areas where enormous amounts of money are being spent. Security
is security, and when you can get a return on your investment,
you ought to work on this area.
Mr. BECERRA. I agree, Mr. Chairman.
Ms. THURMAN. I want to thank all of you. I know some folks
are a little more frustrated, but I honestly believe that this
Committee has the ability to tell the executive branch, if we
are good enough, what the Customs' structure ought to look like
under the new Homeland Security arrangement. And that is what
we will attempt to do.
I look forward to getting the materials back from you. I
know that we probably raised more questions. That may have been
the intent of the Chair. Thank you very much.
[Whereupon, at 7:37 p.m., the hearing was adjourned.]
[Questions submitted from Chairman Thomas to Secretary
O'Neill, and his responses follow:]
QUESTIONS SUBMITTED BY CHAIRMAN THOMAS TO SECRETARY O'NEILL
Question:
Can Customs perform its functions well if Congress mandates that
Customs' revenue functions must remain intact and could not be
reorganized internally or with other Homeland offices until such time
as the Administration identifies specifically what it proposes?
Answer:
The President's proposal would move Customs intact to Homeland
Security in order to minimize any disruptive effects. One of the main
reasons for creating the new department is to achieve synergies and
efficiencies among the now disparate agencies and the new Secretary
would be given broad authority to do so, but any changes would need to
be made only after further careful study. This is an issue on which the
Administration would work closely with the Committee to address its
concerns.
Question:
The fact that Customs collects revenue creates special
circumstances and needs for Customs that other Homeland component
offices will not experience. Do any other government offices or
agencies being transferred to Homeland Security collect revenue as
Customs does?
Answer:
Many agencies collect fees, fines, or penalties. Customs, however,
also collects tariffs, which total about $20 billion annually.
Question:
Are there specific parts of Customs whose exclusive or substantial
function is to collect revenue? Please identify for the Committee those
roles within Customs such as the Import Specialists and the Office of
Rulings and Regulations that have a primary role in the collection of
revenue. What percentage of Customs inspectors perform primarily
revenue collecting functions?
Answer:
Certainly, while there are some functions in Customs, such as those
of the import specialists and the Office of Regulations and Rulings,
that are more directly focused on tariff collection than others, these
same people also make decisions regarding the basic admissibility of
merchandising to the U.S. Inspectors on the border rely on expert
technical and legal advice to help identify trade fraud and the
regulation writers rely on their close contact with the field
inspectors to help them craft trade rules that will both keep trade
moving and permit effective, efficient enforcement. The regulatory
audit function is another activity that is focused on tariff revenue
collection, but the information that auditors develop about businesses
and trade patterns help to target anomalies and risky shipments for
enforcement actions. Inspectors are trained to perform trade
enforcement as well as contraband, drug and security enforcement. We
wart people examining shipments because of trade enforcement concerns
to be alert for security risks. It is difficult, if not impossible, to
separate the percentage of time individual inspectors devote to these
various functions because they are intertwined.
Question:
Customs does so many things other than just searching for narcotics
or preventing terrorists from entering the U.S. How will the
President's proposed changes in organizational structure change the
nature of what Customs does?
Answer:
The President's proposal would move Customs intact. Consequently,
nothing in the nature of what Customs does would change.
Question:
Customs collects over $1 billion in user fees from importers.
According to law, those fees must be used for commercial purposes only.
How can Congress keep track of how the commercial fees will be spent by
the Administration?
Answer:
Unless Congress changes that law, the same restrictions on user
fees that apply now would apply in the future. Under the President's
proposal, Customs would be moved intact, and the same process of
evaluating costs that Customs goes through now could be used in the
future.
Question:
If, Congress were to prohibit decreases in staffing and funding for
Customs trade offices, would this ensure that trade activities are not
inadvertently strangled?
Answer:
The President's proposal recognizes the importance of trade
activities. In addition, Governor Ridge and Customs Commissioner Bonier
have publicly committed to supporting the trade function as it moves to
the never Department. We would want to work with Congress to take
advantage of possible efficiencies that we may be able to realize, for
instance efficiency gains from further automation and completion of the
ACE system.
Question:
Has Customs done arty projections to determine if there will be a
significant cost to move to a new Department?
Answer:
There should not be any because Customs would retain its current
headquarters and other locations. In addition, the consolidation of the
different border entities under one agency has the potential to create
additional efficiencies in the future.
Question:
Have increased security measures affected imports in any way? Can
you give us specific cases?
Answer:
Certainly there were border delays in the week following September
11th. Customs responded quickly to reduce bottlenecks and minimize the
impact on the economy while maintaining a heightened level of alert.
Customs has since implemented innovative approaches to reduce the
impact of the security threat. The Container Security Initiative (CSI),
with cargo examination at the point of export rather than import, helps
prevent delays at the border as well as reducing the threat to the
homeland, The Customs-Trade Partnership Against Terrorism (C-TPAT)
enlists the private sector in the fight against terror. Both are
creative alternatives to the traditional border search.
Question:
What trade authority does Customs have granted directly from
statute, as opposed to delegated by the Treasury Department?
Answer:
Most Customs related authority is currently granted statutorily to
the Secretary and delegated to the Commissioner. We are reviewing the
trade statutes to identify those authorities granted to the
Commissioner, and will provide that information to the Committee as
soon as that effort is completed.
__________
[Questions submitted from Mr. Rangel to Secretary O'Neill,
and his responses follow:]
QUESTIONS SUBMITTED BY MR. RANGEL TO SECRETARY O'NEILL
Question:
Please advise me of any legislative provisions that you would like
addressed in the bill (1) to ensure proper transfer of Customs to the
new Department; (2) to preserve the effectiveness of Customs operations
in protecting our borders and facilitating the commercial flow of
trade; (3) to ensure retention of Customs employee job responsibilities
and the employment protections currently under Title V; and (4) to
maximize Customs' ability to fight our war on terrorism, and other
important responsibilities currently part of the Customs mission.
Answer:
The bill proposed by the President addresses these issues in the
following manner. The legislation includes specific provisions for the
orderly transition of Customs to the new Department. The bill would
provide for a 12-month transition period, during which time the
President would direct when individual components would be transferred.
The bill also provides other authorities for functions necessary for an
orderly transition, such as support services, details, interim
appointments, and the transfer of personnel, assets, and liabilities
related to the components being transferred.
The President's proposal seeks to create an efficient structure to
help ensure that our ports of entry and other critical assets are
protected, and his proposed combination of key components will help do
so. To recognize the importance of Customs' trade functions, section
401 of the proposed legislation includes within the jurisdiction of the
Under Secretary for Border and Transportation Security a number of
``primary responsibilities,'' including: ``(1) preventing the entry of
terrorists and the instruments of terrorism into the United States; (2)
securing the borders, territorial waters, ports, terminals, waterways,
and air, land, and sea transportation systems of the United States.--
(4) administering the customs laws of the United States; and (5) in
carrying out the foregoing responsibilities, ensuring the speedy,
orderly, and efficient flow of lawful traffic and commerce.''
Under the bill, Customs would continue to fulfill all of its
existing functions. The new Department would collect import duties and
remit these funds to the Department of the Treasury. There would be no
loss of revenue as a result of this reorganization.
Customs also strongly believes that any effort to improve our
border security must include the direct involvement and input of the
trade community. The success of programs like Customs Container
Security Initiative (CSI) and the Customs-Trade Partnership Against
Terrorism (C-TPAT) demonstrates how Customs effectively and efficiently
balances its dual missions of security enforcement and trade
facilitation. Under the President's plan, Customs will continue to
administer and enforce the Customs laws, protect our borders against
terrorists and terrorist weapons, and facilitate the flow of legitimate
commerce.
When an organization becomes a part of the new Department,
employees will transfer with existing pay and benefits intact. When the
Department is established, employees represented by unions will
continue to be represented because their bargaining units will move
with them to the Department. The proposed legislation does not impair
employees' collective bargaining rights in any way or change existing
authorities.
The President's legislative proposal would unify authority over
major Federal security operations related to our borders, territorial
waters, and transportation systems. The new Department of Homeland
Security would assume responsibility for operational assets of the U.S.
Customs Service, Coast Guard, Immigration and Naturalization Service
and Border Patrol, the USDA's Animal and Plant Health Inspection
Service and the Transportation Security Administration--allowing a
single government entity to manage the U.S. borders. This is intended
to improve coordination and communication among border agencies,
enhance intelligence sharing, and increase operational efficiencies.
Question:
What is your understanding of why the responsibilities of the
Bureau of Alcohol, Tobacco and Firearms relating to firearms and
explosives are not part of the President's plan for transfer to the new
Department?
Answer:
As you indicated, the President's proposal does not include moving
the Bureau of Alcohol, Tobacco and Firearms (ATF) to the new Department
of Homeland Security. While a number of options were considered, this
was the final decision based on what needed to be done immediately to
secure the homeland.
Under the President's proposal, the new Department would have law
enforcement responsibilities as they pertain to securing and policing
our borders, ports, airports, and territorial waters. The U.S. Secret
Service, also proposed for transfer, would maintain its law enforcement
functions, as well.
We recognize that other proposals have been made regarding ATF and
the reorganization of Federal law enforcement (e.g., Webster
Commission). The President's proposal is designed to cover the changes
that need to be made immediately to accomplish the priority goal of
securing the homeland as quickly as possible. The Treasury Department
will be pleased to continue to work with the Committee on areas of
concern as the legislation advances consistent with the President's
proposal.
__________
[Questions submitted from the Committee to Director Ridge,
and his responses follow:]
QUESTIONS SUBMITTED BY THE COMMITTEE TO DIRECTOR RIDGE
1. Will the Customs Service remain intact within the Department of
Homeland Security or will portions be merged with other agencies either
initially or at some time later?
ANSWER: The President proposes transferring the entire Customs
Service--its border security, trade/revenue, and investigative
missions--into the new Department of Homeland Security. Certainly, the
new Secretary will likely consider how to best organize the new
Department in order to maximize efficiencies and synergies and minimize
redundancies and overlapping missions. The Administration also expects
the new Department to study the different agencies' management systems
with a view to attaining efficiencies in personnel management, fiscal
oversight, procurement, contracting, and other administrative areas.
2. Under the President's proposal, a number of agencies are keeping
their identity within the new Homeland Department, such as the Coast
Guard and the Secret Service. Why is the Customs Service not being
maintained as a discrete entity?
ANSWER: The Administration believes that the new Secretary of
Homeland Security should have the management flexibility to minimize
operational redundancies and overlapping missions. The Administration
is also interested in achieving overhead efficiencies within the new
Department. This may mean that some overlapping functions presently
performed by some agencies might be consolidated.
3. The Administration's bill at Sec. 402 identifies the Coast
Guard, the Transportation Security Administration, the Immigration and
Naturalization Service, and the Animal and Plant Health Inspection
Service as being in the new Border Security Office. Who would be in
charge, and what will these offices do differently once under the
Homeland Security Department?
ANSWER: Section 402 of the draft bill prepared by the
Administration proposes that an Under Secretary for Border and
Transportation Security be in charge of these agencies. The Under
Secretary's responsibilities would include: (1) preventing the entry of
terrorists and the instruments of terrorism into the United States, (2)
securing the borders, territorial waters, ports, terminals, waterways,
and air, land, and sea transportation systems of the United States, (3)
administering the immigration and naturalization laws of the United
States, including the establishment of rules governing the granting of
visas and other forms of permission to enter the United States to
individuals who are not citizens or lawful permanent residents, (4)
administering the customs laws of the United States, and (5) ensuring
the speedy, orderly, and efficient flow of lawful traffic and commerce
in carrying out these responsibilities.
The agencies being transferred to the new Department--The Coast
Guard, the Customs Service, the Immigration and Naturalization Service,
the Animal and Plant Health Inspection Service, and the Transportation
Security Administration will retain their statutory missions within the
Department of Homeland Security. The principal advantage of
transferring these agencies to the new Department is to consolidate
responsibility for the inter-related tasks of border and transportation
security within a single department whose primary mission is homeland
security. The Under Secretary for Border and Transportation Security
will be able to address problems that have plagued federal border-
control efforts to date--lack of coordination and cooperation among the
numerous agencies involved in border management; overlap and
duplication of efforts; fragmented authority and responsibility; and
interagency rivalry.
4. The fact that Customs collects revenue creates special
circumstances and needs for Customs that other Homeland component
offices will not experience. Do any other offices or agencies being
transferred to Homeland Security also collect revenue as Customs does?
ANSWER: Transferring Customs' trade and revenue collection function
into the Department of Homeland Security will achieve the larger
objectives of the President's proposal by (1) ensuring the proper
balance between security and trade facilitation, (2) limiting the size
of the Federal Government, (3) ensuring accountability and coordinated
policymaking, and (4) promoting the collection and analysis of all
information related to homeland security.
While Customs' trade / revenue function is extremely important--the
Service provides the nation with its second largest source of revenue,
returning $22.1 billion to the Treasury in 2001--all of the border-
management agencies the Administration proposes be transferred to the
new Department collect fees, fines or penalties.
5. How can the Committee be sure that the trade mission of Customs
will continue to be funded in the budget of the new Department?
ANSWER: Should the Customs Service be transferred to the new
Department of Homeland Security, The Administration will continue to
develop a proposed budget for all of Customs' statutory functions, and
will continue to transmit the budget to Congress within the
Administration's fiscal year budget proposals. The Congress will be
able to verify the Administration's commitment to Customs' trade
mission and, should it conclude that budget levels should be changed,
make adjustments to the proposal during the appropriations process.
6. Will Customs continue to be the lead office of the collection of
trade data or will another part of Homeland Security take over this
function?
ANSWER: Yes. Customs will retain the mission of collecting trade
data.
7. If Congress mandates that Customs' revenue functions will remain
intact, even within the new Department, and could not be reorganized or
with other Homeland offices until such time as the Administration
identifies specifically what it proposes, is there any reason to
believe that Customs could not perform its functions appropriately?
ANSWER: The President's proposal would move the Customs Service
intact to the Department of Homeland Security. He believes that because
of the interrelated tasks the Service currently performs, moving the
Service in whole is important. The Administration fully expects that
Customs will continue to discharge its revenue functions upon its
transfer to the new Department. Given the Committee's 200 years of
jurisdiction over the Custom Service, however, we would, of course,
welcome the Committee's input on this important function.
The Customs Service's trade and revenue collection mission is an
operational one that involves both enforcing trade laws (e.g.,
determining and verifying the classification, valuation, and country of
origin of goods brought into the U.S.) and collecting duties. As part
of this function, the Customs Service also determines the admissibility
of goods by enforcing quotas and other trade restrictions.
This mission involves far more than the mere collection and
remittance of funds to the Treasury. The process begins with inspectors
and other frontline personnel who examine goods and paperwork to verify
some of the critical components of admissibility and duty
determinations-- classification, valuation, country of origin, and
quantity, among other things. After a duty is paid, Customs regulatory
auditors may examine the records of an importer for compliance purposes
and, depending on the outcome of that audit, may refer the matter to
Customs Service special agents to open a criminal investigation. The
criminal investigation, in turn, may lead to recovery of lost duties
and substantial civil and/or criminal penalties.
Not only does the trade and revenue collection function cut across
the entire Customs Service, it is a key part of the Customs Service's
border security mission for several reasons:
First, the trade and revenue collection function is carried out by
the same Customs Service personnel that ensure border security. The
front line personnel that perform trade enforcement and compliance
activities at the border, such as physical inspections and paperwork
verifications, are the same personnel that perform inspections for
security and other enforcement purposes.
Second, the trade and revenue function provides the Customs Service
with the information that it needs to carry out its border security
mission. For example, a trade compliance examination (i.e., physical
inspection) of a shipment at the border, or an audit of an importer,
may reveal that the importer maintains poor controls over its inventory
and thus should be considered a security risk. As a result of that risk
determination, the importer would be subjected to more physical
inspections at the border to ensure that it does not intentionally or
inadvertently bring contraband into the U.S.
8. What will happen to the continuing development of the new
Customs computer system, the Automated Commercial Environment (ACE),
during the transition to the Department of Homeland Security? What
steps will be needed to join the Customs computer system with that of
the other agencies?
ANSWER: Systems plans for the components, which will enter the new
department, will be carefully but promptly assessed to make sure they
are consistent with both enterprise-wide requirements and specific
statutory functions. There will be consolidation of systems where
justified, with great care paid to make sure there is no interruption
of critical functions. It is likely that the rapid development of the
ACE system will continue as will the interagency community's
development of an International Trade Data System that creates a
harmonized system for import-related data. These systems will likely
become a cornerstone of the Department of Homeland Security's
enterprise architecture.
9. Customs collects over $1 billion in user fees from importers.
According to law, those fees must be used for commercial purposes only.
How can Congress keep track of how the commercial fees be will spent by
the Administration?
ANSWER: Unless Congress changes the laws governing user fees, the
present restrictions on user fees collected by Customs will apply if
the Service is transferred to the Department of Homeland Security. The
draft bill prepared by the Administration does not change Customs'
congressional reporting requirements. Accordingly, Congress' oversight
capabilities in regard to collection and expenditure of importers' user
fees are not reduced in any way by the President's proposal.
10. Has the Administration done any projections to determine if
there will be significant cost to move a new Department?
ANSWER: Earlier this year, the Office of Management and Budget
(OMB) examined the costs associated with and the efficiencies that
would result from the establishment of a single agency comprising the
Customs Service, the enforcement elements of INS, the Coast Guard, and
the border inspectors of the Department of Agriculture. OMB estimated
that combining these components into a single agency would have short-
term costs and the potential for long-term redeployed resources. Short
term costs associated with personnel buy-outs, relocation costs, and
facility costs (breaking and entering new leases) would be covered from
within the existing administrative budgets in these agencies.
[Letter submitted from Mr. Rangel to Ms. Kelley, and her
responses follow:]
June 27, 2002
Colleen M. Kelley
National President
National Treasury Employees Union
901 E Street, NW
Suite 600
Washington, DC 20004
Dear Ms. Kelley:
Thank you for your testimony at the Committee's hearing on June
26th about the President's plan to create a new Department of Homeland
Security. I, and the other Committee Democrats, support the President's
effort and will work, on a bipartisan basis, to ensure development of a
new federal Cabinet-level Department that effectively protects this
country from the global threat of terrorism. As you know, the Ways and
Means Committee is responsible for developing amendments to the
President's plan as relates to the U.S. Customs Service, and we hope to
make such recommendations by July 10, 2002.
In order to move quickly in evaluating the President's plan for
Customs under the House Leadership's schedule, I request that you
advise me of any legislative provisions that you would like addressed
in the bill (1) to ensure proper transfer of Customs to the new
Department; (2) to preserve the effectiveness of Customs operations in
protecting our borders and facilitating the commercial flow of trade;
(3) to ensure retention of Customs employee job responsibilities and
the employment protections currently under Title V; and (4) to maximize
Customs' ability to fight our war on terrorism, continue its drug
interdiction programs, and other important responsibilities currently
part of the Customs mission.
Also, as you agreed at the hearing, I ask that you meet with
Customs Commissioner Bonner to discuss the future of Customs in the new
Department. I am confident that meaningful dialog between the Customs
Commissioner and NTEU officials representing Customs will assist you in
answering the questions listed above and in providing this Committee
with valuable information and a clear direction on how we should
proceed.
Given the short timeframe under which the Committee is working, I
request a written response to these questions by Tuesday, July 2, 2002.
Please feel free to contact the Committee Democratic staff at 202-225-
4021. Also, please provide a copy of your response to 1106 Longworth
House Office Building.
Thank you for your assistance.
Sincerely,
Charles B. Rangel
Ranking Democrat
__________
National Treasury Employees Union
Washington, DC 20004-2037
July 2, 2002
Honorable Charles B. Rangel
Ranking Member
Committee on Ways and Means
1106 Longworth House Office Building
Washington, DC 20515
Dear Ranking Member Rangel:
I again want to thank you for the opportunity to testify before the
Committee on the President's proposal to create a Department of
Homeland Security and its effects on the Customs Service missions of
trade facilitation. I also appreciate the opportunity to offer possible
legislative provisions for inclusion in legislation creating a new
Department of Homeland Security.
I would like to address the issues you raised in the same order as
in your letter. First, to ensure proper transfer of Customs to a
Department of Homeland Security, it must be maintained as a distinct
entity. Congressman Mac Thornberry's Homeland Security legislation, HR
4660 contains a provision that would achieve this goal. The provision
is section 102 Part (2) which states,
TRANSFER OF AUTHORITIES, FUNCTIONS, PERSONNEL, AND ASSETS TO THE
DEPARTMENT.
The authorities, functions, personnel, and assets of the following
entities are transferred to the Department:
(1) The Federal Emergency Management Agency, the 10 regional
offices of which shall be maintained and strengthened by the
Department. (2) The United States Customs Service, which shall be
maintained as a distinct entity within the Department. (3) The portions
of the Immigration and Naturalization Service responsible for law
enforcement and border management, including the Border Patrol and
Divisions of Inspections, Investigations, and Detention and Removal.
(4) The United States Coast Guard, which shall be maintained as a
distinct entity within the Department. (5) The Critical Infrastructure
Assurance Office. (6) The National Infrastructure Protection Center and
the National Domestic Preparedness Office of the Federal Bureau of
Investigation. (7) The Animal Plant Health Inspection Service of the
Department of Agriculture.
Second, to preserve the effectiveness of Customs operations in
protecting our borders and facilitating the commercial flow of trade,
the government must show the public that it is serious about protecting
the borders and facilitating trade by full funding agencies such as the
Customs Service which is tasked with defending the borders and
enforcing the trade laws of the United States. The President's
proposal--HR 5005, currently calls for no additional funding for any
agencies that may be consolidated into a new Department of Homeland
Security. No organizational structure change will be successful, no
matter how good it may look on paper, if the government does not
provide proper funding for its border agencies.
Third, to ensure retention of Customs employees and to ensure that
employee protections currently provided under Title 5 are retained, it
is imperative that the merit system that has evolved for over 100 years
and has produced the most corruption free civil service in the world be
maintained.
To accomplish this goal, section 730 and 732 (bl of the President's
proposal--HR 5005, must be removed. Section 730 provides that every
section of Title 5 of them.?7o de, which-sets out 7a of the rules,
benefits and rights that currently apply to Federal employees, may not
apply to them once they are transferred to the new Department of
Homeland Security, unless two political appointees, the Secretary of
Homeland Security and the Director of OPM so choose.
A list of the main sections of Title 5 is listed below, but
included are whistleblower protection, pay and benefits, including
health care and retirement, antidiscrimination rules, the right to join
a union and the merit system rules that prohibit political patronage.
The legislation needs to ensure that employees of the new Department
will be able to have a union and collectively bargain the same way
employees who currently hold these jobs in their current agency do.
Under the President's proposal--HR 5005, the Secretary of Homeland
Security and the Director of OPM would be allowed to prevent each and
every one of these sections of law from applying to each and every
employee of the new Department of Homeland Security. New personnel
rules, created by these two political appointees, could be changed at
any time. Every new Homeland Security Secretary and OPM Director would
have the opportunity to rewrite them as they saw fit.
Section 732 (b) would allow the Secretary to hire any or all of the
employees of the new department at any pay level, for any length of
time. It is my understanding that the only agency that currently has an
exemption such as this is the CIA.
The General Accounting Office and others have repeatedly warned
Congress that the Federal Government faces a human capital crisis. The
ranks of employees at or near retirement age have swelled to roughly
half of the work force. How will the Department of Homeland Security be
able to retain its most experienced employees when they will be faced
with the possibility of losing the rights and benefits they have
enjoyed for their entire career? More importantly, how will the
Department of Homeland Security be able to attract the highly skilled
employees it needs when employee pay, benefits and rights will be open
to change at any time by political appointees that change every few
years?
The employees that will be moved into a new Department of Homeland
Security have been fighting the war against terrorism, before, during
and since September 11th. They have captured potential terrorists,
seized illegal contraband and prevented financial transactions that
would provide potential terrorists access to the money they need to
implement attacks. They have been fighting to protect our freedoms.
This proposal would take away theirs.
Here is a list of the important sections of Title 5:
Ch.23--merit system principles; Ch.43--performance standards;
Ch.53--pay, including FEPCA; Ch.63--leave; Ch.71--labor/management
relations, including the right to belong to a union; Ch.72--anti-
discrimination, including whistleblower protection; Ch.73--conduct
standards, including Hatch act; Ch.83--CSRS retirement; Ch.84--FERS
retirement; Ch.89--FEHBP.
Fourth, to maximize Customs' ability to fight our war on terrorism,
continue its drug interdiction programs and other important
responsibilities currently part of the Customs mission, the Customs
Service must be fully funded to provide the proper number of personnel
and resources to carry out their missions. In addition to full funding,
additional legislative provisions that would be extremely beneficial to
maximize Customs' employees ability to accomplish their missions
include:
Addition of Journeyman 11 status for Customs personnel:
Language should include the following to ensure that the recent
announcement to increase the Journeyman status of Customs employees by
the Commissioner of Customs is statutorily provided:
AUTHORIZATION OF APPROPRIATIONS FOR CUSTOMS STAFFING
(1) IN GENERAL--There are authorized to be appropriated for the
Department of Treasury such sums as may be necessary to provide an
increase in the annual rate of basic pay----
(A) for all journeyman Customs inspectors and Canine Enforcement
Officers who have completed at least 1 year's service and are receiving
an annual rate of basic pay for positions at GS-9 of the General
Schedule under section 5332 of title 5, United States Code, from the
annual rate of basic pay payable for positions at GS-9 of the General
Schedule under such section 5332, to an annual rate of basic pay
payable for positions at GS-11 of the General Schedule under such
section 5332;
(B) for the support staff associated with the personnel described
in subparagraphs (A), at the appropriate GS level of the General
Schedule under such section 5332.
Addition of Journeyman 12 status for Customs Import Specialists:
Language should include the following to increase the Journeyman status
of Customs Import Specialists to Journeyman 12:
AUTHORIZATION OF APPROPRIATIONS FOR CUSTOMS STAFFING----
(1) IN GENERAL--There are authorized to be appropriated for the
Department of Treasury such sums as may be necessary to provide an
increase in the annual rate, of basic pay----
(A) for all import specialists who have completed at least one
year's service and are receiving an annual rate of basic pay for
positions at GS-11 of the General Schedule under section 5332 of title
5, United States Code, from the annual rate of basic pay payable for
positions at GS-11 of the General Schedule under such section 5332, to
an annual rate of basic pay payable for positions at GS-12 of the
General Schedule under such section 5332;
(B) for the support staff associated with the personnel described
in subparagraphs (A), at the appropriate GS level of the General
Schedule under such section 5332.
Additional language for Law Enforcement Officer Status (6c) coverage
for Customs personnel:
Language should include the following to enable Customs inspectors and
canine enforcement officers to be recognized as law enforcement
officers:
To amend chapters 83 and 84 of title 5, United States Code, to
include inspectors and canine enforcement officers of the United States
Customs Service as law enforcement officers.
SEC. 1. CIVIL SERVICE RETIREMENT SYSTEM.
Section 8331 of title 5, United States Code, is amended--(1) in
paragraph (20) by inserting', customs inspector, customs canine
enforcement officer, after 'administrative position; (2) by striking
`and' at the end of paragraph (27); (3) by striking the period at the
end of paragraph (28) and inserting a semicolon; and (4) by adding at
the end the following: '(29) `customs inspector' means an employee of
the United States Customs Service, the duties of whose position are
primarily to--'(A) enforce laws and regulations governing the importing
and exporting of merchandise; '(B) process and control passengers and
baggage; '(C) interdict smuggled merchandise and contraband; and '(D)
apprehend (if warranted) persons involved in violations of customs
laws, including an employee engaged in this activity who is transferred
to a supervisory or administrative position; '(30) `customs canine
enforcement officer' means an employee of the United States Customs
Service, the duties of whose position are primarily to work directly
with a dog in an effort to--'(A) enforce laws and regulations governing
the importing and exporting of merchandise; '(B) process and control
passengers and baggage; '(C) interdict smuggled merchandise and
contraband; and ' (D) apprehend (if warranted) persons involved in
violations of customs laws, including an employee engaged in this
activity who is transferred to a supervisory or administrative
position.
SEC. 2. FEDERAL EMPLOYEES RETIREMENT SYSTEM.
Section 8401 of title 5, United States Code, is amended----
(1) in paragraph (17)----
(A) in subparagraph (C) by striking 'and' at the end;
(B) in subparagraph (D) by adding 'and' at the end; and
(C) by adding at the end the following:
(E) a customs inspector, and customs canine enforcement officer;
(2) by striking 'and' at the end of paragraph (33);
(3) by striking the period at the end of paragraph (34) and
inserting a semicolon; and (4) by adding at the end the following:
'(35) 'customs inspector' means an employee of the United States
Customs Service, the duties of whose position are primarily to-'(A)
enforce laws and regulations governing the importing and exporting of
merchandise; '(B) process and control passengers and baggage; '(C)
interdict smuggled merchandise and contraband; and '(D) apprehend (if
warranted) persons involved in violations of customs laws, including an
employee engaged in this activity who is transferred to a supervisory
or administrative position; '(36) 'customs canine enforcement officer'
means an employee of the United States Customs Service, the duties of
whose position are primarily to work directly with a dog in an effort
to-'(A) enforce laws and regulations governing the importing and
exporting of merchandise; '(B) process and control passengers and
baggage; '(C) interdict smuggled merchandise and contraband; and '(D)
apprehend (if warranted) persons involved in violations of customs
laws, including an employee engaged in this activity who is transferred
to a supervisory or administrative position; and
SEC. 3. ADMINISTRATIVE PROVISIONS.
(a) EMPLOYEE CONTRIBUTIONS--Any individual who has served as a
customs inspector, and customs canine enforcement officer, before the
effective date of this Act, shall have such service credited and
annuities determined in accordance with the amendments made by sections
2 and 3 of this Act, if such individual makes payment into the Civil
Service Retirement and Disability Fund of an amount, determined by the
Office of Personnel Management, which would have been deducted and
withheld from the basic pay of such individual (including interest
thereon) under chapters 83 and 84 of title 5, United States Code, as if
such amendments had been in effect during the periods of such service.
(b) AGENCY CONTRIBUTIONS--Not later than 90 days after a payment
made by an individual under subsection (a), the Department of the
Treasury shall make a payment into the Civil Service Retirement and
Disability Fund of an amount, determined by the Office of Personnel
Management, which would have been contributed as a government
contribution (including interest thereon) under chapters 83 and 84 of
title 5, United States Code, for the service credited and annuities
determined for such individual, as if the amendments made by sections 1
and 2 of the Act had been in effect during the applicable periods of
service.
(c) REGULATIONS--The Office of Personnel Management shall determine
the amount of interest to be paid under this section and may promulgate
regulations to carry out the provisions of this Act.
SEC. 4. EFFECTIVE DATE.
This Act and the amendments made by this Act shall take effect 90
days after the date of enactment of this Act.
Additional language for raising the overtime cap for Customs Personnel:
Language should include the following to enable Customs employees to
avoid being subject to arbitrary decisions by Customs management on
what overtime cap is established nationwide:
Corrections Relating to Fiscal Year Cap:
(1.) Amend 5(c)(1) of the Act of February 13, 1911 (19 U.S.C.
267(c)(1)) to read as follows: Notwithstanding any other provision of
law, the aggregate of overtime pay under subsection (a) of section 267
of U.S. Code Title 19 (including commuting compensation under
subsection (a)(2)(B) of this section and premium pay under subsection
(b) of this section that a customs officer may be paid in any fiscal
year may not exceed $35,000, except that the Commissioner of Customs or
his designee may waive this limitation in individual cases to prevent
excessive costs or to meet emergency requirements of the Customs
Service.
(2.) TREATMENT OF CERTAIN PAY FOR RETIREMENT PURPOSES? Section
8331(3)(G) of title 5, United States Code, is amended to read as
follows----
`with respect to a customs officer (referred to in subsection
(e)(1) of section 5 of the Act of February 13, 1911), compensation for
overtime inspectional services provided for under subsection (a) of
such section 5, but not to exceed 50 percent of any statutory or
administrative maximum in overtime pay for customs officers which is in
effect for the year involved;'
In closing, we believe that retaining all current Title 5
protections is critical to ensuring that Customs Service employees are
able to continue to provide world class service and fight the war on
terrorism. In addition, the proper funding, maintenance of employee
rights, and legislative changes outlined here will ensure that Customs
successfully continues its missions of trade facilitation and drug
interdiction in the new Department of Homeland Security. Should you
have any additional questions, please do not hesitate to contact me or
Paul Giuliano or Maureen Gilman in NTEU's Legislative Department at
(202) 783-4444.
Sincerely,
Colleen M. Kelley
National President
[Submissions for the record follows:]
American Apparel & Footwear Association
Arlington, Virginia 22209
8 July 2002
The Hon. Bill Thomas
Chairman
House Ways and Means Committee
Washington, DC 20515
Dear Mr. Chairman:
On behalf of the American Apparel & Footwear Association, I am
pleased to provide comments in connection with your review of the
creation of the Homeland Security Department.
The American Apparel & Footwear Association (AAFA) is the national
trade association representing apparel, footwear and other sewn
products companies and their suppliers, which compete in the global
market. AAFA Members make and market their products in the United
States and throughout the world. AAFA's mission is to promote and
enhance its Members' competitiveness, productivity and profitability in
the global market by minimizing regulatory, commercial, political, and
trade restraints.
At the outset, we would like to affiliate ourselves with the
comments and testimony of Jerry Cook from Sara Lee Branded Apparel, one
of our member companies.
In particular, we strongly endorse the concept that the enforcement
and trade facilitation elements of the current mandate of the U.S.
Customs Service must remain together and must work together. Any
proposal that separates these two functions would create uncertainty
and confusion in the operation of the trade.
Our association recently endorsed a new trade policy that promotes,
among other things, commonsense Customs practices to facilitate legal
trade, responsible sourcing from countries that do not support
terrorism, and continued funding for the ACE program.
Accordingly, we encourage you to build into this new Department a
continued and healthy appreciation for the principles that Congress
endorsed when it passed the Mod Act nearly ten years ago. The concepts
of shared responsibility that have worked since then can and must
continue to work, especially as we undertake new responsibilities in
this new environment. On that point, I would note that the AAFA has for
several years now heavily promoted customs compliance programs among
its Members, including the Worldwide Responsible Apparel Production
(WRAP) program, which provides for factory certification and
independent monitoring on such issues as labor, customs compliance,
anti-transshipment, and anti-narcotics.
Finally, it is absolutely essentially that Customs be mandated to
complete its work in creating and implementing the ACE computer
modernization project. We have been pleased that funding for this
program is moving forward and would encourage you to use your
leadership to ensure continued funding for this multi-year project.
If done carefully, a new Departmental entity can smoothly carry out
the twin mandates to secure our homeland against terrorist attacks
while promoting and facilitating legal trade. Most of our Members make
and manufacture products throughout the world and depend upon
sophisticated supply chains that extend through ports and across
borders in order to get the right product to the right market at the
right price and at the right time. We stand behind nobody in our
commitment to ensure secure supply chains to prevent terrorist attacks
on either those supply chains or on our homeland itself. At the same
time, we stress that a Customs operation mired in overly restrictive
procedures that do not recognize commercial practices can obstruct the
trade dramatically. It is for this reason that we were pleased to hear
Commissioner Bonner and Homeland Security Director Ridge recently
assure the trade that the new Department of Homeland Security will keep
trade facilitation among one of its top goals.
Please accept my best regards,
Stephen Lamar
Sr. Vice President
Statement of Timothy H. Edgar, Legislative Counsel, American Civil
Liberties Union
On behalf of the American Civil Liberties Union (ACLU) and its
approximately 300,000 Members, we welcome this opportunity to provide
this testimony for the record on the President's proposed legislation
to create a Department of Homeland Security, the Homeland Security Act
of 2002 (``HSA''). We commend you for examining these issues in today's
hearing.
The ACLU is a non-partisan, non-profit organization dedicated to
preserving civil liberties and the principles of our constitutional
democracy, including open and accountable government.
The proposed Department of Homeland Security will be a massive
Cabinet-level department, containing over 170,000 employees and twenty-
two federal agencies.\1\ It will have substantial powers, and will
include more armed federal agents with arrest power than any other
agency. In considering the proposed Department, Congress should ask
itself not only whether the proposal represents sound public
management, but also whether the Department will have structural and
legal safeguards in place that are sufficient to keep the agency open
and accountable to the public.
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\1\ See Bob Williams & David Nather, Homeland Security Debate:
Balancing Swift and Sure, CQ Weekly, June 22, 2002 at 1642.
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Unfortunately, the draft legislation not only fails to provide such
safeguards, it eviscerates many of the safeguards that are available
throughout the government and have worked well to safeguard the public
interest. As proposed, the plan:
Hobbles FOIA--Any information voluntarily submitted
to the department about terrorist threats to the nation's
infrastructure are exempt from Freedom of Information Act
disclosure, drastically limiting the agency's responsibility to
answer public questions about how well it is addressing these
threats. (HSA Sec. 204).
Limits citizen input--Advisory committees to the
department, which normally include citizen input, hold open
meetings and must be balanced in viewpoint would be immune from
these safeguards of the Federal Advisory Committee Act, further
undercutting the agency's accountability to the public. (HSA
Sec. 731).
Muzzles whistleblowers--Employees of the new agency
could be stripped of the protections contained in the federal
Whistleblower Protection Act. This would eliminate guarantees
that--were the agency to overreach its mandate or engage in
questionable activities--such abuse would be disclosed and the
agency held accountable to Congress and the American public.
Protection for the bravery like that displayed by FBI Agent
Coleen Rowley would not exist in the new agency. (HSA
Sec. 731).
Lacks strong oversight--Given the enormous potential
power of the proposed agency, its Inspector General must not be
hampered like those in other federal law enforcement agencies.
Currently, the cabinet secretary in charge would have veto
power over the IG's audits and investigations. (HSA Sec. 710).
Threatens personal privacy and constitutional
freedoms--Many of the information sharing provisions in the HSA
are vague and do not provide sufficient guarantees to protect
privacy or constitutional freedoms.
Finally, we firmly reject proposals to include in the Department of
Homeland Security the intelligence gathering functions of the Central
Intelligence Agency (CIA), other foreign intelligence agencies, or the
Federal Bureau of Investigation (FBI). Intelligence gathering
operations abroad are, as a practical matter, largely immune from
constitutional constraints. The CIA and other agencies that gather
foreign intelligence abroad operate in a largely lawless environment.
To bring these agencies into the same organization as the FBI risks
further damage to Americans' civil liberties. As a result, Congress
should resist any attempt to endow the Department of Homeland Security
with new intelligence gathering powers or to fold the FBI and CIA into
the new agency. Instead, Congress should put in place clear limits to
prevent the Department from permanently retaining files on Americans
that relate to First Amendment activities and have no connection to any
criminal activity.
I. The Homeland Security Department Must Be Open and Accountable
The President's plan does not contain sufficient structural
guarantees to ensure that this vast new Department will be accountable
to the public, both to ensure it is doing its job and to ensure against
abuse. Instead, the plan eviscerates many of the existing safeguards
for government agencies. These provisions should be eliminated, and a
strong mechanism should be put in place to ensure against abuse.
Freedom of Information Act (FOIA) Exemption
The ACLU strongly opposes section 204 of the proposed legislation,
which creates a broad new exemption to the Freedom of Information Act
(FOIA), 5 U.S.C. Sec. 552. Section 204 provides that information that
companies or others voluntarily provide to the Department about
``infrastructure vulnerabilities'' and other information said to be
relevant to terrorism will be exempt from FOIA. These terms are not
defined by the proposed legislation and could potentially cover a host
of information. This is a deeply misguided proposal, and it should be
rejected.
The FOIA is the bedrock statute designed to preserve openness and
accountability in government and new exemptions to its provisions
should not be created lightly. As the Supreme Court has made clear,
``Disclosure, not secrecy, is the dominant objective of the Act.'' \2\
Open government is a core American value. It should not be set aside
for reasons other than genuine necessity.
---------------------------------------------------------------------------
\2\ Department of the Air Force v. Rose, 425 U.S. 352 (1976).
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The FOIA already contains a number of common sense exemptions that
would cover critical infrastructure information the disclosure of which
could result in harm. The FOIA does not require the disclosure of
national security information (exemption 1), sensitive law enforcement
information (exemption 7), or confidential business information
(exemption 4).
Courts have carefully weighed the public's need for disclosure
against the possible harms of disclosure under FOIA's traditional
exemptions. In deciding whether to disclose technical information
voluntarily submitted by private industry, courts have given
substantial--many in the public interest and FOIA requester community
would say excessive--deference to industry demands for confidentiality
of business information under exemption 4.
Generally, information that a business voluntarily submits to the
government on the basis that it be kept confidential is already exempt
from disclosure if the company does not customarily release such
information to the public and preserving confidentiality is necessary
to ensure that the government will continue to receive industry's
cooperation. See, e.g., Critical Mass Energy Project v. Nuclear
Regulatory Commission, 975 F.2d 871 (D.C. Cir. 1992). It is difficult
to see how any truly sensitive business information that was
voluntarily submitted by a company concerning the vulnerabilities of
its critical infrastructure could be released under this standard.
Indeed, supporters of a new FOIA exemption for critical
infrastructure information have, when pressed, been forthright in
admitting that such legislation simply is not needed to protect
sensitive information from disclosure. For example,
Senator Bennett, chief sponsor of legislation
creating a new critical infrastructure exemption, has admitted
that ``[t]he Freedom of Information Act itself'' currently
allows sensitive information to be protected. ``That is, there
are provisions in the Act that say information need not be
shared'' with the public.\3\
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\3\ Senate Governmental Affairs Committee Holds Hearing on Private
and Public Information Sharing and Infrastructure Security (FDCH
Transcripts), May 8, 2002.
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John S. Tritak, Director of the Critical
Infrastructure Assurance Office of the U.S. Chamber of
Commerce, says ``You could say that [in the] current
environment, if you're very careful and you watch out, the old
existing exemptions will cover any concerns that may arise
under FOIA, not to worry.'' \4\
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\4\ Id.
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Ronald L. Dick, Director of the National
Infrastructure Protection Center of the Federal Bureau of
Investigation (FBI), has said ``[M]any legal authorities have
agreed that the Federal Government has the ability to protect
information from mandatory disclosure under the current
statutory framework.'' \5\
---------------------------------------------------------------------------
\5\ Id.
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VeriSign public policy director Michael Aisenberg has
said worries about disclosure were overblown because FOIA
already protects sensitive information, and new legislation is
simply not needed ``substantively.'' \6\
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\6\ Washington Internet Daily, April 18, 2002.
Rather than put forward evidence that some information about
critical infrastructure exists that is not adequately protected,
supporters of a new exemption have said ``it doesn't matter'' whether
current law provides adequate protection. Rather, it is said, a new
exemption is needed because of a ``perception'' in private industry
that there is some risk, however remote, that information that is
voluntarily submitted to the government might be at risk of disclosure
under FOIA.
If industry is unwilling to provide information to the government,
despite adequate legal protection, the solution is not to change the
law but to change the misperception by issuing legal guidance making
clear the parameters of the FOIA as it currently exists. If a
misperception exists that truly sensitive information that is given to
the government cannot be protected from disclosure, it is hard to see
how that will change if another exemption is enacted.
Perhaps most importantly, creating an overbroad exemption for
``critical infrastructure information'' would undermine, rather than
enhance, security. Such an exemption would permit private industry and
the government to shield from the public the actions they are taking--
and, more importantly, the actions they are not taking--to protect the
public from attacks on critical infrastructures.
Secrecy can hinder anti-terrorism efforts. Earlier this year in
Israel, the media obtained a government report that discussed the
potential vulnerability of a fuel depot to terrorists--exactly the sort
of information about ``infrastructure vulnerabilities'' that might be
exempt from FOIA under the proposed legislation. Military censors
blocked publication of the report, and persuaded the mayor of Tel Aviv
not to go public with a campaign to fix the problem. Nothing was done.
Terrorists then attacked the fuel depot. In that case, public debate
might well have forced action to address the problem.\7\ The United
States should not make the same mistake.
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\7\ See Aviv Lavie, Media: Sensing the Censor, Ha'aretz (Tel Aviv,
Israel), May 29, 2002.
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For the all of the above reasons, ACLU opposes the enactment of a
new FOIA exemption for critical infrastructure information. At the very
least, however, any new exemption that Congress enacts should be
subject to the following responsible limits:
First, any new exemption must be limited to clearly marked cyber-
security documents, i.e., reports that describe cyber-attacks on a
company's computer systems that have resulted or could result in some
harm to its critical infrastructure. It should not apply to information
about all vulnerabilities in critical infrastructure. Proposals to
exempt information that is voluntarily shared with the government were
developed to deal with the discrete and relatively new problem of
cyber-attacks. To expand the scope of information that is exempted to
include information about vulnerabilities to traditional physical
attacks would interfere with a host of environmental and public safety
regulatory regimes that have been developed over decades.
Second, any new exemption must be for written documents only, not
``information'' of all sorts. It would be virtually impossible to
determine if information possessed by the government was the result of
some oral conversation with a private sector company, making a FOIA
exemption that covered such information unworkable and potentially
devastating to the public's right to know.
Third, any new exemption must be limited in time, and should last
for months, not years. A company which controls infrastructure that is
vital to the public must have an incentive not only to share
information, but also to do something to make itself less vulnerable to
such attacks. A time limited exemption will give responsible companies
and government agencies an incentive to fix their problem with due
speed. Without a time limit, companies and the government can simply
sit on the problem without any pressure to act.
Fourth, a new exemption should be an alternative to existing FOIA
protections, not a new club to wield against FOIA requesters. Companies
that wish to take advantage of the new exemption should clearly state
on the relevant document they are requesting confidentiality under that
exemption. Companies that fail to fix their vulnerabilities within a
reasonable time limit, even with the protection of the new exemption,
should not be allowed to take advantage of FOIA's other potentially
applicable exemptions to cover up their failure to act after that time
limit has expired. If companies believe the information they desire to
share is protected under another FOIA exemption, they should be
required instead to rely on that other exemption at the time of
submission.
Finally, strict reporting requirements and a sunset clause should
be included in the legislation to determine whether the new regime is
working.
Federal Advisory Committee Act (FACA) Exemption
Section 731 of the HSA provides that advisory committees
established by the Secretary of the Department of Homeland Security are
exempt from the Federal Advisory Committee Act (FACA), and that Members
of such advisory committees are not subject to certain restrictions on
federal employees' conduct.
The FACA was passed in 1972 to promote the values of openness,
accountability, and balance of viewpoints, and to ensure administrative
efficiency and cost reduction. FACA imposes requirements on agencies
\8\ when they establish or utilize any advisory committee, which is
defined as a group of individuals, including at least one non-federal
employee, which provides collective advice or recommendations to the
agency. 5 U.S.C. App. II, Sec. 3(2). When an agency seeks to obtain
such advice or recommendations, it must ensure the advisory committee
is ``in the public interest,'' id. at Sec. 9(2), is ``fairly balanced
in terms of points of view represented and the function to be
performed,'' id. at Sec. 5(b)(2), and does not contain Members with
inappropriate special interests. Id. at Sec. 5(b)(3). If these criteria
are satisfied, the agency must file a charter for the committee. Id. at
Sec. 9(c).
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\8\ The FACA does not apply to the CIA or the Federal Reserve
System. 5 U.S.C. App. II Sec. 4(b).
---------------------------------------------------------------------------
Once an advisory committee is operating, the agency also must
comply with requirements designed to ensure public access and
participation. FACA requires an agency to provide adequate public
notice that it is establishing an advisory committee, id. at
Sec. 9(a)(2), conduct open meetings, id. at Sec. 10(a), keep minutes of
those meetings, id. at Sec. 10(c), make available for public inspection
and purchase all documents prepared for or by advisory committees, id.
at Sec. Sec. 10(b), 11(a), and permit all interested persons to attend,
appear before, or file statements with any advisory committee. Id. at
10(a)(3). These openness requirements ensure public monitoring of
advisory committees and reduce the likelihood that advisory committees
can serve as secretive channels for special-interest access to
government agencies. FACA's right of access to advisory committee
records is subject to the same nine exemptions that apply to access to
agency records under the FOIA, which we believe are sufficient to guard
against any disclosure of truly sensitive information.
By exempting from FACA requirements any advisory committees
established by the Secretary of the Department of Homeland Security,
the HSA severely undermines the openness and public-access goals of
FACA. Although the HSA provides that the Secretary shall publish notice
in the Federal Registrar announcing the establishment of an advisory
committee and identifying its purpose and Membership, the meetings will
not be open to the public, formal minutes of committee activity during
those meetings will not be kept, and the public will not have access to
view or purchase documents prepared for or by those advisory
committees. Public access to and participation in advisory committees
are essential to guarding against special-interest access to advisory
committees and influence upon government decision-making.
In addition, the HSA exempts Members of advisory committees
established under the Department of Homeland Security from federal laws
restricting federal employees and officers (including Members of
advisory committees) from participating in or advising the government
upon matters about which there exists a conflict of interest. See 18
U.S.C. Sec. Sec. 203, 205, 207. Combined with the lack of public access
to and participation in advisory committee proceedings, exemption from
these laws threatens to erode FACA's requirement that advisory
committees' Memberships reflect a balance of viewpoints, and undermines
the goal of accountability.
Waiver of Whistleblower Protection Act (WPA) and other Title 5
Protections
The federal Whistleblower Protection Act (WPA) was enacted to
ensure that federal employees \9\ who believe that a violation of law,
mismanagement or other abuse has occurred may come forward and disclose
that information without fear of summary dismissal or punitive action.
The WPA protects federal employees from adverse action on the basis of
a disclosure of information if the employee ``reasonably believes [the
information] evidences a violation of any law, rule, or regulation or
gross mismanagement, gross waste of funds, an abuse of authority or a
substantial and specific danger to public health and safety.'' 5 U.S.C.
Sec. 2302(b)(8). An employee is not protected if the disclosure
involves classified information or if the disclosure is specifically
prohibited by law. Id. The Act contains administrative remedies,
administered by the Merit System Protections Board, and an employee may
also seek judicial review in the United States Court of Appeals for the
Federal Circuit. 5 U.S.C. Sec. Sec. 1221, 7703(b). In this way, the WPA
guarantees that federal agencies are held accountable to the American
public if they overreach their mandate or engage in questionable
activities.
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\9\ The WPA does not apply to the CIA, FBI, Defense Intelligence
Agency (DIA), the National Imagery and Mapping Agency (NIMA), the
National Security Agency (NSA), and, ``as determined by the President,
any Executive agency or unit thereof the principal function of which is
the conduct of foreign intelligence or counterintelligence
activities.'' 5 U.S.C. 2302(a)(2)(C)(ii). However, employees of the FBI
are covered by similar whistleblower protections contained at 5 U.S.C.
Sec. 2303, but must make their disclosures to an official designated by
the Attorney General.
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The HSA permits the Secretary to sweep away the Whistleblower
Protection Act, and all other protections for federal employees under
Title 5, for the purpose of establishing a ``Human Resources Management
System'' (HSA Sec. 730) that is ``flexible, contemporary, and grounded
in the public employment principles of merit and fitness.'' By allowing
the Secretary to make these personnel rules ``[n]otwithstanding any
other provision of this title,'' i.e., Title 5, the HSA does not
guarantee employees of the Department of Homeland Security the
protections of the WPA. Without such protection, employees who are in
the best position to spot problems, violations of the law or dangers to
the public are effectively silenced.
The Homeland Security Department's Inspector General May Lack Authority
We are concerned that the Homeland Security Act does not adequately
provide for a fully functioning Inspector General (IG). Section 103(b)
provides for the creation of an Inspector General pursuant to the
Inspector General Act of 1978. However, section 710 of the HSA gives
the Secretary of Homeland Security authority to override Inspector
General Investigations in several areas including: (1) intelligence,
counterintelligence, or counter terrorism matters; (2) ongoing criminal
investigations or proceedings; (3) undercover operations; (4) the
identity of confidential sources, including protected witnesses; (5)
matters that constitute a threat to persons or property protected by
the United States Secret Service and (6) other matters that constitute
a serious threat to national security. Given the mission of the
Homeland Security Agency, it is conceivable that many of the functions
performed by this new agency could be said to fall under one of these
exempted categories.
Other agencies have similar provisions that require the inspector
general to be under the direct authority of the Department Secretary
(e.g. Treasury, Department of Justice, Postal Service) when the IG is
investigating areas of national security. We understand the need to
protect information that if released could pose a danger to national
security. However, many of the agencies that are going to become a part
of the new Homeland Security Act such as FEMA, the INS, the Animal and
Plant Health Inspection Service of the Department of Agriculture and
the Coast Guard have functions much broader than dealing with national
security. We are concerned that transferring these agencies into a
Department whose primary function is to protect the United States
against terrorism could erroneously be perceived as elevating their
regular duties to those of national security, thereby making such
currently non-exempt activities exempt from Inspector General
oversight.
We recommend further study of this issue before legislation is
approved, regular oversight by Congress and a requirement for the
Homeland Security Department to report to Congress concerning how often
the Inspector General is prevented from performing its duties due to
section 710 exemptions, and the standards by which the Secretary
exercises such authority.
II. The Homeland Security Department Should Not Invade the Privacy or
Constitutional Rights of Americans
Finally, the creation of a new Homeland Security Department
naturally leads to concerns that such a large government agency could
abuse its authority by invading the privacy or freedoms that Americans
hold dear. Common sense protections can ensure against such abuses.
Because a primary function of the new Department is to receive and
analyze information, Congress should insist on appropriate safeguards
to protect the privacy of the information and to make sure that it is
not used inappropriately. For example, there should be procedures to
limit the use and disclosure of the collected information; rules that
require the information to be secure and confidential; procedures to
remove and destroy old data and remedies for the violation of statutory
and constitutional rights and penalties for misuse of personal
information.
The Intelligence Gathering Functions of the CIA and FBI Should Remain
Separate and Outside the Homeland Security Department
We commend the Administration for leaving the intelligence
gathering function out of the new Department. The HSA leaves those
functions to the Central Intelligence Agency (CIA) and other
intelligence agencies and to the Federal Bureau of Investigation (FBI).
While the government must do a better job of analyzing the intelligence
information it already collects from both foreign and domestic sources,
the Congress should not approve new intelligence gathering powers, much
less a new intelligence gathering agency, without a showing that such
powers are truly needed and do not unnecessarily tread on Americans'
civil liberties.
Under our system of government, the CIA and other intelligence
agencies are tasked with collecting foreign intelligence abroad. As a
practical matter, these foreign activities have been largely immune
from constitutional limits and from oversight by the federal courts,
although they are and must remain subject to oversight by the Congress.
On the other hand, the FBI collects foreign intelligence in the United
States, and also investigates and prevents criminal activity. These
domestic activities are clearly constrained by statute and by the
Constitution. The FBI's intelligence gathering functions are also
subject to oversight by the Foreign Intelligence Surveillance Court.
Blurring of domestic and foreign intelligence gathering functions
could have a severe impact on civil liberties, potentially leading to
widespread spying on Americans constitutionally-protected political and
religious activity. This is already a danger under the relaxed FBI
guidelines for domestic investigations recently announced by Attorney
General Ashcroft.\10\ The Congress should resist any attempt to further
erode these protections by including substantial intelligence gathering
functions in the new Department of Homeland Security.
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\10\ For a memorandum explaining how these changes threaten
constitutional rights, see Interested Persons Memorandum of Marvin J.
Johnson, ACLU Legislative Counsel, June 6, 2002, available at .
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The Homeland Security Department Should be Barred from Political Spying
Instead of adding to the Homeland Security Department new
intelligence gathering powers that could tread on civil liberties,
Congress should consider adding provisions that would prevent the
Department from maintaining files on Americans that are not linked to
any criminal activity, but instead relate solely to political beliefs
and associations. Under the draft legislation, while the Department
will not gather intelligence information, it will receive such
information in the course of its efforts to prevent terrorism.
Without safeguards, these provisions could lead to abuse. No one
wants a repeat of the J. Edgar Hoover era, when the FBI was used to
collect information about and disrupt the activities of civil rights
leaders and others whose ideas Hoover distained.\11\ Moreover, during
the Clinton Administration, the ``Filegate'' matter involving the
improper transfer of sensitive information from FBI background checks
of prominent Republicans to the White House generated enormous public
concern that private security-related information was being used for
political purposes. Congress should not provide a future Administration
with the temptation to use information available in Homeland Security
Department files to the detriment of its political enemies.
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\11\ For a discussion of how the FBI engaged in illegal
surveillance and harassment of Dr. Martin Luther King, Jr., see Marvin
J. Johnson, ACLU Legislative Counsel, The Dangers of Domestic Spying by
Federal Law Enforcement: A Case Study on FBI Surveillance of Dr. Martin
Luther King (January 2002), available at .
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One model the Congress could consider is Oregon Revised Statutes
Sec. 181.575. It provides that no state law enforcement agency may
``collect or maintain information about the political, religious or
social views, associations or activities'' of a person or group unless
such information ``directly relates to an investigation of criminal
activities'' and there are ``reasonable grounds to suspect'' the
subject ``is or may be involved in criminal conduct.'' Such sensible
limits would ensure that the Department is focused on its mission of
preventing unlawful terrorist activity, not on keeping tabs on
unorthodox or unusual, but constitutionally protected, political or
religious activity.
III. Conclusion
The creation of a new Homeland Security Department is truly a
massive undertaking. It requires careful and thoughtful consideration.
While Congress understandably wants to respond to the Administration's
initiative without undue delay, caution is needed to ensure that the
basic principles of our government that ensure public accountability of
government activity remain intact.
Instead, the Administration's plan weakens many of the laws that
are vital to ensuring an open and accountable government, by creating
unnecessary blanket exemptions to the Freedom of Information Act, the
Federal Advisory Committees Act, and the Whistleblower Protection Act.
The plan also fails to provide for an effective review mechanism,
instead proposing an Inspector General that may lack sufficient power
to provide an effective check on the powerful new Secretary of Homeland
Security. Finally, while the plan should be commended for recognizing
the importance of the distinction between foreign and domestic
intelligence gathering for the protection of civil liberties,
safeguards against political spying must be added to avoid a repeat of
the abuses of the Hoover era.
American Petroleum Institute
Washington, DC 20005-4070
July 31, 2002
The Honorable Bill Thomas
Chairman, Committee on Ways and Means
U.S. House of Representatives
Washington, D.C. 20515
Dear Chairman Thomas:
The American Petroleum Institute (API) appreciates the opportunity
to provide the Committee with comments for the hearing on the proposed
Department of Homeland Security (DHS). The American Petroleum Institute
(API) represents over 400 companies involved in all aspects of the oil
and gas industry, including exploration, production, transportation,
refining, and marketing. Because petroleum products make up a
significant part of the U.S. domestic and foreign trade, API and its
Members have extensive dealings with the U.S. Customs Service (Customs)
on which they rely heavily for information and guidance.
API strongly supports the President and Congress in their efforts
to combat terrorism and has actively participated in the development
and implementation of many of the programs instituted since September
11th. In particular, we support the concept of a Department of Homeland
Security.
Support for the Department of Homeland Security
An integral part of the DHS will be the U.S. Customs Service.
Today, the U.S. Customs Service has the combined roles of trade
enforcement and trade facilitation. The continuity and enhancement of
both of these functions is critical to API's Members. The trade
enforcement function of Customs is identifiably aligned with the core
concepts and the DHS mission, principally protecting our homeland from
terrorist attacks.
The trade facilitation function of U.S. Customs within this new DHS
environment is less clear. As currently formulated, DHS will primarily
be an enforcement agency. API and its Members want to ensure that the
trade facilitation functions of the U.S. Customs Service continue and
are expanded during this transition. The trade facilitation function is
critical to:
ensure that legitimate trade thrives,
creation of jobs in America,
allowing competition in a global economy, and
fostering a strong American economy.
The trade facilitation function of Customs has led to innovative
programs such as the Trade Support Network (TSN) and the Treasury
Advisory Committee on Commercial Operations of the Customs Service
(COAC). This function has been critical during the planning and
implementation phases of programs such as the Customs-Trade Partnership
Against Terrorism (C-TPAT), the Automated Commercial Environment (ACE),
and the Importer Self Assessment (ISA) program. All of these efforts
have freed up constrained Customs resources to focus on other critical
programs, such as the halting of illegal trade, performing drug
interdiction, and enforcing import/export restrictions.
Proposed Solution to Ensure Continuing Trade Facilitation
API and its Members believe that the critical role that trade
facilitation plays in our economy should be formalized within DHS
through a Trade Advisory Council (TAC). This council, comprised of
representatives from the various trade communities, would provide input
directly to the Under Secretary for Border and Transportation Security.
The council would be critical to ensuring that views, needs, and
concerns of the importing and exporting communities are communicated at
the appropriate level. This council would also play an important role
in ensuring that trade facilitation does not become a second tier
priority behind enforcement in the new DHS environment. We believe that
the TAC structure and responsibilities should be included in the DHS
authorizing legislation.
Further, we propose that either through legislative language
included in the DHS authorizing legislation or through the legislative
history of the bill, that Congress express its intent that current
Customs programs that seek input from the trade community must continue
without disruption in the new DHS environment. These programs include,
but are not limited to the Trade Support Network (TSN) and the Treasury
Advisory Committee on Commercial Operations of the Customs Service
(COAC).
The establishment of the formal structures outlined above will
ensure that trade facilitation does not become a lesser priority in a
department that will be heavily weighted in enforcement activity. The
current legislation includes five (5) functions that the Under
Secretary for Borders and Transportation Security ``shall'' perform.
None of the listed functions specifically identify trade facilitation.
The enforcement emphasis with DHS, while appropriate, could over time
lead to a diminish role for trade facilitation. Congress, from the
point of creation of DHS, must ensure that trade facilitation continues
to be an important and core responsibility of the department.
Movement of Certain Export Promotion Programs to the Department of
Commerce
API and its Members believe that certain export promotion programs
that are currently managed by the U.S. Customs Service do not properly
align with the goals of the DHS and should be transitioned to other
appropriate government agencies. In particular, the duty drawback
program is an export promotion program that does not naturally align
with the DHS stated mission of protecting our homeland. The drawback
program allows for the recouping of duties paid when an eligible export
has occurred. Since its inception, the program has been a critical tool
in developing and supporting American export activity. Congress should
review the drawback program and other export related programs in order
to determine a more appropriate department or agency than DHS for these
programs.
In particular, the drawback program naturally fits within the
Department of Commerce's stated mission of ``job creation, economic
growth, sustainable development and improved living standards for all
Americans by working in partnership with business, universities,
communities and workers to build for the future and promote U.S.
competitiveness in the global marketplace by strengthening and
safeguarding the nation's economic infrastructure.''
We appreciate the committee's consideration of these comments and
concerns. API and its Members are willing to assist the committee in
whatever means possible during these important times. Should you wish
to discuss the concepts outlined herein, please contact Michael Platner
at 202/682-8418.
Sincerely,
Charles E. Sandler
Vice President
Statement of the American Textile Manufacturers Institute
This statement is submitted by the American Textile Manufacturers
Institute (ATMI). ATMI is the national trade association of the
domestic textile industry, which employs approximately 435,000
individuals nationwide.
First of all, ATMI understands and fully supports President Bush's
desire to create a U.S. Department of Homeland Security, and we urge
Congress to ensure that this department is given the resources it will
need to perform the vital tasks which will be assigned to it.
At the same time, ATMI would like to caution that, in transferring
the assets and authority of the U.S. Customs Service to the new
Department of Homeland Security, great care should be taken to ensure
that the essential mission of the Customs Service is not in any way
weakened. Indeed, the various responsibilities already assigned by
Congress to the Customs Service are absolutely critical to our nation's
security, and if anything the Customs Service should be given
additional resources so as to better fulfill this task.
By way of background, ATMI has had a long relationship with the
U.S. Customs Service. ATMI and several of its member firms have trained
scores of Customs agents in textile and apparel manufacturing
materials, methods and procedures in order to provide them with the
expertise required to detect fraud in textile and apparel trade. This
expertise has been used by Customs production verification teams (aka
``jump teams'') and port personnel to ensure compliance with Customs
laws and regulations and trade agreements--such as NAFTA--to which the
United States is party.
It is a regrettable fact that unscrupulous traders both abroad and
in the United States have engaged in every kind of fraud known with
respect to U.S. imports of textiles and apparel. The volume of
fraudulently entered textiles and apparel is reckoned in the billions
of dollars annually and, besides cheating the Treasury of significant
revenue to which it is legally entitled, has had and continues to have
a damaging effect on domestic producers and their workers.
Other victims of these ongoing frauds are honest exporters and
importers.
Over the years Customs has interdicted large quantities of textile
and apparel imports that attempted to enter domestic commerce
illegally. Unpaid duties have been collected, fines and penalties
assessed and culpable individuals sentenced.
With respect to transshipment, the practice of falsely declaring
the country of origin of imported products in order to evade
quantitative restraints maintained under the World Trade Organization's
Agreement on Textiles and Clothing, millions of garments and made-up
textile products have been charged against the quotas of the countries
of true origin because of transshipment. Yet the illicit practices
continue on a large scale.
Therefore, ATMI and its member companies are understandably
concerned that any redeployment of Customs' assets from the Department
of the Treasury to a newly created cabinet-level department must not in
any way diminish or impair Customs' ability to investigate, detect and
interdict illicit textile and apparel trade.
In its notice of the June 26 hearing on this subject, the Committee
noted that one of Customs' many responsibilities is ``Protecting
American business and labor and intellectual property rights by
enforcing U.S. laws intended to prevent illegal trade practices . .
.''. ATMI is pleased that the Committee recognizes the importance of
this element of Customs' daunting mission.
Traders who conduct their business legally also have an important
stake in the operations of the Customs Service and have been quite
vocal in their calls for greater speed, efficiency and simplicity in
Customs procedures. To this end, ``trade facilitation'' has become
their mantra and has garnered considerable attention within the Customs
Service. The Committee noted in its June 19 Advisory that trade
facilitation is one of Customs' ``core functions''. ATMI does not
disagree with this assessment, but does wish to caution that
enforcement measures must exist so that illicit trade is not
facilitated.
In closing, ATMI supports inclusion of the Customs Service in the
new Department of Homeland Security, and urges the Committee and the
Congress to provide sufficient resources for the Customs Service to
better fulfill its enormous responsibilities.
Statement of the Border Trade Alliance, San Diego, California
The Border Trade Alliance (BTA) has been monitoring plans to
establish a Department of Homeland Security with great interest. Since
1986, our organization has advocated in favor of the resources needed
by our land border ports of entry and the federal inspection services
posted at those ports of entry, which together are critical to
thwarting illegitimate trade and travel while facilitating the speedy
passage of legitimate travelers and cargo.
On April 11, 2002, the BTA Chair, Stephen Gross, testified before
the Senate Government Relations Committee chaired by Senator Joseph
Lieberman. In that hearing, Mr. Gross offered our organization's
support for Senator Lieberman's plan to establish a Department of
National Homeland Security with a cabinet level secretary to oversee
it. Then in June, as we all know, President Bush offered a similar plan
from his Administration to establish a Homeland Security Department.
We are greatly encouraged by the momentum these proposals are
gaining and welcome the opportunity to offer our years of our
experience in cross-border affairs to provide insight as to the role
that the U.S. Customs Service could play in this new Department of
Homeland Security.
The BTA has a long history of working with the Customs Service to
achieve goals that are in the best interests of both the agency and the
trade community. Based upon our years of working as an organization
with U.S. Customs, and the experiences our individual Members have in
their day-to-day dealings with Customs, we propose the following ideas
to the Committee:
1) We remain convinced that good law enforcement equates to speedy
trade facilitation. Further, we acknowledge that these changing times
require new and innovative ideas in response to the need for greater
security. We also ascribe to the principle that security must begin at
the point of loading and not at the U.S. port of unloading. Therefore,
as we approach the structure and focus of this new department, we
cannot lose sight of the need for international accord on such topics
as the types of security equipment to be used, the qualifications of
the personnel who will operate it, the standards for the training of
that personnel and agreed upon standards by which security will be
measured. We also agree that risk management tools, human and
artificial, must be employed and maximized in order to distinguish
between those shipments which should move through the system with
minimal scrutiny and those which warrant more attention.
2) In this new era of increased security, we must not lose sight of
the key role played by international trade. It is the life-blood of our
economy, even when that economy is teetering, as it is right now. In
the legislative language proposed by the Bush Administration, we were
greatly encouraged to read that one of the responsibilities of the
Under Secretary for Border Transportation Security (Section IV) will be
to ensure the ``speedy, orderly, and efficient flow of lawful traffic
and commerce.'' As noted above, the BTA is an organization which
believes that increased security and more efficient trade facilitation
can be synonymous. However, if this new department is focused solely on
securing our physical boundaries, then our economic security will
suffer. Many of our land border communities are poor and trade is their
primary industry. We must continue to insure that we do not heighten
security to the point where it strangles the economic viability of
these communities or the rest of the country.
3) With the new responsibilities proposed comes the need for new
resources. For Congress to expect real results from the Department of
Homeland Security and a smooth transition by Customs (and the other
agencies) into the new department, then Congress must meet its
responsibility to fund U.S. Customs (and the other inspection agencies
that are part of this transition) at a level that realistically allows
the agency to be equal to the new tasks it (and the other affected
agencies) is being expected to tackle. It is no longer satisfactory to
leave Customs at the same staffing level at which it has operated for
the last ten (10) years. While it is important to make sure there are
enough inspectors and agents to conduct proper examinations and follow-
up, we should not lose sight of the fact there are many other positions
within Customs which are equally important but much less high profile.
For example, Import Specialists, who often are Customs' first line of
contact with importers, deal with importers on a daily basis and are
often in the best position to spot commercial fraud. Similarly, there
are personnel which process the millions of entries filed each year.
These and similar positions are just as important to the overall
ability of Customs to do its jobs as the latest high-tech piece of X-
ray equipment.
4) We are aware the Committee is focused on Customs' dual mission
of law enforcement and trade facilitation. The Committee has listed the
issues about which it wishes to receive information. Mindful of that
list and our focus on land border trade and transportation, we wish to
raise an additional issue about which we have felt strongly since our
inception. Many of our Members cross the border daily (some even
several times a day). Too often they and others have found long lines,
even before the events of September 11th. The requirements to enter are
often interpreted in contradictory manners depending on the agency
personnel manning a given gate. Often there is a tremendous lack of
coordination in terms of staffing needs as each inspection agency seeks
to address its unique role. We have long supported what we have chosen
to call unified port management (UPM). In its simplest terms, UPM means
that one agency is put in charge of the staffing and similar
administrative requirements at the ports of entry. By doing so, there
can be proper planning for staffing needs, including peak and slow
times. Therefore, if Homeland Security is properly administered, we can
see the possibility for a real cost savings, both to taxpayers and to
business. If legitimate cargo and travelers are able to cross more
smoothly, their expedited treatment means less time is wasted and so
the attendant costs are minimized.
5) While we have never taken a formal position as to which agency
should be put in charge, many of our Members have long felt that
Customs is the agency which should be in charge for the simple reason
that it is the only federal inspection agency which regularly reaches
out to the trade community in trying to address its mandate. The most
recent example of Customs good-faith efforts to work with the trade has
taken the form of the Customs-Trade Partnership Against Terrorism (C-
TPAT). The guidelines Customs published and the methodology it is using
to roll out the program and administer it are the direct result of
intense discussions with the trade. Unlike many other federal agencies,
Customs regularly consults with its constituencies. In the case of C-
TPAT, Customs initially met with the trade under the aegis of the
Subcommittee on Border Security formed by Treasury's Commercial
Operations Advisory Committee. While many of the basics of C-TPAT were
worked out there, Customs did not consult with only that group but has
been regularly reaching out to the trade community through meetings
with major trade associations. Customs should be encouraged to continue
these efforts, as they are vital to making our borders secure. The
other federal agencies in Homeland Security should be similarly
encouraged to reach out to the trade community. In the end, we in the
business community are the best source of solutions which are both
practical and workable.
We thank you for this opportunity to comment on this important
issue and welcome future opportunities where our insights may prove
relevant. As the Ways and Means Committee continues to monitor the
important subject of the role of U.S. Customs in the Department of
Homeland Security, we offer the Border Trade Alliance's 16 years of
experience in border trade affairs should the Committee require any
additional information as we all seek to better organize our government
for homeland and economic security.
Statement of the National Customs Brokers and Forwarders Association of
America
The National Customs Brokers and Forwarders Association of America
(NCBFAA) is pleased to provide its views on the President's proposal to
create a Department of Homeland Security.
NCBFAA is the national trade association representing customs
brokers, ocean freight forwarders, air forwarders, nonvessel operating
common carriers (NVOCCs) and other intermediaries. Our Members are
responsible for directing the flow of cargo on behalf of our customers,
for handling interactions between shippers, carriers and consignees and
for serving as the interface with regulatory agencies. Specifically,
customs brokers are licensed professionals who interact directly with
the Customs Service on behalf of the importing public. We represent
small, medium and large importers, preparing their entries, collecting
duties and other revenues, and ensuring that imported merchandise
complies with U.S. law.
NCBFAA strongly supports the President's proposal to create a
Department of Homeland Security. It brings under one roof all the
disparate agencies tasked with that function, giving coherence and
focus to the government's homeland security mission. The proposal also
provides the tools for the Secretary to coordinate the activities of
these agencies. Previously, competition for mission authority and
agency standing was counterproductive to the overall effort.
Implementation of the President's proposal will give the government a
single, coordinated voice on security issues.
NCBFAA recognizes the need to include the Customs Service within
the new Department. After all, Customs has already been tasked by the
President to assume a major role in protecting the borders from being
compromised by terrorists. The Customs Service is the one agency with a
sufficiently robust presence at the borders to perform this mission.
The agency also has the unique combination of expertise, manpower, and
infrastructure required to conduct this effort.
The President's proposal appropriately transfers all of Customs to
the new Department of Homeland Security, recognizing that it is not
possible to divide Customs' trade and security responsibilities between
Treasury and the new Department. Personnel engaged in commercial
operations are also necessary and integral participants in security
activities. The agency must remain intact.
NCBFAA believes it is essential that commercial operations continue
to have a preeminent role at Customs. In years past, the culture of
enforcement has threatened to stifle the free flow of trade. Management
has reduced its emphasis on facilitation and placed a higher premium on
commercial enforcement.
As the Customs Service makes a new home in the Department of
Homeland Security, the significant role of trade cannot be lost to the
demands of security. Properly structured and implemented, effective
trade facilitation can actually enhance security, giving the agency the
ability to better target its enforcement efforts to high risk shipments
and activity. To ensure a proper balance of its dual roles, NCBFAA
recommends the following:
Within the Customs Service itself, security measures
should be separated, whenever possible, from commercial
measures. For example:
(1) LCustoms should not blur the line between
commercial enforcement and security measures. An
importer's record on commercial compliance may have
nothing to do with his ability to provide supply chain
integrity.
(2) LA manifest should not become a ``Noah's Ark'' for
every form of necessary data element. [To the extent
that expanded data requirements are added, however, the
manifest data should not be publicly available through
the Freedom of Information Act (FOIA).] A manifest
should continue to function as a commercial document.
Instead, for security purposes, NCBFAA recommends a
separate security document.
(3) LCustoms should not require commercial entry data
(such as 6-digit HTS numbers, which may not be valid at
earlier points in the entry process) at an inordinately
early time when the requirement only encumbers trade
and when less intrusive alternatives exist.
Presently, commercial operations interests are
represented at the highest levels of Customs [e.g., Field
Operations, Office of Trade Relations, OR&R and the traditional
role of the Deputy Commissioner].
These should not be diminished.
Advocacy from the private sector has been built into
the government structure (e.g., COAC, the Trade Support
Network). This important partnership should be retained.
Resourcing for commercial functions must be generous
since the funding source, the merchandise processing fee, more
than provides those monies. A negative example this year is the
underfunding of import specialists.
The Commissioner should recommend concrete steps,
whether through organizational measures, resourcing or other
means, to protect the status of commercial operations.
This concludes NCBFAA's statement. We look forward to working with
this Committee on the challenging task ahead.