[Senate Hearing 107-855]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 107-855
 
                  SECURING OUR PORTS AGAINST TERROR: 
              TECHNOLOGY, RESOURCES, AND HOMELAND DEFENSE
=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON TECHNOLOGY, TERRORISM,
                       AND GOVERNMENT INFORMATION

                                 of the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 26, 2002

                               __________

                          Serial No. J-107-61

                               __________

         Printed for the use of the Committee on the Judiciary







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85-082                           WASHINGTON : 2003
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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts     ORRIN G. HATCH, Utah
JOSEPH R. BIDEN, Jr., Delaware       STROM THURMOND, South Carolina
HERBERT KOHL, Wisconsin              CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California         ARLEN SPECTER, Pennsylvania
RUSSELL D. FEINGOLD, Wisconsin       JON KYL, Arizona
CHARLES E. SCHUMER, New York         MIKE DeWINE, Ohio
RICHARD J. DURBIN, Illinois          JEFF SESSIONS, Alabama
MARIA CANTWELL, Washington           SAM BROWNBACK, Kansas
JOHN EDWARDS, North Carolina         MITCH McCONNELL, Kentucky
       Bruce A. Cohen, Majority Chief Counsel and Staff Director
                  Sharon Prost, Minority Chief Counsel
                Makan Delrahim, Minority Staff Director
                                 ------                                

   Subcommittee on Technology, Terrorism, and Government Information

               DIANNE FEINSTEIN, California, Chairperson
JOSEPH R. BIDEN, Jr., Delaware       JON KYL, Arizona
HERBERT KOHL, Wisconsin              MIKE DeWINE, Ohio
MARIA CANTWELL, Washington           JEFF SESSIONS, Alabama
JOHN EDWARDS, North Carolina         MITCH McCONNELL, Kentucky
                 David Hantman, Majority Chief Counsel
                Stephen Higgins, Minority Chief Counsel





                            C O N T E N T S



                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Cantwell, Hon. Maria, a U.S. Senator from the State of Washington    70
Feinstein, Hon. Dianne, a U.S. Senator from the State of 
  California.....................................................     1
Kyl, Hon. Jon, a U.S. Senator from the State of Arizona..........    14
Schumer, Hon. Charles E., a U.S. Senator from the State of New 
  York...........................................................     3

                               WITNESSES

DeBusk, F. Amanda, former Assistant Secretary for Export 
  Enforcement, Department of Commerce, and former Commissioner, 
  Interagency Commission on Crime and Security in U.S. Seaports, 
  Washington, D.C................................................    30
Petersen, Kim E., Executive Director, Maritime Security Council, 
  Fort Lauderdale, Florida.......................................    35
Quartel, Rob, Chairman and CEO, FreightDesk Technologies, Inc., 
  and former Member, United States Federal Maritime Commission, 
  McClean, Virginia..............................................    39
Schubert, William G., Maritime Administrator, Department of 
  Transportation, Washington, D.C................................     4
Steinke, Richard D., Chairman of the Board, American Association 
  of Port Authorities, and Executive Director, Port of Long 
  Beach, Long Beach, California..................................    27
Tischler, Bonni, Assistant Commissioner, Office of Field 
  Operations, United States Customs Service, Washington, D.C.....    11
Upchurch, Charles W., President and CEO, SGS Global Trade 
  Solutions, Inc., and Representative, Global Alliance for Trade 
  Efficiency, New York, New York.................................    57
Venuto, Kenneth T., Rear Admiral, Director of Operations Policy, 
  United States Coast Guard, Washington, D.C.....................    15

                       SUBMISSIONS FOR THE RECORD

Advanced Research and Applications Corporation, R.A. Armistead, 
  President and CEO, Sunnyvale, California, statement............    67
International Microwave Corporation, Anthony Acri, Chief 
  Executive Officer, East Norwalk, Connecticut, statement........    71
Nacht, Michael, Dean and Professor of Public Policy, Goldman 
  School of Public Policy, University of California, Berkeley, 
  Berkeley, California, statement................................    72
Port of Oakland, Oakland, California, statement..................    75
Science Applications International Corporation, John H. Warner, 
  Jr., Corporate Executive Vice President and Director, and James 
  Winso, Corporate Vice President, General Manager Security 
  Products, San Diego, California, statement.....................    77


SECURING OUR PORTS AGAINST TERROR: TECHNOLOGY, RESOURCES, AND HOMELAND 
                                DEFENSE

                              ----------                              


                       TUESDAY, FEBRUARY 26, 2002

                              United States Senate,
     Subcommittee on Technology, Terrorism, and Government 
                                               Information,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 3:24 p.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Dianne 
Feinstein, chairperson of the subcommittee, presiding.
    Present: Senators Feinstein, Schumer, and Kyl.

OPENING STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR FROM 
                    THE STATE OF CALIFORNIA

    Chairperson Feinstein. I would like to open this hearing 
and particularly thank our witnesses for coming. I will 
introduce them in a moment.
    Senator Kyl, the ranking member, with whom I have the great 
pleasure of working, is at the White House and will be along, 
but will be a little late. And so in the interest of time, I 
thought we might begin this.
    I would like to begin by just making a brief statement. A 
while ago, in this committee while we were considering the 
PATRIOT Act and the Attorney General John Ashcroft was making a 
presentation, he held up a copy of the Al-Qaeda terrorist 
handbook. And one part of that was on recruiting. Now, this is 
a translation, but I just want to read one paragraph.
    ``Recruit people carefully because such activities could 
lead to death or arrest. Most likely candidates are smugglers, 
the needy, those seeking political asylum, adventurers, workers 
at coffee shops, restaurants, and hotels, and workers at 
borders, airports, and seaports.''
    And it is the last word really that we are here to discuss 
today. Seaports are often out of the public eye, but they are a 
very critical and important part of economic activity. Ninety 
percent of cargo moves by container, and much of that is 
stacked stories high on huge ships.
    Each year, 200 million containers move between ports, 
making this the most important and critical part of global 
trade. Our nation's seaports handle 95 percent of U.S. trade 
with non-contiguous countries, meaning non-connecting 
countries--big words--and this trade is expected to triple in 
the next 15 to 20 years.
    Now, a lot of this growth is going to occur in my home 
State, California, and we boast two of the busiest seaports in 
the Nation: Los Angeles/Long Beach and Oakland in the San 
Francisco Bay Area.
    While seaports are essential hubs of commerce and 
transportation, they are also plagued with serious problems, 
and that is what we are here today to discuss and see what we 
might be able to do about it.
    Our seaports today are extremely vulnerable to terrorism. 
Drug trafficking, alien smuggling, export of stolen 
automobiles, and international cargo theft are rampant. Yet in 
spite of the fact that the major problems besetting seaports 
all fall within the traditional jurisdiction of United States 
law enforcement, no Federal agency currently has comprehensive 
authority to regulate activity at seaports. That is point No. 
1.
    So, in a nutshell, I believe that many of the problems at 
seaports are really due to insufficient Federal oversight and 
the lack of personnel and technology. I know that Senators 
Hollings and Graham, of Florida, have introduced legislation to 
help solve these problems, and that legislation has passed the 
Senate. But there is much more that we can do to ensure the 
safety and integrity of our seaports and the communities that 
typically surround them.
    Let me give you an example. Last October, Rizik Amid Farid, 
an Egyptian and suspected Al-Qaeda member, was found in a 
container aboard a vessel bound for Canada. The container also 
had a bed, toilet, portable heater, and water supply for the 3-
week trip. Farid also had a Canadian passport, global satellite 
phone, cell phone, laptop computer, various cameras, 
identification documents, airport maps, an airline mechanic's 
certificate, and security passes for airports in Canada, 
Thailand, and Egypt.
    He was found during a routine inspection by Italian 
authorities while the ship was at dock in southern Italy. Farid 
is suspected of being a senior Al-Qaeda member because the 
operation to smuggle him into Canada was obviously expensive 
and well organized.
    One wonders whether other Farids have managed to come into 
North America through seaports. Due to short staffing and 
limited technology, inspectors today look at only 1 or 2 
percent of containers; 98 to 99 percent are just waved through. 
Hence, virtually every time a ship docks, the only people who 
know what is on a container are the people who shipped it, 
maybe, and the people picking it up, maybe. And if those people 
are terrorists, they are free to ship munitions and weapons 
overseas to their compatriots or even set off a bomb, or even 
sleepers themselves.
    So we are here today to hear from some very critical people 
who are very knowledgeable with respect to our seaports, and 
this committee is particularly looking for good ideas which can 
stand the test of time, are practical and doable, and so that 
we might put together a piece of legislation to improve the 
situation.
    I would like now to introduce our first panel.
    Captain William Schubert, United States Department of 
Transportation. Captain Schubert is the Department of 
Transportation's Maritime Administrator. He was recently 
confirmed last November. He is a former maritime industry 
consultant and maritime industry official. He has over 27 years 
of professional maritime experience.
    I will just mention the three of you, and then we will go 
right down the line, if this is all right.
    Bonni Tischler is from the United States Customs Service. 
She is the Assistant Commissioner to the Office of Field 
Operations of the United States Customs Service. She is the 
first woman to hold that position. She is directly responsible 
for trade compliance, anti-smuggling, outbound and passenger 
operations, 20 Customs management centers, and 300 ports of 
entry. She also manages an annual operating budget of 
approximately $1 billion and the operations of more than 12,000 
employees.
    And, finally on this panel, Rear Admiral Kenneth Venuto, 
United States Coast Guard. Rear Admiral Kenneth Venuto is the 
Director of Operations Policy for the United States Coast 
Guard. As Director, he maintains management oversight of a wide 
range of programs supporting the Coast Guard's five strategic 
goals: maritime safety, mobility, maritime security, protection 
of natural resources, and, finally, national defense.
    So that is our first panel, and if we may, Mr. Schubert, 
may we begin with you please. Welcome.
    Captain Schubert. Thank you, and good afternoon. Madam 
Chair, with your permission, I would like to submit my written 
comments for the record, and I have some brief comments to 
make.
    Chairperson Feinstein. May I ask you to hold up?
    Captain Schubert. Sure.
    Chairperson Feinstein. Because this might even get his vote 
on something, if I let him speak right now.
    [Laughter.]
    Senator Schumer. Dianne always gets my vote on whatever she 
wants.
    Chairperson Feinstein. I would like to acknowledge the 
senior Senator from New York, Chuck Schumer, to make a 
statement.

 STATEMENT OF HON. CHARLES E. SCHUMER, A U.S. SENATOR FROM THE 
                       STATE OF NEW YORK

    Senator Schumer. Well, thank you, Senator Feinstein. I very 
much appreciate your holding this important hearing. As the 
person who represents the largest ports on the West Coast and I 
represent the largest port on the East Coast, obviously we both 
have an interest in this. It is extremely timely. It is 
extremely important, and I want to thank the witnesses for 
coming. This is an issue of great concern to many, many New 
Yorkers and certainly to me, and your taking the leadership on 
this issue is wonderful.
    I would ask that my entire statement be read into the 
record and just make a couple of brief points.
    I guess what I would say is I have a fear greater than just 
about any other, and that is that someone will use our ports 
and bring a nuclear weapon through a container. The bomb in 
Hiroshima was a very simple device. It was two chunks of high-
grade uranium, weapons grade, at opposite ends of a tube. And 
what the bomb did is, when it was detonated, all it did is slam 
those two chunks of uranium together, creating what physicists 
call a critical mass of uranium, and the nuclear explosion 
ensued.
    You don't need an airplane to deliver that kind of a bomb. 
You don't need a missile. You can put it in a container, send 
it by ship, and create huge, huge havoc--or on a truck, for 
that matter.
    And so we have a big job ahead of us because how can we not 
do everything we can to stop that from happening and at the 
same time make sure that our ports continue to be able to flow 
commerce. You know, we could inspect every container hand-to-
hand, and the ports would be backed up all the way from Los 
Angeles to Tokyo or New York to London.
    So we have to do a lot. I support the Hollings bill, but I 
think we have to go further, and I think this hearing is so 
important because it highlights attention.
    The bill that I am planning to introduce soon--and I hope 
we could debate it at some point--would first mandate that all 
ports in the U.S. that receive international cargo have the 
capability to inspect and span up to 10 percent of the 
containers entering the port. That means we would provide each 
port in the Nation with enough Customs inspectors and scanning 
machines to inspect up to 10 percent. Right now it is less than 
3.
    Second, we would create a new research and development fund 
to develop new technologies related to port security. We need 
to be able to know that every container is safe.
    And, third, there are a lot of loopholes that remain in 
port security infrastructure. The Hollings bill closes some. 
Our bill closes others.
    I think our first step is to support the Hollings bill and 
then to move forward, and, Madam Chairwoman, I look forward to 
working with you and salute your leadership on this issue so we 
can make our ports safe.
    And with that I would just ask unanimous consent that my 
entire statement be read in the record.
    Chairperson Feinstein. Absolutely.
    Thank you very much, Senator Schumer. I look forward to 
working with you, and, you know, I think we should have a 
hearing in this committee if your bill comes to this committee, 
and also we will have some of the questions hopefully that I 
have and you have answered today by some of the experts, and we 
might even be able to add to it as well. So thank you very 
much. I appreciate it.
    And I appreciate the courtesy of you and the witnesses 
because of the schedule.
    Chairperson Feinstein. Happy to do it.
    Senator Schumer. Thanks.
    Chairperson Feinstein. Captain Schubert, please.

   STATEMENT OF WILLIAM G. SCHUBERT, MARITIME ADMINISTRATOR, 
         DEPARTMENT OF TRANSPORTATION, WASHINGTON, D.C.

    Captain Schubert. Thank you. Madam Chair, good afternoon 
again, and with your permission, I would like my written 
statement submitted for the record.
    Chairperson Feinstein. So ordered.
    Captain Schubert. And I have some brief comments.
    I am Captain William Schubert, Maritime Administrator, and 
I am pleased to be here today to address the important issue of 
port security on behalf of the Department of Transportation.
    The Department of Transportation has always sought to 
maintain secure transportation within every mode. We continue 
to do so today with greater sense of urgency and direction 
through the newly created Transportation Security Agency, or 
TSA.
    My own agency, the Maritime Administration, has 
historically played a critical role in port development and 
security. One of our duties has been to provide security 
guidance to the commercial ports in the U.S. and coordinate 
Government and maritime stakeholders in their security efforts. 
MARAD co-chaired the Presidential Commission on Crime and 
Security in U.S. Seaports, and as Chair of the National Port 
Readiness Network, MARAD plays a lead role with the military in 
assuring port security and protection of critical 
infrastructure during a mobilization.
    Today, I would like to address several recent developments 
led by Secretary Mineta in the area of port security in which 
DOT has been actively involved--grants for the improvement of 
port infrastructure, cargo and container security, 
credentialing for transportation workers, and the availability 
of maritime insurance against terrorism-related losses. Admiral 
Venuto will then brief the committee on specific Coast Guard 
initiatives to secure our ports and protect shipping.
    As you know, the Department of Defense Appropriations Act 
for fiscal year 2003 appropriated $93.3 million to the 
Transportation Security Agency to award competitive grants to 
critical national seaports to help finance the cost of 
enhancing port facility security. Such grants are to be awarded 
based on security assessments as determined by the Under 
Secretary of Transportation for Security, the Administrator of 
the Maritime Administration, and the Commandant of the Coast 
Guard.
    Discussions between TSA, MARAD, and the Coast Guard 
resulted in an agreement that MARAD and the Coast Guard would 
work cooperatively on behalf of TSA to administer the emergency 
seaport security funding contained in the act. Secretary Mineta 
has just approved our implementation plan. We will soon begin 
to award grants based on the most urgent homeland security 
needs. Preference will be given to ports that have already 
begun demonstrated port security enhancements.
    Madam Chair, if you are interested, during the question-
and-answer period, I do have a brief overview of how that grant 
program will be administered, if you are interested.
    Chairperson Feinstein. I am very interested. If you want to 
go into it now, please feel free to.
    Captain Schubert. Sure. We do have handouts of this chart.
    When this Department of Defense appropriation of $93.3 
million came about, we at the Coast Guard and the Maritime 
Administration and the TSA worked diligently to put together a 
plan of implementation to award these grants. We recognized 
that the grants were done on an emergency basis or to handle on 
a priority basis things that would be considered urgent for 
port security.
    So with that in mind, we have come up with this time line 
of which we are already past the decision memo, which has been 
approved by the Secretary, the selection outline, which has 
also been completed, and we have drafted a broad agency 
announcement which will be released tomorrow to the public.
    After tomorrow, we will have approximately a 20-day 
application period. We have developed a way that applications 
can be filed and submitted over the Internet without any paper 
or time loss.
    Chairperson Feinstein. By port authorities?
    Captain Schubert. Port authorities would be eligible to 
submit an application in this process, yes, ma'am.
    We also will furnish the committee, if you would like, a 
copy of the broad agency announcement once it is released 
tomorrow.
    After a 20-day application period, all the applications are 
due on March 27th. The Maritime Administration regional 
directors and primarily the captains of the port, which will 
really have the final say-so, will review these applications on 
a regional basis and prioritize them.
    Then after that happens, headquarters will review and 
prioritize those applications. That will take approximately 25 
days. And then the recommendation will be forthcoming, and the 
selection board, which will be myself, the Commandant, and a 
representative from TSA, will review the recommendations. And 
if everything goes correctly by June 11th, the grants will be 
awarded.
    I will also add that we have targeted approximately 10 
percent of the $93.2 million will go towards proof-of-concept 
type of applications. These would be not research and 
development so much, but for the implementation technology that 
might not have been used before.
    Chairperson Feinstein. Thanks very much.
    Captain Schubert. The events of September 11th have 
highlighted the vulnerability of our international container 
shipments to acts of terrorism, with more than 12 million TEUs 
arriving on our shores yearly. Prior to September 11th, the 
Department's primary concern was the efficient movement of 
these containers through the transportation system. Clearly, 
the advent of just-in-time business processes and the use of 
the transportation system as a rolling inventory has tied the 
marine transportation system to the economic vitality of this 
country.
    It only follows that a serious disruption of this system 
could have devastating effects on our economy. In recognition 
of this fact, the Department established an interagency 
Container Working Group in December to make system improvement 
recommendations through a well-honed security lens, balancing 
national security interests with economic efficiency.
    Another area of concern is the issue of identifying and 
credentialing employees who have access to ships, ports, 
terminals, and cargos. This includes everyone from the point of 
origin to the ultimate destination. As a result, the Department 
established a Credentialing Direct Action Group, known as a 
CDAG, co-chaired by MARAD, to examine the feasibility of an 
identification card for all transportation workers and other 
persons who require access to secure areas of transportation 
facilities.
    The primary goal of the CDAG is to fashion a nationwide 
security program that verifies the identity of transportation 
workers, validates their background information, assists 
transportation facilities in managing their security risk, and 
accounts for personal access to transportation facilities and 
activities of authorized personnel.
    This has been a joint public-private effort. The CDAG has 
made a concerted effort to seek out the advice of 
transportation experts in devising this program. They 
understand that industry support is key to the success of this 
effort.
    My last point concerns the availability of insurance for 
terrorism risk in the maritime industry. For ships generally, 
the market is providing insurance against losses from terrorist 
attacks. But the cost of insurance has escalated 200 to 300 
percent since 9/11. For cruise ships, the cost is up 1,000 
percent. Even as premiums were going up, however, the insured 
loss coverage was reduced by underwriters.
    Turning to land-based assets, like buildings and ports, the 
news is very different. Reinsurance renewals fell due on 
January 1st, and reinsurers excluded terrorist risk. Such 
coverage is available from primary insurers, but coverage is 
very limited, and the cost is prohibitive.
    The Department of Transportation does not need to be 
convinced that port security is a good idea. We have recognized 
it as a critical component of our maritime industry and our 
national security for many years. Nevertheless, achieving 
appropriate levels of security in our seaports and seeking to 
educate our international partners as to the need and benefits 
of seaport security is no small undertaking.
    DOT is aggressively pursuing all aspects of transportation 
security in all modes, utilizing our own resources and tapping 
the best minds in the industry and labor. We look forward to 
working with you and the Members of Congress to protect our 
citizens and grow the economy.
    I want to thank you again for inviting me here today, and 
now I would be happy to answer any questions you or other--
well, no other committee members are here. Thank you.
    [The prepared statement of Captain Schubert follows:]

Statement of William G. Schubert, Maritime Administrator, United States 
                      Department of Transportation

    Good Afternoon Madam Chairman and members of the Subcommittee. I am 
Captain William G. Schubert, Maritime Administrator. I am pleased to be 
here today to address the important issue of seaport security on behalf 
of the Department of Transportation.
    The Department of Transportation (DOT) has always sought to 
maintain secure transportation within every mode. We continue to do so 
with a greater sense of urgency and with more focus through the newly 
created Transportation Security Administration.
    My own agency, the Maritime Administration (MARAD), has always 
played a critical role in port security. One of our duties is to 
provide port security guidance to the commercial ports in the United 
States and to coordinate government and commercial port stakeholders in 
their security efforts. MARAD Co-Chaired the Presidential Commission on 
Crime and Security in U.S. Seaports, and, as Chair of the National Port 
Readiness Network, plays a lead role with the military in assuring port 
security and protection of critical infrastructure during mobilization. 
We have developed an Inter-American Port Security Training Program in 
which nearly 300 port personnel have been trained in the Western 
Hemisphere, and the Merchant Marine Academy at Kings Point provides 
security training to industry. We have also been working with the port 
community to advance uses of technology that have positive security 
benefits both within the port and through its landside intermodal 
connections. I welcome the opportunity to continue our efforts to 
improve port security.
    Today, I would like to address several recent developments led by 
Secretary Mineta in the area of port security in which DOT has been 
actively involved--grants for the improvement of port infrastructure, 
cargo and container security, credentialing for transportation workers 
and the availability of maritime insurance against terrorism-related 
losses. Admiral Venuto will then brief the Committee on specific Coast 
Guard initiatives to secure our ports and protect shipping.
          Grant Program for Improvement of Port Infrastructure
    As you know, the Department of Defense Appropriations Act for FY 
2002 (Act) appropriated $93.3 million to the Transportation Security 
Administration (TSA) to award competitive grants to critical national 
seaports to finance the cost of enhancing facility and operational 
security. Such grants are to be awarded based on the need for security 
assessments and enhancements as determined by the Under Secretary of 
Transportation for Security, the Administrator of the Maritime 
Administration, and the Commandant of the Coast Guard (USCG).
    Discussions among TSA, MARAD, and the USCG resulted in agreement 
that MARAD and the USCG would work cooperatively, on behalf of TSA, to 
administer the emergency seaport security funding contained in the Act. 
MARAD and the USCG have met, and we expect final approval of our 
implementation plan very quickly.
    MARAD and USCG will act as ``agents'' of TSA for the distribution 
of grants from the $93.3 M appropriation. The final grant approval body 
will be a board consisting of the Under Secretary of Transportation for 
Security, myself as Administrator of the Maritime Administration, and 
the Commandant of the Coast Guard, or our representatives. 
Determination of grant awards will be based on consideration of the 
most urgent needs from a homeland security perspective. It is 
anticipated that initial awards will commence in June 2002. We are 
moving very quickly to put this money to work.
    We intend to use a small amount of this money to fund ``proof of 
concept projects''; we will focus on critical seaports. Preference will 
also be given to ports that have already begun port security 
enhancement through some demonstrated action.
                      Cargo and Container Security
    An analysis of our transportation system in the aftermath of the 
events of September 11, 2001 clearly laid bare the susceptibility of 
container shipments as a delivery system for an enemy's weapons, with 
over 12 million TEU's/year arriving at our shores. Prior to September 
11th, from a DOT perspective, our primary concern was the efficient 
movement of these containers through the transportation system. The 
advent of just-in-time business processes and the use of the 
transportation system as a rolling inventory tied the transportation 
system even more integrally into the economic vitality of this country.
    In order to address the security issues surrounding the movement of 
marine cargo containers through the international, intermodal 
transportation system, an interagency Container Working Group was 
established in December 2001. The effort is co-chaired by the 
Departments of Transportation and Treasury (U.S. Customs). The 
Container Working Group's activities are focused in four subgroups: 
Information Technology, Security Technologies, Business Practices, and 
International Affairs. Just this month, the Working Group provided 
recommendations to the Office of Homeland Security on Ensuring the 
Security of Cargo Container Transportation. Recommendations addressed 
improving the coordination of government and business efforts as they 
relate to container security; enhancing data collection; improving the 
physical security of containers; initiating activities on the 
international front; and considering all possible uses of advanced 
technologies to improve the profiling of containers and to increase the 
physical security of containers.
    Even with our best efforts, our current transportation system is 
groaning under capacity constraints and congestion in many ports is 
increasing. To further complicate matters, container traffic, even with 
the current economic slowdown, is predicted to double in the next 
twenty years. Improving efficiency is one of the key ways to help solve 
these capacity and congestion problems. Yet efficiency improvements 
must now be looked at through a security lens. Our transportation 
system will need to operate both efficiently and securely. These twin 
goals of efficiency and security need to be addressed simultaneously.
    We are working jointly with U.S. Customs, exporters, importers, 
carriers, and governments to establish business and security practices 
which will push the nation's virtual borders outward to the point of 
loading of the containers. Security must be established before the 
vessel carrying the container or cargo begins its international travel. 
Technology and information are also essential to container security. 
For that reason, we strongly support the accelerated implementation of 
the U.S. Customs ACE and Integrated Trade Data System (ITDS) to bring 
it online as quickly as possible.
                Credentialing for Transportation Workers
    Security background checks and credentialing of all who move or 
have access to cargoes has never been more important. This includes 
everyone from facilities and conveyances to the destination warehouse. 
Thus, the Department established an interagency ``Credentialing Direct 
Action Group'' (CDAG), co-chaired by MARAD, to examine the feasibility 
and process for conducting background checks and issuing an 
identification card for all transportation workers and other persons 
who require access to secure areas of transportation facilities.
    The primary goal of the CDAG is to fashion a nationwide 
transportation worker identity solution that verifies the identity of 
transportation workers, validates their background information, assists 
transportation facilities in managing their security risks, and 
accounts for personnel access to transportation facilities and 
activities of authorized personnel. The CDAG is primarily concerned 
with private-sector transportation workers, and has held numerous 
meetings that have included many representatives from the 
transportation industry and transportation labor. Such outreach efforts 
are necessary. They are experts in transportation, and we have found 
they are anxious to contribute their knowledge to solving the difficult 
issues surrounding personnel identification. We are building industry 
buy-in at the front end to ensure the success of this effort.
    The most difficult issue is to define the appropriate levels of 
security for the broad spectrum of transportation facilities and 
operations and how these should be applied. There have also been some 
concerns regarding the anticipated background check process. Various 
models are being investigated by several groups to try and improve 
responsiveness, lower cost and improve consistency over present 
practices for credentialing. We also face the privacy issues presented 
by the collection and maintenance of databases containing personal 
information.
    The CDAG has already developed a functional requirements document, 
which identifies the principal attributes that a credentialing system 
must have to achieve the interoperability necessary to reach across the 
transportation industries. This document has been shared with many of 
the major transportation industry associations. They have begun to 
provide their comments.
    Under a maritime cooperative program called the Ship Operations 
Cooperative Program (SOCP) that is administered by the Maritime 
Administration, industry, in partnership with multiple government 
agencies, is currently working to evaluate and test a Mariner 
Administrative Smart Card credentialing system to reduce fraud, track 
mariner training, facilitate shipboard sign on/sign off and enhance 
shipboard security. The Smart Card Administrative Project started in 
October of 2000 and is a 50/50 cost sharing initiative between the 43-
member SOCP and the Maritime Administration.
    As a result of the September 11, 2001 events, added emphases within 
the project are being placed on the potential of smart card 
applications for addressing security concerns. Members of the 
cooperative including MARAD and USCG are engaged internationally with 
the International Maritime Organization, International Labor 
Organization, International Transport Workers' Federation and others to 
discuss security and credentialing issues. In addition, SOCP is 
coordinating with DOT entities that are currently working maritime 
security issues to ensure the project is in line with currently 
discussed directions. SOCP is working closely within DOT, and with 
other agencies including the General Services Administration, to ensure 
interoperability through standardization. This project has the 
potential for demonstrating the effectiveness of smart card technology 
to improve efficiency, reduce fraud and increase security in the 
maritime industry.
               Insurance Against Terrorism-Related Losses
    The Merchant Marine Act, 1936 (Act), authorizes the Secretary of 
Transportation to ensure the availability of adequate insurance for 
vessels engaged in the waterborne commerce of the United States. This 
authority, delegated to MARAD, provides coverage for vessels, their 
cargoes, crews, and third-party liabilities against war risks, 
including acts of terrorism, if commercial insurance is not available 
on reasonable terms and conditions. The insurance may be made available 
to both U.S. and foreign flag vessels.
    There are two basic forms of war risk insurance. Section 1202 of 
the Act addresses commercial vessels in commercial trade while, Section 
1205 pertains to vessels that are under charter or in the employ of the 
Department of Defense. Recently, President Bush authorized DOT to 
provide war risk insurance under Section 1202. The insurance is 
available for areas currently excluded in commercial war risk trading 
warranties: the Persian or Arabian Gulf and adjacent waters, Israel, 
Lebanon, Gulf of Aqaba and the Red Sea, Yemen, Pakistan, Oman, Syria, 
and Egypt. Authority under Section 1205 for the Middle East has 
remained in effect since it was authorized by Then-President Bush in 
August 1990. Since February 20, 2002, MARAD has written Section 1205 
insurance on five vessels in the employ of the Military Sealift 
Command.
    Although the combined losses arising out of the attacks of 
September 11th are estimated in the tens of billions of dollars, we are 
seeing an excellent response all across the insurance industry in 
responding to the coverage of these losses. While the losses are of 
catastrophic proportions, the industry is financially sound and most 
property/casualty insurers are highly reinsured with major reinsurers 
with excellent reserves.
    The insurance industry has taken a major hit as a result of 
September 11th events and what we are seeing is a major restructuring 
of terrorism risks. Many primary property/casualty insurance coverages, 
which would include port infrastructure, had reinsurance renewals on 
January 1st of this year and it appears that most reinsurers have 
excluded terrorism risks from their renewal coverage. A few major 
primary insurers are offering to write terrorism risks on fixed 
property, but with very limited cover (up to $50 million on some risks) 
at very, very high premiums. As a result of this, we have been advised 
by a number of insurance brokers and underwriters that upon insurance 
renewal many companies and properties are underinsured or uninsured for 
terrorism risks.
    The situation is somewhat better with regard to vessel insurance, 
where terrorism risks are generally covered under the war risk policy. 
Terrorism coverage is still available for vessels and cargoes, but the 
cost has increased significantly. For example, war risk underwriters 
issued cancellation notices on war risk policies on all vessels 
worldwide on September 19th, (which they were permitted to do under 
their seven-day cancellation clauses). They reinstated these policies 
on September 26th with increases of annual premium of 200 to 300 
percent on most fleets, except for cruise vessels, which we understand 
faced a 1,000 percent increase in annual premiums. In addition, war 
risk underwriters published new excluded zones, extending from Egypt to 
Pakistan, where vessels and cargoes may not enter without paying 
thousands or even hundreds of thousands of dollars of additional 
premium. Marine war risk/terrorism insurance is still available from 
the commercial market, although at much higher premium rates and with 
much more limited coverage on the liability side since September 11th. 
The Protection and Indemnity Clubs, a mutual arrangement of shipowners, 
which provide vessel liability coverage, now limit coverage for 
terrorism risk as of February 20th to $200 million per vessel--an 
amount far lower than previously. Vessels and cargoes are still moving 
worldwide, but the cost is higher and the terms more limited. In 
addition, we understand that one of the mutual clubs that provides 
insurance for terminals, stevedores, port authorities and transport and 
logistics companies for handling equipment and property was able to 
reinstate terrorism cover as of February 1st, but it is not clear on 
what terms or cost.
    In summary, insurance covering risks of terrorism is still in a 
state of flux and we expect this to continue for some time to come.
                               Conclusion
    The Department of Transportation does not need to be convinced that 
port security is a good idea. We have recognized it as a critical 
component of our maritime industry and our national security for many 
years. Nevertheless, achieving appropriate levels of security in our 
seaports and seeking to educate our international partners as to the 
need and benefits of seaport security is no small undertaking. DOT is 
aggressively pursuing all aspects of transportation security in all 
modes utilizing our own resources and tapping the best minds in the 
industry and labor.
    I would be happy to answer any questions you or the other Committee 
members may have.

    Chairperson Feinstein. Thanks very much, Captain Schubert, 
and we will do the questions after we hear from the other two 
witnesses.
    Next is Ms. Tischler. Welcome.

STATEMENT OF BONNI TISCHLER, ASSISTANT COMMISSIONER, OFFICE OF 
 FIELD OPERATIONS, UNITED STATES CUSTOMS SERVICE, WASHINGTON, 
                              D.C.

    Ms. Tischler. Madam Chairwoman, thank you for your 
invitation to testify before the subcommittee today. I bring 
you Commissioner Bonner's regards and his apologies. We have 
appropriations hearings tomorrow, and he is up to his eyebrows 
in alligators. But he does extend our invitation to you to 
visit with us, perhaps, at your convenience in one of the ports 
in California, and you can see firsthand how we target seaport 
cargo.
    Since September 11th, Commissioner Bonner's top priority 
for the Customs Service has been responding to the terrorist 
threat at our land borders, seaports, and airports. His highest 
priority is doing everything we can reasonably and responsibly 
to keep terrorists and terrorist weapons from entering the U.S. 
Our Customs inspectors, canine enforcement officers, and 
special agents are doing just that: protecting and defending 
our country against the terrorist threat at all of our ports of 
entry.
    Since September 11th, Customs has been at a Level 1 alert 
across the U.S. at all border entry points. Level 1 requires 
sustained, intensive anti-terrorist questioning and includes 
increased inspections of travelers and goods at every port of 
entry. Because there is a continued threat that international 
terrorists might attack again, we remain at Level 1 alert to 
this very day, and we will be doing a Level 1 alert for the 
foreseeable future.
    Commissioner Bonner has implemented around-the-clock 
coverage by at least two armed Customs officers at every 
Customs location, even at low-volume crossings along our 
Northern border. Customs inspectors are in many places working 
12 to 16 hours a day, 6 and 7 days a week.
    To help ensure that Customs develops a coordinated, 
integrated counterterrorism strategy for border security, 
Commissioner Bonner established a Director of Anti-Terrorism, 
reporting directly to him and responsible for the coordination 
of Customs anti-terrorism efforts.
    In an operational context and to support our Customs 
officers in the field, he and I have established the Office of 
Border Security, which reports to me. The mission of that 
office is to develop more sophisticated and complex anti-
terrorism targeting techniques for passengers and cargo in each 
border environment and to provide a single point of contact for 
events taking place in our field.
    In establishing our priority to prevent terrorists and 
terrorist weapons from transiting our borders, we believe that 
Customs must also do everything possible to push the border 
outwards. We must expand our perimeter of security away from 
our national boundaries and towards foreign points of 
departure.
    Any effort to push the border outwards must include the 
direct involvement of the trade community. Commissioner Bonner 
established the Customs-Trade Partnership Against Terrorism, or 
C-TPAT, as we call it, to build on past, successful security 
models between Customs and the Trade that were expressly 
designed to prevent legitimate commercial shipments from being 
used to smuggle narcotics.
    Another core area in these efforts is the implementation of 
the Container Security Initiative, or CSI. As you know, one of 
the stated goals of current terrorist organizations has been 
not only to target American lives but to target the American 
economy.
    The vast majority of world trade, about 90 percent, moves 
in containers, much of it carried on oceangoing container 
ships. Nearly half of all incoming trade to the U.S. by value--
about 46 percent--arrives by ship and most of that is in 
containers.
    If terrorists were to succeed in concealing a weapon of 
mass destruction, even a crude device, among the tens of 
thousands of containers that enter U.S. ports every day, the 
devastation would be horrible and impossible to contemplate. 
And the impact on our global economy would be severe. As the 
primary agency for cargo security, I believe U.S. Customs 
should know everything there is to know about a container 
headed for this country before it leaves a foreign port, such 
as Rotterdam or Singapore. Customs wants that container pre-
screened there, not here.
    The effective use of technology depends largely on good 
targeting, for which we require advance information. Much has 
been said regarding Customs examining 2 percent of incoming 
cargo to the U.S. To some, the overall number of examinations 
may seem surprisingly low in proportion to the vast amount of 
trade we process. But the percentage of examination varies by 
associated risk, and it is important to note that the cargo 
Customs selects for intensive inspection is not chosen 
randomly. It is the result of a careful screening process, a 
process that uses information culled from a vast database on 
shipping and trading activities known as the Automated Manifest 
System. Using targeting mechanisms that operate within this 
system and information derived from our enforcement databases, 
we are able to sort through cargo manifests provided to Customs 
by shippers and carriers and choose those shipments that appear 
unusual, suspect, or high-risk. It is a system that has served 
us well, but one that definitely can be tweaked up.
    Currently, the submission of advanced shipping manifests to 
Customs is voluntary. We cannot rest our Nation's security on 
the vagaries of haphazard advance information that is often 
incomplete and sometimes inaccurate. Timely, accurate, and 
complete information is vital to this Nation's security, and we 
should mandate that it is provided in advance.
    Madam Chairwoman, I could just skip to my summation here or 
complete this, and may I submit this for the record?
    Chairperson Feinstein. Absolutely.
    Ms. Tischler. Thank you so much.
    In conclusion, the terrorists have already exploited one 
key component of our transportation system: commercial 
aviation. It is not at all unthinkable that they would seek to 
target others, including maritime trade. We believe our 
seaports and the system of global trade they support are 
vulnerable, and we believe that the U.S. and the Customs 
Service must act now to address this threat.
    Thank you very much for the opportunity to testify before 
you today.
    [The prepared statement of Ms. Tischler follows:]

Statement of Bonni G.Tischler, Assistant Commissioner, Office of Field 
               Operations, United States Customs Service

    Senator Feinstein thank you for your invitation to testify before 
this Subcommittee today. Since September 11th, Commissioner Bonner's 
top priority for the Customs Service has been responding to the 
terrorist threat at our land borders, seaports and airports. His 
highest priority is doing everything we reasonably and responsibly can 
to keep terrorists and terrorist weapons from entering the United 
States.
    Through our Customs Inspectors and Canine Enforcement Officers, and 
Special Agents we are doing just that: protecting and defending our 
country against the terrorist threat at all our ports of entry, 
including our seaports.
    Since September 11th, Customs has been at a Level One alert across 
the country--at all border entry points. Level 1 requires sustained, 
intensive anti-terrorist questioning, and includes increased 
inspections of travelers and goods at every port of entry. Because 
there is a continued threat that international terrorists will attack 
again, we remain at Level 1 alert to this day and will be at Level 1 
for the foreseeable future.
    As part of Commissioner Bonner's response, Customs has implemented 
round-the-clock coverage by at least two armed Customs officers at 
every Customs location, even at low volume crossings along our northern 
border. To this day, Customs inspectors are, in many places, working 12 
to 16 hours a day, six and seven days a week.
    To help ensure that Customs develops a coordinated, integrated 
counter-terrorism strategy for border security, Commissioner Bonner 
established a new Office of Anti-Terrorism.
    In an operational context and to support our Customs officers in 
the field, we have also established the Office of Border Security. The 
mission of that office is to develop more sophisticated anti-terrorism 
targeting techniques for passengers and cargo in each border 
environment and provide a single point of contact for events taking 
place in our field.
    In approaching our primary priority to prevent terrorists and 
terrorist weapons from transiting our borders, we believe that Customs 
must also do everything possible to ``push the border outwards.'' We 
must expand our perimeter of security away from our national boundaries 
and towards foreign points of departure.
    Any effort to ``push the border outwards'' must include the direct 
involvement of the trade community. The Customs-Trade Partnership 
Against Terrorism, or ``C-TPAT,'' builds on past, successful security 
models between Customs and the trade that were designed to prevent 
legitimate commercial shipments from being used to smuggle illegal 
drugs
    Another core area in these efforts is implementation of the 
Container Security Initiative, or CSI. As you know, one of the stated 
goals of current terrorist organizations has been not only to target 
American lives, but to target the American economy.
    The vast majority of world trade--about 90%--moves in containers, 
much of it carried on oceangoing container ships. Nearly half of all 
incoming trade to the United States by value--about 46%--arrives by 
ship, and most of that is in containers.
    If terrorists were to succeed in concealing a weapon of mass 
destruction, even a crude nuclear device, among the tens of thousands 
of containers that enter U.S. ports every day, the devastation would be 
horrible to contemplate. And the impact on our global economy would be 
severe. As the primary agency for cargo security, I believe U.S. 
Customs should know everything there is to know about a container 
headed for this country before it leaves a foreign port, such as 
Rotterdam or Singapore, for an American port. Customs wants that 
container pre-screened there, not here.
    The effective use of technology depends largely on good targeting, 
for which we require advance information. Prior to September 11th, 
Customs examined about 2% of incoming cargo to the U.S. That percentage 
is significantly higher now. However, to some the overall number of 
examinations may still seem surprisingly low in proportion to the vast 
amount of trade we process. Yet it is importation to note that the 
cargo Customs selects for intensive inspection is not chosen randomly. 
It is the result of a careful screening process, a process that uses 
information culled from a vast database on shipping and trading 
activities known as the Automated Manifest System. Using targeting 
systems that operate within AMS, we are able to sort through the cargo 
manifests provided to Customs by shippers and carriers, and chose those 
shipments that appear unusual, suspect, or high-risk. It is a system 
that has served us well, but one that can and must serve us much better 
in light of September 11th.
    Currently the submission of advanced shipping manifests to Customs 
is voluntary. We cannot rest our Nation's homeland security on the 
vagaries of haphazard advance information that is often incomplete and 
sometimes inaccurate. Timely, accurate, and complete information is 
vital to homeland security and we should mandate it is provided in 
advance. Current legislation, such as S.1214 takes us a major step 
closer to where we ultimately need to be, particularly for the CSI--and 
that is to have full information on incoming cargo before it even 
leaves the foreign port.
    As part of our immediate response to September 11th, Customs 
promptly sought, and the Congress promptly enacted, legislation that 
made the submission of data on incoming passengers to Customs' Advanced 
Passenger Information System mandatory for all airlines. That law was 
passed last November as part of the Aviation Security Bill. Initially, 
the Commissioner ordered all international airlines flying into the 
U.S. from abroad to submit advance passenger information to Customs, or 
face 100% inspection of people and goods departing their flights. This 
enabled Customs to better secure advance passenger information on all 
incoming international flights before the new law took effect.
    Beginning with the mega-ports that export to the U.S., we should 
establish a new international security standard for containers in order 
to protect this vital system of global trade. The core elements of the 
CSI are the following:

         First, we must establish international security 
        criteria for identifying high-risk cargo containers that 
        potentially pose a risk of containing terrorists or terrorist 
        weapons.
         Second, we must pre-screen the high-risk containers at 
        their port of shipment--in other words before they are shipped 
        to the U.S.
         Third, we must maximize the use of detection 
        technology to pre-screen high-risk containers. Much of this 
        technology already exists and is currently being used by the 
        U.S. Customs Service.
         Fourth, we must develop and broadly deploy ``smart'' 
        boxes--smart and secure containers with electronic seals and 
        sensors that will indicate to Customs and to the private 
        importers or carriers if particular containers have been 
        tampered with, particularly after they have been pre-screened.

    As you can glean from this list, technology and information are 
essential to a successful container security strategy, and to our 
counter-terrorist mission in general. And to put it simply, the more 
technology and information we have, and the earlier in the supply chain 
we have them, the better.
    I also look forward to the completion of the Automated Commercial 
Environment, or ACE, which as you know is an extremely important 
project for the Customs Service. ACE, our new system of trade 
automation, offers major advances in both the collection and sorting of 
trade data.
    We are also working with the Canadian and Mexican governments to 
improve information exchange and adopt benchmarked security measures 
that will expand our mutual borders and reduce the terrorist threat to 
most of the North American continent.
    The terrorists have already exploited one key component of our 
transportation system: commercial aviation. It is not at all 
unthinkable that they will seek to target others, including maritime 
trade. We believe our seaports and the system of global trade they 
support are vulnerable, and we believe that the U.S. and the Customs 
Service must act now to address this threat. Thank you.

    Chairperson Feinstein. Thank you very much.
    I am delighted to be joined by the ranking member, Senator 
Kyl of Arizona, with whom I have worked closely for a number of 
years now. Senator, do you wish to make a statement at this 
point?

  STATEMENT OF HON. JON KYL, A U.S. SENATOR FROM THE STATE OF 
                            ARIZONA

    Senator Kyl. Madam Chairman, I would like to put my 
statement in the record. It says very nice things about your 
calling this hearing today, and I would love to repeat that to 
everybody. In the interest of time, I will simply say that I 
thank you very much for holding a hearing on this very 
important topic. I appreciate our witnesses' being here, and I 
will just put that in the record.
    [The prepared statement of Senator Kyl follows:]

  Statement of Hon. Jon Kyl, a U.S. Senator from the State of Arizona

    Senator Feinstein, thank you for calling today's hearing on 
protecting our nation's seaports against terrorism. Even before the 
tragic events of September 11, this subcommittee concerned itself with 
the protection of Americans from terrorist acts within our shores. I 
know both of us have worked to address the problem of identifying 
terrorists and stopping them from entering the United States. However, 
I do not believe that the public is aware that our seaports offer 
access points for terrorists and their weapons, including weapons of 
mass destruction, to enter our country with relative ease.
    In October, Italian police discovered a suspected Al Qaeda 
operative hiding inside an ocean container. The container was equipped 
with a bed, toilet, satellite phone, computer, camera, airport maps, 
and airport security passes for Canadian, Thai, and Egyptian airports. 
All the necessary elements for another senseless act of terrorism were 
present. Thankfully, this terrorist was intercepted in time.
    The U.S. Custom service states that only two percent of the 5.5 
million cargo containers that entered our seaports in the year 2000 
were ever inspected. But it is also important to recognize that, of the 
two percent of truck-sized containers that were inspected, many were 
not inspected until they reached their final destination. This means 
that a container may arrive in the port of Los Angeles and travel 
across the United States by rail or truck and not be inspected until it 
reaches the East Coast.
    We are now aware of the economic fallout from the destruction of 
the World Trade Center towers by terrorists. The closing of any of the 
12 major American seaports would also have severe economic effects, not 
only locally but throughout the nation. It is increasingly important 
that local, state, federal, and private entities make a coordinated 
effort to render our seaports safe.
    I don't want to give the impression that Congress and the 
administration are not working on this issue. More that one-third of 
the 8,000 Coast Guard reservists have been called back to duty. This is 
a substantial call-up for an agency the size of the U.S. Coast Guard. 
The Coast Guard has boarded over 6,000 ships since the September 11 
attacks, and 112 ``security zones'' have been established around port 
installations, commercial vessels, coastal power plants, and other 
infrastructure. In addition, the Senate passed the Port and Maritime 
Security Act of 2001. This Act is intended to examine the problem of 
port security, coordinate resources, authorize appropriations for 
equipment, and increase criminal penalties. However, we must always 
look to do more.
    We have a very distinguished group of witnesses before us today. I 
am interested in examining with them how we can inspect a greater 
proportion of these containers without delaying the movement of goods 
through our ports, and what assistance Congress can provide to reach 
our objective of protecting our seaports, economy, and citizens.
    Again, I would like to thank Senator Feinstein for holding this 
hearing today. We have always had an excellent working relationship and 
I look forward to examining this issue with her, with the skillful 
assistance of these witnesses.

    Chairperson Feinstein. Thank you.
    Admiral please?

   STATEMENT OF REAR ADMIRAL KENNETH T. VENUTO, DIRECTOR OF 
 OPERATIONS POLICY, UNITED STATES COAST GUARD, WASHINGTON, D.C.

    Admiral Venuto. Madam Chairman, Senator Kyl, thank you for 
inviting the Coast Guard. Admiral Loy sends his regards.
    I have a written statement that I would like to present for 
the record, and I have also a few verbal comments.
    The Coast Guard is a unique organization. It is a military 
organization with maritime responsibilities, and it is a multi-
missioned service that has got unique civil law enforcement 
authorities. It is the principal agency responsible for 
maritime homeland security and for port security of the 
country.
    I would like to just review for a few minutes some of the 
things that the Coast Guard did immediately following the 
tragic events of 9/11 because they have a bearing on the sense 
of this hearing.
    The Coast Guard provided a massive response right after the 
events of 9/11 to protect and secure the ports, waterways, and 
coastal areas of the United States. We still are maintaining a 
heightened level of security throughout our waterways.
    We recalled from other missions 55 cutters, 42 aircraft, 
hundreds of small boats. We recalled port security units four 
of them that are reserve units, to provide heightened port 
security in New York, Boston, Seattle, and Los Angeles/Long 
Beach in particular.
    Our Captains of the Port restricted vessel traffic and 
actually had some port closures during the time period. We 
implemented security zones around critical infrastructure on 
the waterside as well as high-value critical vessels.
    To give you a sense, prior to 9/11, we roughly had about 12 
security zones throughout the United States in one given time. 
Today, ma'am, we have 130 security zones going on on a daily 
basis, or more.
    We implemented a 96-hour advance notice of arrival for 
ships coming from foreign ports to our country to provide a 
crew list as well as a sense of what their cargo was.
    We provided vessel escorts to vessels which were considered 
to be of high interest or high value. We did joint interagency 
boardings on some of those vessels to make sure that everything 
was okay.
    We implemented a prototype sea marshal program to ensure 
the internal security of vessels that could be used as 
potential weapons in our port areas in San Francisco and Los 
Angeles/Long Beach. We have extended the sea marshal program to 
roughly ten ports in the United States today, and we have done 
that by the call-up of reserves.
    Just to give you a sense of the reserve call-up, there are 
8,000 reservists in the Coast Guard Reserve. We called up 2,700 
as a result of the events of 9/11. We currently still have 
almost 1,900 on active duty today.
    Essentially, before 9/11, the Coast Guard's level of effort 
in our port security mission was around 2 percent. As a result 
of 9/11, we surged to almost 58 percent of a level of effort 
towards port security, which in the long run was not 
sustainable. Since then, as we have developed a more balanced 
approach, we have a level of effort, of total Coast Guard 
effort of about 21 percent of our mission requirements going to 
port security today.
    We have reached out to the Navy in partnership. We have 
today 13 Navy coastal patrol boats helping us do port security 
mission areas. We have also reached out to the Office of Naval 
Intelligence in a joint intelligence and information operation 
out of Suitland in our Intelligence Coordination Center.
    We have reached out to the International Maritime 
Organization. Last November, the Commandant personally went to 
the IMO and submitted a resolution for better international 
maritime security, and, Madam Chair, I have for your 
information a summary of the latest Intercessional Working 
Group that met in a special session. The results of that are 
provided to you and the members of the committee.
    The Commandant developed a ports, waterways, and coastal 
security strategic plan that essentially has the efforts of 
pushing our border outwards in kind of a layered defense, 
viewing our border as a continuum, basically originating from 
the country of origin all the way here to the United States. 
Our level of effort is to provide an appropriate and heightened 
level of security in our port areas, yet at the same time 
facilitating commerce.
    The Commandant has set five strategic goals: to build 
Maritime Domain Awareness, which is basically intelligence and 
information sharing in an interagency effort; to control the 
movement of high-interest vessels that ply our coastal areas 
and our ports; to enhance our presence through deterrence and 
response capabilities by having more harbor patrols and folks 
at our marine safety offices being able to do more security 
inspections of high-value facilities; to protect our critical 
infrastructure and to enhance Coast Guard force protection; and 
to improve domestic and international partnerships.
    The Commandant is in the process of developing a multi-year 
resource plan, and the Coast Guard appreciates the emergency 
response supplemental that was passed by the Congress in fiscal 
year 2002 to help us along in that process. And we seek your 
support for the President's budget because it is the first year 
of that 3-year plan in order to provide an appropriate level of 
resources to help in our port security efforts.
    I could go on, ma'am, about the value of our port areas. 
You did it very articulately in your opening comments about the 
value of our ports areas to our economy. Basically, our ports 
contribute about $1 trillion to the gross domestic product of 
this country, and there are 361 ports in the country, 95,000 
miles of coastline, 25,000 miles of inland waters, 3.4 million 
square mile exclusive economic zone, and we recognized that we 
have got the principal responsibility to ensure its security.
    We have focused on--we can't do that alone. It requires 
partnerships with other Federal agencies, State and local 
authorities and agencies, private sector partnerships, as well 
as international partnerships. And we look forward to 
continuing in that effort.
    Thank you, ma'am.
    [The prepared statement of Admiral Venuto follows:]

  Statement of Rear Admiral Kenneth T. Venuto, Director of Operations 
                   Policy, United States Coast Guard

    Good afternoon Madam Chairman and distinguished members of the 
Subcommittee. As Director of Coast Guard Operations Policy, I thank you 
for the opportunity to appear before you today to discuss the Coast 
Guard's maritime security strategy following the attacks of September 
11th.
    It has been said that the future has a way of arriving unannounced. 
The future arrived suddenly, violently and without warning on a clear 
day in September. In past years, our view of national security was 
projected mainly abroad, rather than within our own borders. Today, we 
suffer under the constant threat of terrorism as a means of coercion or 
retaliation, as much of the world already has, a reality that will no 
doubt continue well into the future.
    Prior to September 11th, the Coast Guard's efforts were directed 
toward executing and enhancing maritime safety and security, 
environmental protection, and homeland defense in addition to our other 
normal peacetime missions. However, September 11th marked a change in 
the comfort and confidence our Americans citizens had in their security 
and safety. Yet despite the obvious presence of the unseen enemy, the 
Coast Guard engaged in a massive response effort to protect our ports 
and Marine Transportation System. We also immediately escalated our 
force protection condition to protect our own people and facilities. 
The unique nature of the Coast Guard, as an agile emergency response-
oriented organization within the Department of Transportation, allowed 
us to immediately increase our security posture, using existing active 
duty, reserve, civilian, and auxiliary personnel; as well as units, 
ships, boats and aircraft. One of the biggest lessons learned from 
September 11th is that the nature of the threat facing all nations has 
changed dramatically. What we saw on September 11th was were hijackers 
taking over commercial flights for the sole purpose of turning them 
into human guided weapons of mass destruction. We must translate that 
thought pattern and recognize the vulnerability of our maritime 
environment. We must change our assumptions underlying maritime 
security.
    As a nation that depends so heavily on the oceans and sea lanes as 
avenues of prosperity, we know that whatever action we take against 
further acts of terrorism must protect our ports and waterways and the 
ships that use them. The Marine Transportation System of the United 
States handles more than 2 billion tons of freight, 3 billion tons of 
oil, transports more than 134 million passengers by ferry, and 
entertains more than 7 million cruise ship passengers each year. The 
vast majority of the cargo handled by this system is immediately loaded 
onto or has just been unloaded from railcars and truckbeds, making the 
borders of the U.S. seaport network especially vulnerable.
    Preventing another attack requires an understanding of the maritime 
dimension of Homeland Security and constant vigilance across every mode 
of transportation: air, land, and sea. The agencies within the 
Department of Transportation, including the U.S. Coast Guard, Federal 
Aviation Administration, Federal Highway Administration, Federal Motor 
Carrier Safety Administration, Federal Railroad Administration, Federal 
Transit Administration, the Saint Lawrence Seaway Development 
Corporation, and the Maritime Administration (MARAD), touch all three 
modes of transportation and are cooperatively linked. This is 
especially true of the maritime mode. Ensuring robust port and maritime 
security is a national priority and an intermodal challenge, with 
impacts in America's heartland communities just as directly as the U.S. 
seaport cities where cargo and passenger vessels arrive and depart 
daily. The United States has more than 1,000 harbor channels, 25,000 
miles of inland, intracoastal and coastal waterways, serving 361 ports 
containing more than 3,700 passenger and cargo terminals.
    Simply stated, the Marine Transportation System is a complex 
transportation network, as is clearly evident in ports across the 
nation. These port complexes continue to grow at an amazing rate. 
Current growth predictions indicate that container cargo will double in 
the next 20 years. The biggest challenge facing our Marine 
Transportation System is how to ensure that legitimate cargo is not 
unnecessarily delayed as we and other nations introduce enhanced 
security measures against some very real and potent threats. The 
importance of the U.S. Marine Transportation System and the priority 
placed upon it by the Department of Transportation cannot be 
overstated.
    I am very proud of the job our Coast Guard men and womean have been 
doing to deter potential future terrorist attacks in the maritime 
arena. Our people are working long hours, and 25 percent of our total 
Reserve population has been placed on active duty. In many ports, 
reserve members have been recalled to assist in a myriad of port 
security mission, such as the boarding and escorting of high interest 
vessels. However, this posture is not sustainable. . .nor is it an 
efficient or effective use of resources. Our challenge for the future 
is to determine what the new normalcy represents in terms of mission 
requirements and associated operational activity, while also ensuring 
that the Coast Guard is able to provide forces to meet its many 
responsibilities. While the most pressing security challenges have been 
met with existing authorities, we now must work to build a network of 
protections-one that transforms what has been a rapid response into a 
sustained effort that recognizes heightened ports, waterways and 
coastal security as a part of normal operations. In addition, marine 
security depends on the users of the maritime transportation system, 
including shippers and operators, and affects the trade corridors they 
use.
    The intermodal aspect of the Marine Transportation System requires 
the Department of Transportation and its agencies with a stake in the 
system to take a coordinated approach in addressingto address the 
expansive security requirements. Through interagency collaboration and 
extensive partnering with public, private, domestic and international 
entities, tremendous steps have been taken to address close the 
strategic gaps between the current and desired level of protection for 
our nation's ports and waterways. A key in this local outreach effort 
has been the continued engagement by the Captains of the Port with the 
private sector through such forums as the Port Readiness and Harbor 
Safety Committees. The teamwork and desire of the community to 
significantly enhance maritime security is exemplary. Equally important 
are partnering efforts with the international community. Recognizing 
that the maritime sector of the world's economy is the most valuable 
and the most vulnerable, at a recent International Maritime 
Organization meeting in DecemberFebruary, the Coast Guard proposed the 
development of concrete actions that will enhance maritime security 
worldwide. These proposed international recommendations are key in 
intercepting threats before they reach our borders, thus extending the 
borders of our domain awareness, an awareness that was lost leading up 
to the attacks of September 11th.
    While effective ports, waterways and coastal security is built upon 
the principles of awareness, prevention, response, and consequence 
management, the primary objectives are awareness and prevention, since 
we hope to avoid any need for future consequence management. Awareness 
helps focus resources and provides efficiency to prevention. Prevention 
places a premium on awareness, detecting, identifying, and tracking 
threats to our ports, waterways and coastal security. However, once 
terrorists or the means of terrorism are on the move towards or within 
the United States, the nation must have the means to detect and 
intercept them before they reach our borders and our transportation 
system. While there are no guarantees, there is good reason to believe 
that we can improve our national ability to detect potential threats 
through effective use of information. Exploiting available information 
to separate the good from the bad, and then stop the bad, is the heart 
of the Coast Guard developed Maritime Domain Awareness concept and 
overall Ports, Waterways and Coastal Security Strategy. This strategy 
must facilitate legitimate maritime commerce, which is supposed to 
double in the next 20 years, while filtering threats by using real time 
intelligence.
    The goals of the Coast Guard's Ports, Waterways and Coastal 
Security Strategy will be to:

         Build Maritime Domain Awareness.
         Control movement of High-Interest Vessels
         Enhance presence and response capabilities.
         Protect critical infrastructure and enhance USCG force 
        protection.
         Conduct Domestic and International Outreach.

    In summary, the Department of Transportation mounted a significant 
and rapid response to this severe and unexpected threat. Notably, 
maritime trade, which is critical to this country's economic strength, 
continues to move through ports with minimal interruption. It is no 
surprise that sustaining mobility will come at a higher cost to all of 
us. But the reality is that we live in a country that prides itself on 
the openness of its democracy, so we remain at risk to attacks of 
terrorism. It is incumbent upon our government to minimize this risk. 
With your support, the Coast Guard shall meet this challenge and ensure 
that our nation's Marine Transportation System remains the very best in 
the world.

    Chairperson Feinstein. Thank you very much, Admiral.
    We will begin the questions now, and let me begin with a 
brief statement. I really question the effort to stretch out 
our ports--I have lost the right words, but to stretch out our 
ports so that the inspection is done at the port of origin 
rather than at the port of delivery. I think we open ourselves 
to a huge loophole if we do that. I would not bet on a port in 
Pakistan really not being subject to bribery, to inspect a ship 
rented by Osama bin Laden that might contain a nuclear device 
in it. No way, no how would I ever think that that could be 
protected against, because I don't. So I think the only 
protection is our own port structure.
    Now, I would like to read a scenario. A suspicious ship is 
heading toward United States waters. It is carrying a type of 
cargo not found in its home port or its recent ports of call. 
Some of its crew are on an intelligence watch list because they 
are suspected of having links with radical Islamic 
organizations. And the ship is scheduled to arrive on the same 
day as a tanker carrying highly volatile fuel.
    According to national security expert Stephen Flynn, 
despite these red flags, this highly suspicious ship could 
still enter U.S. waters without being stopped or examined 
because information about the ship is scattered in bits and 
pieces throughout different agencies and, thus, no one is able 
to see the big picture--similar, Senator to what we have talked 
about before.
    So my question to any or all of you is: Is there a system 
in place to gather, compile, and analyze information from 
different agencies? You have mentioned the passenger manifest 
and crew manifest, but forget that. Is there a system in place 
that is interoperable to manage data, to be able to pick out a 
suspicious ship, and then, second, keep it from entering an 
American port?
    Admiral Venuto. Let me answer at least part of that 
question.
    First of all, I think there is no current system that looks 
at everything right now. We don't have an integrated 
information system per se. We in the maritime arena are 
beginning to develop that. The ideal situation would be that we 
get all the information electronically, both on the crew, the 
passengers, the cargo, it was all visible, and that the various 
agencies who had responsibility for whatever element that is--
whether it is the Coast Guard, whether it is the Customs 
Service, whether it is INS--could be able to get the 
information they need from that particular database.
    Chairperson Feinstein. You get intelligence data, FBI data, 
NSA data?
    Admiral Venuto. We get some of that, ma'am. Today we do. We 
require, as I said before, this 96-hour notice of arrival. What 
we get with that, of course, every ship is required to report 
their arrival 96 hours before, and they have to provide the 
crew list to us as well as----
    Chairperson Feinstein. Can you stop the ship?
    Admiral Venuto. We can prevent it from entering port if 
they don't get our permission, and we have, in fact, stopped 
vessels from coming in, told them that they had to stay out.
    We had a recent case on the West Coast, out in Hawaii, 
where a ship wanted to come in for whatever reason, and they 
wanted to come in before the 96-hour notice of arrival, and we 
told them they could not until they provided us the crew list 
so we could run it through our intelligence database, which we 
run with the Navy, and we check on the crew to see whether they 
have any particular----
    Chairperson Feinstein. Would you get information, for 
example, about a ship that Osama bin Laden may have rented or 
in some way controlled or leased? ``Leased'' is the same thing 
as renting.
    Admiral Venuto. It depends on how much intelligence 
information we have on----
    Chairperson Feinstein. I bet the answer is no.
    Admiral Venuto. Yes, you may not. You know, one of the 
things, if you notice, one of the issues that we brought up at 
IMO was visibility of ownership on ships.
    Chairperson Feinstein. What is IMO?
    Admiral Venuto. It is the International Maritime 
Organization. It is the organization that regulates 
international standards of shipping throughout the world. We 
have used it primarily--it was primarily as a safety 
organization, and through U.S. efforts we have brought up the 
safety standards of the international fleet throughout the 
world.
    Chairperson Feinstein. But you get no intelligence----
    Admiral Venuto. But we get no intelligence from them. The 
issue would be if--you may not have visibility of ownership. 
You may not have visibility of who, in fact, is using the ship 
to have their cargo come in currently. You may not have that. 
But Customs runs the cargo dimensions of it more. I am not as 
qualified to answer that particular question.
    Chairperson Feinstein. We have worked together on trying to 
make this data more interoperable between agencies, and the 
area that we haven't yet encountered is the seaport. And it 
seems to me that you ought to have intelligence data because 
this is the only way you are going to be able to prevent 
something from coming in, is some suspicion that is checked out 
as being, what they say, a good source so that you can take 
some action.
    Senator Kyl, Senator Schumer pointed out his deep concern, 
and I know that you share it, and I share it, too, and that is 
that there may 1 day be a nuclear device aboard one of these 
ships, and we don't have the equipment to really understand 
that once the ship comes in. So you have got to figure once the 
ship comes in, it is too late. So you have got to stop the ship 
from coming in.
    Now, how do you do that? Intelligence.
    Ms. Tischler. Senator Feinstein, if I might?
    Chairperson Feinstein. Yes.
    Ms. Tischler. I know that my colleague has something he 
wants to talk to you about, but I would just like to comment. 
So much of our sorting capability is based on advance 
information that we don't have because it is not enough in 
advance.
    It is Customs' position--and Senator Hollings and Senator 
Kyl and you have been very helpful in trying to see that the 
industry got us information enough in advance to even do the 
targeting. It is our premise that we need the information from 
the trade on point of departure from wherever it is they are 
coming from.
    Chairperson Feinstein. You don't get that now?
    Ms. Tischler. We don't get it--we get it--it is not 
mandatory. It is voluntary. And although we have a lot of 
helpers in the community and we do get quite a bit of 
information, the fact is that we don't get it in most cases 
timely enough. We don't get it complete enough. We don't get it 
accurately enough. We would like to lay down the data 
requirements from a uniformity perspective that we need every 
time so that the agencies can sort.
    With that in mind, I know the legislation pieces that are 
out there. One of them--I think it is Senator Hollings' bill--
addresses a 5-day lag time, which is okay if you are coming 
from Europe or from Asia, but if you are coming in from 
Venezuela or the Caribbean, they get there faster than they 
actually have to submit the manifest data.
    And just to add on to my colleague from the Coast Guard, we 
do get intelligence information. We have jointly boarded ships, 
Customs has with the Coast Guard and the FBI based on 
information received from our sister agencies in the 
intelligence community. And the only thing that is driving us 
right now is that need for advance information, the 
intelligence from the community, and the technology to actually 
sort the containers when they show up on our shores.
    We do have radiation detecting capabilities, but think of 
this: What if--and probably it will come shielded. So it is our 
contention--we have radiation pagers that our inspectors have 
that work pretty well if there is a radiation source. If it is 
shielded, it is not going to pick it up. So I think we need 
lead detectors. And I am not trying to be facetious, but we 
sort of have to expand our universe in terms of the technology 
that is available to all the agencies that are pitted against 
the problem.
    We have radiation portal devices that have been used on the 
Russian border, actually, against smuggled nuclear material in 
one lane of traffic. We asked if it could be stretched to a 
cut, like, for instance in Miami. I am a Miami girl. Government 
cut is where all the boats come in through when they are going 
to Dodge Island. It would be so much better to be able to sort 
a large vessel all at one time to see if there was a radiation 
source on the vessel before it got to the dock, if the Coast 
Guard missed it out at sea. And they need their own portable 
radiation detectors in order to really help.
    But right now, some of the technology is in the works 
through DOE and their labs and some of it is in the works 
through DOD, and they are sharing with us so that we are trying 
to work on commercializing these pieces of equipment, which we 
would be glad to show you at your convenience if you come down 
to the port at--Los Angeles seaport or Oakland. And I think 
that is the answer.
    So it is really a meld of the intelligence, the sharing of 
information, the databases themselves, the advance information. 
That 2 percent figure that we were talking about is based on a 
sorting of high-risk cargo. And at L.A. seaport, I know----
    Chairperson Feinstein. You know where I am going, because I 
have been through the border stuff now for 10 years since I 
have been here. Everything has been to speed trade: Let it go 
through, ask questions later. And we are now in an era where we 
can't do that.
    Where I think we should go is how do we set the dynamic 
whereby private companies know they have to do greater 
diligence with respect to what goes on a ship because that ship 
may well be stopped and sit offshore for a month while the 
Coast Guard or some other agency goes through it bit by bit by 
bit if they don't do that due diligence.
    And I agree with you on the shielding. I agree with you on 
the cost of the X-rays. I am very worried that--Port of Long 
Beach will speak for itself, but I know the inability--I talked 
to Customs people in Los Angeles. I know how overstressed they 
are and undermanned, and the load is just tremendous.
    So my feeling is to create a situation whereby the 
companies that do the loading aren't going to take the risk of 
a ship getting stopped as a first step.
    I want to give Senator Kyl a chance, but did you want, 
Captain Schubert----
    Captain Schubert. Yes, I would like to make a few comments.
    Chairperson Feinstein. And then Senator Kyl.
    Captain Schubert. First of all, I don't think any of the 
panelists have any disagreement with you whatsoever about 
increasing--that we need to increase the level of security in 
our ports. But when it comes to cargo security, especially, and 
the way intermodal operations work today, all of the agencies 
here--the Coast Guard, Customs, the Department of 
Transportation, the modal administrators, all agree that when 
it comes to cargo coming from international ports, we must have 
some form of prescreening in the foreign ports.
    Now, we have a Container Working Group where all three 
agencies have worked together on this issue, and we have 
identified a working plan both short term and long term to 
address this issue. And I am very confident that we will have a 
combination of technology, more inspections in foreign ports, 
not necessarily by U.S. Government people, but we need to be 
able to profile the cargo before it is loaded on the ship.
    Chairperson Feinstein. Who does the inspections in foreign 
ports? And how many foreign ports would this be?
    Captain Schubert. Well, there are a number of foreign 
ports, but there are something like 12 transshipment ports, 
major transshipment ports, before, you know, the cargo comes to 
the United States. We are talking about containers now that 
represent probably 80 percent of the cargo coming to the United 
States.
    So I know it seems like a lot of ports, but we are really 
concerned about the ports just prior to leaving to come to the 
United States. Some cargo might be transshipped several times 
through several countries, for example. But the point is--and 
the best illustration that I have given many, many times since 
9/11 is when we had the tragic events of 9/11, Secretary Mineta 
basically brought down the whole airline industry for 4 days to 
make sure that each plane was checked for safety and that there 
wasn't any more terrorists on the planes. And that took 4 days 
before we could get the system back up and operating again.
    If we had a similar situation with a container where we had 
a credible threat, all we knew is that there might be ten 
containers coming from ten different directions with a dirty 
bomb or some other weapon of mass destruction in it, and we had 
to shut down our ports and our intermodal system to do the same 
thing that we did on the air side, we would have to shut our 
system down for 4 months. That is by some estimates, up to 4 
months, just to check all the containers. If anything can bring 
our economy down, that can.
    So we need to have a combination and several layers of 
security in the ports, on the ships, and also some sort of 
preclearance of cargo before it is actually loaded on the ship. 
And that is something that I think all three agencies here, 
plus listening to the stakeholders--the carriers, the shippers, 
they all agree that we need to come up with an efficient system 
that can do that to increase security.
    Chairperson Feinstein. Thanks very much.
    Senator Kyl. Thank you. Obviously, there is just a lot that 
is going to have to be done to maintain our commercial 
activities, but at the same time begin to deal better with 
terrorism than we have in the past. And obviously, too, any 
suggestions that you all have that we can help on I think would 
be very welcome.
    In that regard, it is pretty clear that this is going to 
cost a lot of money, and particular, Commissioner Tischler, let 
me ask you: What would be the effect of taking the Customs user 
fees away from the Customs Service in terms of your ability to 
perform this task?
    Ms. Tischler. My personal opinion is it would severely 
hamper us. I know that there is a lot of controversy about the 
user fees. I know that the big user fees that go into the COBRA 
fund, for instance, pay for some of our people, about 1,200 of 
them, and pay for all of the overtime and quite a bit more. And 
so we are--for instance, if that one sunsets--and it is 
supposed to sunset September 30, 2003--we would be severely 
hampered in how we operated. Most of the overtime--all of the 
overtime that is being done by the inspectors now has really 
depleted the fund since 9/11. So as just a personal sentiment, 
because we have been struggling with the whole COBRA concept 
for the last 2 years as if it might sunset in 2003, it would 
put a big crimp in our activities.
    Senator Kyl. I think--correct me if I am wrong--that the 
biggest single--and I know there are several different funds, 
but the biggest is the merchandise processing fee fund.
    Ms. Tischler. Yes, sir.
    Senator Kyl. And I have a figure for that of, in the year 
2001, $957 million, so just under $1 billion. And I realize 
that this is scored against Customs. Technically it goes into 
the general fund, but if you were to not have the benefit of 
that in your appropriations, I presume it would be fairly 
devastating, would it not?
    Ms. Tischler. It would absolutely be devastating. I think 
our total budget is closing in on $3 billion thanks to Congress 
and the administration. So to take that much out, if it were as 
the offset, would be truly devastating.
    Senator Kyl. Right. Now, you mentioned offset. The reason I 
bring this up is that at least one suggestion is that the way 
to pay for about $15 billion in subsidies in the energy bill 
from the Finance Committee is to apply these Customs user fees. 
And I have tried to make the point that that is not probably a 
good idea, and I made that point to Governor Ridge today as 
well. And I am sure that if that is still an idea that is out 
there, you will want to make sure that folks understand the 
implications of it were that to be done.
    Ms. Tischler. Yes, sir. I will refer it to our Office of 
Finance, who I am sure will talk to OMB on the scoring issues.
    Senator Kyl. It is not just a matter of on the scoring 
issues. It is a matter of Congress deciding to take those fees 
and put them to another object here, in this case, the energy 
bill.
    Ms. Tischler. Right, sir. I understand.
    Senator Kyl. Okay. Thanks.
    I need to apologize to everyone. Not only was it a bad time 
at the beginning, but I also have a 4:15 that I did not realize 
earlier. And so I am not going to be able to spend as much time 
with all of you as I would like, but I don't want you to infer 
from that that I am not just as interested as Senator Feinstein 
is in trying to figure out ways to deal with this problem.
    We have got a bill now that deals with individuals 
traveling to the country from abroad. In some respects, that is 
easier to deal with. In other respects, it is not. But we need 
to do the same thing here with regard to cargo. And just as we 
do with people, we don't want to slow them down. We want to get 
as many people coming to the United States as possible. But 
since they are our guests, we also want to make sure that none 
of them are unwanted guests. And that same thing goes for any 
cargo, of course.
    So, again, I regret that I can't stay here. I have read all 
of your testimony, and I regret that I won't hear the other 
panel. But, again, Madam Chairman, I thank you very much for 
your continued interest in this subject, and I look forward to 
working with you on ways that we can improve the ability to 
detect material that shouldn't be coming into the country.
    Chairperson Feinstein. Thank you very much. Thank you.
    Before we move on to the other panel, I want to just ask, 
this business of having cargo checked in other ports before it 
comes on, and you mentioned that check would be confined to the 
12 largest----
    Captain Schubert. No, I didn't. I didn't----
    Chairperson Feinstein. You said that ports that handle a 
large percent are really 12 of them, so I just gathered from 
that that you were saying----
    Captain Schubert. We could start with the major ports, and 
this is an issue that----
    Chairperson Feinstein. Does that include Karachi?
    Ms. Tischler. No.
    Chairperson Feinstein. No? See, there----
    Captain Schubert. Karachi wouldn't be----
    Chairperson Feinstein. Pardon me?
    Captain Schubert. Karachi wouldn't be one of the 12 ports, 
no, ma'am.
    Chairperson Feinstein. Well, there is your weak link.
    Captain Schubert. Right. But what we need in the industry 
today--and I am speaking from my 27 years of experience in both 
being a ship's captain and sailing on ships, handling over $7 
billion in exports for both freight forwarders and shippers. I 
really do understand how complex the industry is, and knowing 
that I can still make this next statement very confidently: The 
industry needs more discipline than it has had in the past. We 
have cases now, for example, the way the industry works today, 
where a container can be loaded on a ship and be halfway across 
the Atlantic Ocean before anybody gets any documentation on 
what the container is, what is in the container. That simply 
can't continue to be a business practice that we can accept.
    What we are talking about--and I am really getting more 
into the Customs issue here, but it is reporting, mandatory 
reporting of what is said to be in the containers. And from 
that information and the history of the shippers that are out 
there, you could put together a profiling to determine what 
containers really need to be inspected, what containers don't 
have to be inspected.
    This is just an important element of adding security to our 
maritime system. It does not in any way take away from the 
importance of what you said earlier about improving the 
security in our ports. It is just another layer that has to be 
thrown in there, and it is something that is absolutely 
necessary, in my opinion.
    Chairperson Feinstein. I appreciate that, and it is not up 
to me to argue. If the administration wants to move in this 
direction, that is up to the administration, certainly. But I 
would like you--I have very deep concerns about it because I 
think it will just create a--you know, we know there are--I 
won't say how many, but there are a number of missing tactical 
nuclear weapons. We know that there is access to all of this 
stuff. And, you know, my goal is to keep it out of this 
country, and the only way I know to do it is to secure our 
ports to be able to keep it out. And I have always very deeply 
believed if it comes to commerce or if comes to protection of 
our people, the protection of our people comes first.
    And I have got news. I don't mind having our ports shut 
down for 4 months if it is going to prevent a nuclear weapon 
from coming into this country. For me, that is a piece of cake. 
I mean, you do it.
    When I was mayor of San Francisco, I told my airport 
director, who is now director of the airport in Toronto, if a 
bomb ever leaves here on a plane, don't show up, you don't have 
a job the next day. And, you know, you have got to make your 
people move and understand and really work, and at the time we 
even had bogus dogs at the airport. They weren't real dogs--I 
mean trained to sniff bombs. And that was San Francisco 
International Airport.
    Now, that was a long time ago. Things have changed a lot 
since then. But I don't think there is anything that replaces 
vigilance at our ports or keeping dangerous ships out of our 
ports. And by dangerous ships, I mean where your intelligence 
alerts that there is a problem. Then you delay it and you see 
that there is nothing aboard that ship.
    Anyway, does anyone have anything else they want to say?
    Admiral Venuto. Could I just say, Madam Chairman, just a 
few things?
    Chairperson Feinstein. Sure.
    Admiral Venuto. I think what we are trying to describe here 
is a risk management kind of regime where we try to establish 
security protocols in partnership with other agencies, with the 
private sector, and with international partners that are 
legitimate traders. And if you establish that system of 
protocols, that helps you then to focus the resources that we 
have on those suspect areas you talk about, where if we have a 
system of protocols with the 12 major ports that we trade with 
and everybody abides by the system of security protocols, then 
we can focus our efforts on those more suspect ships and 
containers and shippers that don't have the same system of 
protocols.
    Just as our intelligence agencies--I mean, we have, we say, 
high-interest vessels. I can't really go into the information 
as to what classifies a high-interest vessel because it is 
classified. But we recognize that there are certain areas of 
the world, certain crew members, et cetera, that we need to 
focus on, and that helps us take our scarce resources and focus 
in that area.
    If you look at joint inspection areas, one of the protocols 
that we would like to set up is to actually have inspectors in 
other countries, U.S. inspectors, or U.S. inspection of their 
security procedures--and they would do the same to us; it would 
have to be a partnership--in those areas. So it is a matter of 
profiling the right suspect vessels with our scarce resources 
to do that, recognizing that it is a risk management regime.
    Chairperson Feinstein. Thanks very much, Admiral. I 
appreciate it. Thank you very much for being here. We will move 
on to the second panel.
    Thank you very much for being here. And if I may, because 
there are five people, perhaps I will do the introductions 
seriatim, one by one. Let me find my introduction list here.
    The first witness is Richard Steinke from the Port of Long 
Beach, California. He is the executive director of the port, 
the busiest port in the United States and, with the Port of Los 
Angeles, the third largest port complex in the world. During 
his 5 years there, container volume passing through the port 
increased by 30 percent, and last year alone, nearly $200 
billion in cargo passed through that port. Mr. Steinke is also 
the chairman of the board of the American Association of Port 
Authorities, an alliance of more than 150 port authorities in 
the United States, Canada, the Caribbean, and Latin America. 
Welcome, and we will be very interested in what you have to 
say.

    STATEMENT OF RICHARD D. STEINKE, CHAIRMAN OF THE BOARD, 
    AMERICAN ASSOCIATION OF PORT AUTHORITIES, AND EXECUTIVE 
      DIRECTOR, PORT OF LONG BEACH, LONG BEACH, CALIFORNIA

    Mr. Steinke. Thank you, Madam Chair, and thank you for this 
opportunity to address you on the important matter of port 
security. Enhancing security is the top priority for America's 
ports today.
    Safety and protection have been of paramount concern to the 
Port of Long Beach. Prior to the events of September 11th, our 
focus, as well as many other ports, was primarily on crime 
prevention, with an emphasis on cargo theft. Following the 
tragic terrorist attacks on the World Trade Center and the 
Pentagon, the focus of our efforts to protect the port and 
facilitate commerce and the free flow of goods has been 
broadened to include prevention and response to acts of 
terrorism.
    Besides being one of the busiest ports in the world, the 
Port of Long Beach as well as the Ports of Oakland and San 
Diego in California represent part of the National Port 
Readiness Network. This designation by the Maritime 
Administration requires the port to be prepared and ready 24/7 
to respond to national emergencies whether they are military or 
civil in nature. Our deepwater entryway is a Federal 
navigational channel that must remain clear and operational at 
all times so that ships carrying strategic cargo can enter or 
exit the port unimpeded.
    The roadways and railways leading to these load-out centers 
must be adequately secured also to provide for movement of 
goods and people. While the Port of Long Beach's role in 
responding to national emergencies is a major one 
strategically, each and every port in the United States has the 
potential for playing a significant part in the security of 
this country by serving as a conduit for a sound national 
economy.
    Long before the events of September 11th, the port realized 
a need for maintaining the highest levels of security possible. 
To that end, the Port of Long Beach has proactively developed a 
port security plan to create and maintain a level of security 
that might serve as a model for the maritime industry.
    Over the last decade, the Port of Long Beach has created a 
Port Crime and Security Committee, made up of industry 
stakeholders, terminal operators, Federal, State, and local law 
enforcement agency representatives, and terminal security 
officials. We meet on an ongoing basis to discuss issues 
related to crime, safety, and security. These meetings shape 
the infrastructure and open lines of communications among 
industry and law enforcement responsible for the safety of the 
people who work in the ports and the security of the cargo that 
move through it. Since September 11th, we have been operating 
at a heightened security level. We have increased the number of 
committees and task forces to address the expanded needs and 
new charge for greater protection of our port.
    Greater security is not limited simply to the movement of 
cargo through the port. Every capital project that we undertake 
now has a new element built into it. Our plans for a new bridge 
or pier, widening of a channel, or erecting a crane all now 
must include considerations for security enhancements. We have 
recently completed a detailed security assessment of our 
waterfront facilities, including the Port Harbor Patrol, Long 
Beach Police Department, and the U.S. Coast Guard, and expect 
that this assessment will suggest additional improvements and 
upgrades. Those refinements will require funding not heretofore 
anticipated.
    Basically, what I am saying is the new demands for security 
will require new sources of fundings. Funding considerations 
should be given to supplement the manpower needs of the 
participating Federal and local law enforcement agencies. We 
especially would like to emphasize our support for increased 
funding for the U.S. Coast Guard and the U.S. Customs Service. 
Approximately 35 percent of all waterborne cargo containers 
that come into the United States come through the Los Angeles/
Long Beach Port Complex, so the workload of these two agencies 
is many times above the level expected of them in other ports 
throughout the country.
    The Port of Long Beach believes there needs to be increased 
funding for U.S. ports and Federal agencies, as well as a 
proper balance of dollars and personnel to the ports with the 
greatest cargo volumes and vulnerabilities.
    It is my honor to serve as chairman of the American 
Association of Port Authorities. AAPA strongly supports Federal 
programs aimed at protecting America's seaports from acts of 
terrorism and other Federal crimes. Following September 11th, 
ports took immediate action and have invested millions of 
dollars to heighten security at their facilities. AAPA believes 
increased funding is required for the Federal agencies to take 
the lead on maritime security such as the U.S. Coast Guard and 
the U.S. Customs, as I noted previously.
    In addition, America's public ports need Federal financial 
help to implement security enhancements in a timely and 
effective manner. The $93.3 million provided by Congress is a 
good first step, but significantly more money will be needed. 
Because each port has unique characteristics, a one-size-fits-
all approach does not work. Seaport security should be 
coordinated at the local level, working with the U.S. Captain 
of the Port to establish local security committees and develop 
appropriate security measures based on threat and vulnerability 
assessments.
    There are a number of other initiatives that could be 
examined in a review of seaport security issues as they relate 
to international maritime traffic into and out of ports. 
Automatic Identification Systems that provide a ship's 
identity, position, course, and speed, seafarer identification 
and background check, port-of-origin container examinations, as 
we have talked about before, are all items that need further 
investigation.
    I would be remiss if I did not make special note of the 
exemplary job done by the Coast Guard following the tragic 
events of September 11th. They deserve recognition for taking 
the lead in exerting positive control over the port at a time 
when confidence and assurance were needed. The Coast Guard 
continues to play an instrumental role in our efforts to keep 
our people at the Port of Long Beach and the other ports in the 
United States safe.
    In closing, I thank you, Madam Chair, and the members of 
the Senate Judiciary Committee on Technology, Terrorism, and 
Government Information for your interest and concern in seaport 
security issues.
    Thank you.
    [The prepared statement of Mr. Steinke follows:]

     Statement of Richard Steinke, Chairman of the Board, American 
 Association of Port Authorities, and Executive Director, Port of Long 
                                 Beach

    Madam Chair, members of the committee. Thank you for this 
opportunity to address you on the important matter of Port security. 
Enhancing security is the top priority for America's ports today.
    Safety and protection have been of paramount concern to the Port of 
Long Beach. Prior to the events of September 11, our focus was 
primarily crime prevention with an emphasis on cargo theft. Following 
the tragic terrorist attacks on the World Trade Center and the 
Pentagon, the focus of our efforts to protect the Port and facilitate 
commerce and the free flow of goods has been broadened to include 
prevention and response to acts of terrorism.
    Besides being one of the world's busiest seaports, the Port of Long 
Beach (as well as the Ports of Oakland and San Diego in California) is 
part of the National Port Readiness Network. This designation by the 
Maritime Administration requires the Port to be prepared and ready 24/7 
to respond to national emergencies whether they are military or civil 
in nature. Our deepwater entryway is a federal navigational channel 
that must remain clear and operational at all times so that ships 
carrying strategic cargo can enter or exit the Port unimpeded.
    The roadways and railways leading to these load-out centers must be 
adequately secured to provide for movement of goods and people. While 
the Port of Long Beach's role in responding to national emergencies is 
a major one strategically, each and every port in the United States has 
the potential for playing a significant part in the security of this 
country by serving as a conduit for a sound national economy.
    Long before the events of September 11, the Port of Long Beach 
realized a need for maintaining the highest levels of security 
possible. To that end, the Port of Long Beach has proactively developed 
a port security plan to create and maintain a level of security that 
might serve as a model for the maritime industry.
    Over the last decade, the Port of Long Beach created a Port Crime 
and Security Committee. Made up of industry stakeholders; terminal 
operators; federal, state, and local law enforcement agency 
representatives; and terminal security officials; we meet on an ongoing 
basis to discuss issues related to crime, safety and security. These 
meetings shaped the infrastructure and opened lines of communications 
among industry and law enforcement responsible for the safety of the 
people who work in the ports and the security of the cargo that move 
through it. Since September 11, we have been operating at a heightened 
security level. We have increased the number of committees and task 
forces to address the expanded needs and new charge for greater 
protection of our port.
    Greater security is not limited simply to the movement of cargo 
through the Port. Every capital project that we undertake now has a new 
element built into it. Our plans for a new bridge or pier, widening of 
a channel, or erecting a crane all now must include considerations for 
security enhancements. We have recently completed a detailed security 
assessment of our waterfront facilities, including Port Harbor Patrol, 
Long Beach Police Department, and the U.S. Coast Guard, and expect that 
this assessment will suggest improvements or upgrades. Those 
refinements will require funding not heretofore anticipated.
    Basically, what I am saying is that the new demands for security 
will require new sources of funds. Funding considerations should be 
given to supplement the manpower needs of the participating federal and 
local law enforcement agencies. We especially would like to emphasize 
our support for increased funding for the U.S. Coast Guard and the U.S. 
Customs Service. Approximately 35% of all waterborne cargo that comes 
into the United States comes through the Los Angeles/Long Beach Port 
Complex, so the workload of these two agencies is many times above the 
level expected of them in other ports throughout the country.
    The Port of Long Beach believes there needs to be increased funding 
for the U.S. ports and federal agencies, as well as a proper balance of 
dollars and personnel to the ports with the greatest cargo volumes and 
vulnerabilities.
    It is my honor to serve as Chairman of the American Association of 
Port Authorities. AAPA strongly supports federal programs aimed at 
protecting America's seaports from acts of terrorism and other federal 
crimes. Following September 11, ports took immediate action and have 
invested millions of dollars to heighten security at their facilities. 
AAPA believes increased funding is required for the federal agencies 
that take the lead on maritime security, such as the U.S. Coast Guard 
and U.S. Customs as I noted previously.
    In addition, America's public ports need federal financial help to 
implement security enhancements in a timely and effective manner. The 
$93.3 million provided by Congress is a good first step, but 
significantly more money is needed. Because each port has unique 
characteristics, a one-size-fits-all approach does not work. Seaport 
security should be coordinated at the local level, working with the 
U.S. Coast Guard Captain of the Port to establish local security 
committees and develop appropriate security measures based on threat 
and vulnerability assessments.
    There are a number of other initiatives that could be examined in a 
review of seaport security issues as they relate to international 
maritime traffic into and out of the ports. Automatic Identification 
Systems (AIS) that provide a ship's identity, position, course and 
speed, seafarer identification and background check, port of origin 
container examinations, are all items that need further investigation.
    I would be remiss if I did not make special note of the exemplary 
job done by the Coast Guard following the tragic events of September 
11. They deserve recognition for taking the lead in exerting positive 
control over the Port at a time when confidence and assurance were 
needed. The Coast Guard continues to play an instrumental role in our 
efforts to keep our people and the Port of Long Beach safe.
    In closing, I thank you Madam Chair and all the members of The 
Senate Judiciary Subcommittee on Technology, Terrorism and Government 
Information for your interest and concern in seaport security issues.

    Chairperson Feinstein. Thank you very much, Mr. Steinke.
    Amanda DeBusk, welcome. Amanda DeBusk is the former 
Commerce Department Assistant Secretary for Export Enforcement. 
She was head of a 165-person organization in charge of 
enforcing U.S. export controls and international trade 
negotiations and initiatives. She is a former Commissioner on 
the Interagency Commission on Crime and Security in U.S. 
Seaports.
    Welcome.

 STATEMENT OF F. AMANDA DEBUSK, FORMER ASSISTANT SECRETARY FOR 
    EXPORT ENFORCEMENT, DEPARTMENT OF COMMERCE, AND FORMER 
 COMMISSIONER, INTERAGENCY COMMISSION ON CRIME AND SECURITY IN 
                U.S. SEAPORTS, WASHINGTON, D.C.

    Ms. DeBusk. Thank you very much.
    Today, I would like to highlight some of the 
recommendations of the Seaports Commission and, in particular, 
to talk about some of those recommendations that were not 
completely addressed in the Port and Maritime Security Act that 
passed the Senate this past December.
    Let me begin by providing some context for the Commission's 
study. The Seaports Commission was looking at terrorist threats 
in connection with the new millennium. We were concerned about 
how wide open our seaports are compared to our airports. In 
most cases, there is easy access to the seaports.
    Criminal activity at the seaports is a big problem. The 
Commission found significant criminal activity was taking place 
at most of the 12 seaports surveyed. One of the cases my former 
office investigated involved a riot control vehicle that was 
exported to China as a fire truck. The vehicle was huge. It 
resembled a tank, and it had a turret on the top for spraying 
pepper gas. It was exported in a container, and at the time no 
one knew what was inside that container. So if someone can 
smuggle a tank through a seaport, it does not make us feel 
secure about catching chemical weapons or a nuclear bomb.
    Chairperson Feinstein. Did it come from a California port?
    Ms. DeBusk. Yes, it did.
    Chairperson Feinstein. I won't ask--or shall I ask which 
one?
    Ms. DeBusk. Los Angeles.
    Chairperson Feinstein. Thank you.
    Ms. DeBusk. The Commission found that the state of security 
at seaports generally ranged from poor to fair, with a few 
exceptions where the security was good. The Commission made 
recommendations that, if implemented, would go a long way in 
combating terrorism at our seaports. I will discuss 
recommendations on physical security, cargo security, and data 
needs, something that you had touched upon.
    First, concerning physical security, the Commission 
provided recommendations on minimum physical security standards 
covering fences, lights, gates, restrictions on vehicle access, 
restrictions on carrying firearms, the establishment of a 
credentialing process, considering criminal background checks 
for those with access to sensitive areas of the port, and 
development of a private security officer certification 
program.
    The Port and Maritime Security Act provides for the 
development of Maritime Facility Security Plans that would 
address these needs. However, to develop and implement these 
plans, which are very complex, would take a long time. While 
there is authority for interim measures, there is no standard 
for these interim measures. An alternative might be to 
immediately put in place standards identified by the Commission 
and permit waivers if a seaport had a good reason not to 
implement a particular requirement. That would move us along 
more quickly.
    For example, we could put in place a restriction on 
carrying guns at seaports. It makes no sense to prohibit nail 
clippers at airports but allow guns at seaports. Of the 12 
seaports surveyed by the Commission, not a single one 
restricted firearms. And to my knowledge, this situation has 
not changed.
    Chairperson Feinstein. Could you explain that? When you say 
firearms, your officers would carry firearms.
    Ms. DeBusk. That is exactly right.
    Chairperson Feinstein. But what do you mean by restricting 
firearms?
    Ms. DeBusk. Suppose that I, private citizen, Amanda DeBusk, 
decided to stroll down to the port, I could have my gun with 
me.
    Chairperson Feinstein. Interesting.
    Ms. DeBusk. Exactly right. This would seem something that 
is so basic that it is--it was pretty amazing to us that not a 
single seaport had that restriction.
    Chairperson Feinstein. None of the major seaports had any 
restriction on anybody walking in with a gun?
    Ms. DeBusk. That is correct. You are correct.
    Chairperson Feinstein. Thank you.
    Ms. DeBusk. So certainly the Seaport Commission, which was 
composed of officials from law enforcement agencies, 
recommended that arms at the seaport be restricted to law 
enforcement personnel.
    Another example of a basic security requirement that could 
immediately be implemented is a restriction on private vehicle 
access to the ports. At many ports, access is uncontrolled. At 
one of the ports I visited, we saw a line of vehicles parked 
right beside the vessel. We were told that these were the dock 
workers' vehicles parked there for convenience. At the time, we 
were concerned that the vehicles could be hiding places for 
smuggled drugs. Today we must consider the possibility that a 
car bomb or a dirty nuclear weapon could be hidden in those 
vehicles. So, once again, that is something that could be 
implemented immediately.
    Now I would like to turn to recommendations concerning 
cargo security. We need better information about cargo 
transiting the ports. On the import side, the information is 
often vague, and import entries may be filed 5 days after 
arrival. On the export side, information is likewise often 
vague and is required 10 days after export. As the Seaports 
Commission noted, consolidated shipments often contain no 
information on what is included in a container, listing the 
cargo as ``various'' or ``assorted merchandise.''
    The Port and Maritime Security Act would tighten up on the 
timeliness by requiring information on imports to be provided 
prior to importation and information on exports to be provided 
within 24 hours of when cargo is delivered to the marine 
terminal operator. However, the legislation does not address 
the specificity of the information, which goes to comments from 
the earlier panel about targeting. A concern with providing 
more detailed information is that it would allow high-value 
cargo to be targeted for theft by those with access to the 
information.
    One solution might be to tighten up on existing 
requirements. The Seaports Commission studied compliance. In a 
1999 study, Customs found a 53 percent discrepancy rate for 
ship manifests in terms of the number of containers on board. 
Over half of the vessels had either more or fewer containers on 
board than were reported.
    There are also numerous instances of people being smuggled 
in containers. You told us about the Al-Qaeda operative, Farid. 
Unfortunately, it is a common occurrence for illegal aliens to 
be smuggled into the United States in containers. The Seaports 
Commission catalogued literally hundreds of these situations. 
It used to be that these individuals were smuggled relatively 
short distances, but now they are coming long distances. In Los 
Angeles, Immigration arrested 30 illegal aliens in containers 
that had come all the way from China.
    Clearly, we do not have a handle on how many containers are 
transiting our seaports or on what is in those containers. The 
Seaports Commission found that lax compliance and non-
compliance may be related to penalties. The maximum penalty for 
incorrect information is $1,000. The Seaports Commission noted 
that carriers appear to treat the penalties as a cost of doing 
business. If the Congress legislated higher penalties, 
compliance probably would improve.
    Last, I would like to mention data issues, starting with 
the basics. In analyzing crime at the seaports, the Seaports 
Commission encountered a lack of data. The Commission 
recommended that databases be modified to ensure the collection 
and retrievability of data relating to crime at the seaports. 
The Port and Maritime Security Act does not address this issue. 
The Congress could task an agency with responsibility for data 
gathering and provide the resources. With better data, law 
enforcement agencies could identify patterns and weaknesses at 
particular ports.
    I would like to close with a statement in the Commission's 
report: ``A terrorist act involving chemical, biological, 
radiological, or nuclear weapons at one of these seaports could 
result in extensive loss of lives, property, and business, 
affect the operations of harbors and the transportation 
infrastructure, including bridges, railroads, and highways, and 
cause extensive environmental damage.''
    We need to take action now to reduce the risk of future 
catastrophes. Thank you for inviting me to testify.
    [The prepared statement of Ms. DeBusk follows:]

 Statement of F. Amanda DeBusk, Former Assistant Secretary for Export 
             Enforcement, United States Commerce Department

    Chairman Feinstein, Senator Kyl, members of the Committee, I am 
honored to be here today. I am speaking to you as a former Commissioner 
on the Interagency Commission on Crime and Security in U.S. Seaports. 
President Clinton established the Commission by Executive Memorandum on 
April 27, 1999. I served on the Commission as the Commerce Department 
representative in my capacity as Assistant Secretary for Export 
Enforcement.
    Senator Bob Graham was instrumental in the creation of the 
Commission. Chairman Feinstein testified before the Commission on 
February 16, 2000 at a hearing in San Francisco. Senators Hollings and 
Graham introduced legislation implementing many of the Commission's 
recommendations. That legislation passed the Senate on December 20 as 
the Port and Maritime Security Act of 2001.
    Today I would like to highlight the Commission's recommendations 
that are most important for this Committee and that are not completely 
addressed in the Port and Maritime Security Act. Let me begin by 
providing some context for the Commission's study. The Seaports 
Commission was looking at terrorist threats in connection with the 
events celebrating the New Millennium. We were concerned about how wide 
open our seaports are compared to our airports. In most cases, there is 
easy access to the seaports.
    Criminal activity at the seaports is a big problem. The Commission 
found that significant criminal activity was taking place at most of 
the 12 seaports surveyed. One of the cases my former office 
investigated involved a riot control vehicle that was exported to China 
as a fire truck. The vehicle resembled a tank and had a turret for 
spraying pepper gas. It was exported in a container, and no one knew at 
the time of export what was inside. If someone can smuggle a tank 
through a seaport, it does not make us feel secure about catching 
chemical weapons or a nuclear bomb.
    The Commission found that the state of security at seaports 
generally ranged from poor to fair, with a few exceptions where the 
security was good. The Commission made recommendations that, if 
implemented, would go a long way in combating terrorism at our 
seaports. I will discuss some recommendations on physical security, 
cargo security and data needs.
    First, concerning physical security, the Commission provided 
recommendations on minimum physical security standards covering fences, 
lights, gates, restrictions on vehicle access, restrictions on carrying 
firearms, the establishment of a credentialing process, considering 
criminal background checks for those with access to sensitive areas of 
the port, and development of a private security officer certification 
program. The Port and Maritime Security Act provides for the 
development of Maritime Facility Security Plans that would address 
these physical security issues. To develop and implement these complex 
plans is likely to take a long time. While there is authority for 
interim security measures, there are no standards for these measures. 
An alternative might be to immediately put in place minimum standards 
identified by the Commission and permit waivers if a seaport had a good 
reason not to implement a particular requirement.
    For example, we could immediately put in place a restriction on 
carrying guns at seaports. It makes no sense to prohibit nail clippers 
at airports, but allow guns at seaports. Of the 12 seaports surveyed by 
the Commission, not a single one restricted firearms. To my knowledge, 
this situation has not changed. The Seaports Commission, composed of 
officials from federal agencies involved in law enforcement at the 
seaports, recommended restrictions on firearms except for law 
enforcement personnel.
    Another example of a basic physical security requirement that could 
be immediately implemented is the restriction on private vehicle access 
to the ports. At many ports, access is virtually uncontrolled. At one 
of the ports I visited, we saw a line of vehicles parked right beside 
the vessel. We were told that these were the dockworkers' vehicles 
parked there for convenience. At the time, we were concerned that the 
vehicles could be hiding places for smuggled drugs. Today we must 
consider the possibility that a car bomb or a ``dirty nuclear weapon'' 
could be hidden in those vehicles.
    Now I would like to turn to recommendations concerning cargo 
security. We need better information about cargo transiting the ports. 
On the import side, information is often vague and import entries may 
be filed 5 days after arrival. On the export side, information is 
likewise often vague and is required 10 days after export. As the 
Seaports Commission noted, consolidated shipments often contain no 
information on what is included in a container, listing the cargo as 
``various'' or ``assorted merchandise.''
    The Port and Maritime Security Act would tighten up on timeliness 
by requiring that information on imports must be provided prior to 
importation and information on exports must be provided within 24 hours 
of when cargo is delivered to the marine terminal operator. However, 
the legislation does not address the specificity of information. A 
concern with providing more detailed information is that it would allow 
high value cargo to be targeted for theft by those with access to the 
information.
    One solution might be to tighten up on existing requirements. The 
Seaports Commission studied compliance issues. In a 1999 study, Customs 
found a 53% discrepancy rate for ship manifests in terms of the number 
of containers on board. Over half of the vessels had either more or 
fewer containers on board than were reported.
    There are numerous instances of people being smuggled in 
containers. Customs Commissioner Bonner reported in a recent speech 
that Italian authorities found a suspected Al Qaeda operative locked in 
a shipping container bound for Canada. Inside the container, the 
suspect had a bed, a bathroom, airport maps, security passes and an 
airport mechanic's certificate.
    Unfortunately, it is a common occurrence for illegal aliens to be 
smuggled into the United States in containers. The Seaports Commission 
catalogued literally hundreds of these situations. It used to be that 
these individuals were smuggled relatively short distances, mainly into 
the Port of Miami, but this is not the case any more. In Los Angeles, 
Immigration arrested 30 illegal aliens in containers that had come all 
the way from China.
    Clearly, we do not have a handle on how many containers are 
transiting our seaports or on what is in those containers. The Seaports 
Commission found that lax compliance and non-compliance may be related 
to penalties. The maximum penalty for incorrect information is $1000. 
The Seaports Commission noted that carriers appear to treat the 
penalties as a cost of doing business. If the Congress legislated 
higher penalties, compliance probably would improve.
    Last, I would like to mention data issues. In analyzing crime at 
the seaports, the Seaports Commission encountered a lack of data. The 
Seaports Commission recommended that databases be modified to ensure 
the collection and retrievability of data relating to crime at the 
seaports. The Port and Maritime Security Act does not address this 
issue. The Congress could task an agency with responsibility for data 
gathering and provide the necessary resources. With better data, law 
enforcement agencies could identify patterns and weaknesses at 
particular ports.
    I would like to close with a statement in the Commission's report: 
``A terrorist act involving chemical, biological, radiological, or 
nuclear weapons at one of these seaports could result in extensive loss 
of lives, property and business, affect the operations of harbors and 
the transportation infrastructure, including bridges, railroads and 
highways, and cause extensive environmental damage.'' We need to take 
action now to reduce the risk of future catastrophes. Thank you for 
inviting me to testify on this important subject.

    Chairperson Feinstein. Thank you. Excellent testimony, and 
we will talk to you more in our Q&A period.
    Let me just go on and introduce now Mr. Kim Petersen of the 
Maritime Security Council. He serves as the executive director 
of the Security Council. He has over 22 years of experience in 
domestic and international security and anti-terrorism 
activities. He has directed operations for former U.S. 
Secretaries of State Henry Kissinger and Alexander Haig and 
served as the senior staff member in both the United States 
Senate and the Defense Department.
    Welcome, Mr. Petersen.

  STATEMENT OF KIM E. PETERSEN, EXECUTIVE DIRECTOR, MARITIME 
           SECURITY COUNCIL, FORT LAUDERDALE, FLORIDA

    Mr. Petersen. Thank you, Madam Chair. As the executive----
    Chairperson Feinstein. And before you start, what we are 
really interested in--and maybe this might--are suggestions. 
You know, Ms. DeBusk did it, things we might do legislatively 
to tighten up our system. So if you have----
    Mr. Petersen. I have lots of them.
    Chairperson Feinstein. Good.
    Mr. Petersen. As the executive director of the Maritime 
Security Council, I am pleased to have the opportunity to 
address the committee today and relate the views and concerns 
of our membership. I also ask that my written testimony be 
entered into the record, and I will provide a few brief 
remarks.
    Chairperson Feinstein. It will. Thank you.
    Mr. Petersen. As background, the Maritime Security Council 
was created in 1988 to address the many security concerns of 
the U.S. and international maritime community. We are a member-
driven organization representing 65 percent of the world's 
shipping that works closely with United States Government 
agencies concerned with maritime security and counterterrorism. 
Our mission is to advance the security interests of the 
international maritime community against terrorists and other 
transnational criminal threats.
    In addition to being the principal clearinghouse for the 
exchange of information between its carrier members, the MSC 
also acts as a liaison with regulators and governments offering 
vital intelligence on crimes at sea and information on security 
conditions in foreign ports. The Maritime Security Council has 
been designated as a maritime security advisor to both the U.S. 
State Department and Interpol, the international police 
organization.
    It is important to acknowledge that the maritime industry, 
both the sea carriers and the ports, have been working for 
years to address the issue of crime and security in the 
maritime environment. The passenger cruise industry 
unilaterally developed and implemented security control and 
accountability measures designed to mitigate or deter criminal 
activity through the identification and exclusion of 
unauthorized personnel. Some States, most notably Florida, had 
begun extensive port security programs that have become models 
for the rest of the Nation.
    However, subsequent to the terrorist attacks of September 
11, the maritime industry's focus changed from mitigation of 
criminal activities to the prevention of terrorism. This has 
had the effect of directing resources at a new and more complex 
threat while at the same time providing viable safeguards 
against criminal concerns, such as container theft, drug 
smuggling, and conspiracies to bring in illegal aliens.
    While it is readily accepted that our seaports are a 
critical component of the U.S. national infrastructure, a clear 
understanding of how these engines of commerce are protected is 
not so readily appreciated. What is of surprise to many is that 
it is not the Federal Government that is providing security for 
the Nation's seaports but, rather, it is local governments and 
port authorities coupled with local law enforcement and private 
security companies. Were it not for local governments 
protecting the seaports themselves, Federal agencies such as 
INS, Customs, and the Coast Guard would not be able to perform 
their mission. Therefore, it is of significant concern to the 
Maritime Security Council that the extraordinary needs of port 
authorities and local governments for funding to perform 
fundamental security operations not be overlooked when monies 
for security enhancements and recurring operational costs are 
being allocated. Absent State-directed funding and Federal 
reimbursements for completed security capital improvements, we 
can expect that many ports will simply be unable to meet the 
many ongoing challenges created as a consequence of the 
horrible events of September 11.
    As I testified before the U.S. Senate's Commerce Committee 
in October, it would be a catastrophic mistake for us to 
consider U.S. borders and coastlines as our first line of 
defense against foreign-based foes. In addition to enhancing 
domestic seaport security measures, the Maritime Security 
Council believes it is critical to push back the boundary of 
homeland security to foreign ports of origin. Particularly in 
an age of increasingly available weapons of mass destruction, 
it must be seen as a dangerous policy to await the arrival of 
suspicious cargo into an American seaport before it is 
subjected to a first round of scrutiny.
    I understand your concerns, Madam Chair, about the 
potential of container inspections being subverted in ports 
such as Karachi. It is, therefore, our recommendation that a 
program analogous to the Federal Aviation Administration's 
Foreign Airport Security Assessment Program be developed and 
funded. A Foreign Seaport Assessment Program in tandem with a 
prescreening program, as recommended by U.S. Customs and the 
Maritime Administration, would need to identify those ports 
that fail to meet minimum security standards with such 
standards being agreed to through the UN's International 
Maritime Organization. The next critical element would be for 
the U.S. to spearhead a program that would provide technical 
assistance and, where necessary, financial help to those ports 
that serve as potential points of origin for those bent on 
harming American interests.
    The Maritime Security Council recommends to this committee 
that every port of origin with ships bound for a U.S. 
destination should be audited at least once every 3 years, with 
non-compliant ports being audited annually until they reach 
compliance. Implementation of this program, and the sanctions 
that would become a part of it, will create a self-sustaining 
financial incentive for compliance with these new international 
port security standards.
    In conclusion, the Maritime Security Council thanks you, 
Madam Chairwoman, and the other members of the subcommittee for 
the opportunity to provide this testimony. We stand prepared, 
as we always have, to assist the committee and its staff in 
these important efforts, and we will be dedicating a 
significant portion of the International Maritime Security 
Conference, which we are holding in Fort Lauderdale on March 
6th through 8th, to discuss the issues raised in this hearing.
    Thank you.
    [The prepared statement of Mr. Petersen follows:]

  Statement of Kim E. Petersen, Executive Director, Maritime Security 
                   Council, Fort Lauderdale, FLorida

    Thank you Chairman Feinstein and members of the Committee. As the 
Executive Director of the Maritime Security Council, I am pleased to 
have this opportunity to address the committee today to relate the 
views and concerns of our membership.
                               Background
    The Maritime Security Council was created in 1988 to address the 
many security concerns of the US and international maritime community. 
We are a member-driven organization that works closely with United 
States government agencies concerned with maritime security and 
counterterrorism. Our mission is to advance the security interests of 
the international maritime community against terrorist and other 
transnational criminal threats. The MSC represents maritime interests 
before government bodies; works in partnership with industry and 
government; disseminates timely information to its members; encourages 
the development of industry-specific, task-appropriate security 
technologies; and, convenes conferences and meetings for the 
membership.
    The MSC has established partnerships with a number of these 
agencies to prevent or respond to a wide range of transnational 
criminal activities, including terrorism, illegal drug trafficking, 
piracy, theft, and trafficking in human cargo.
    In addition to being the principle clearinghouse for the exchange 
of information between its carrier members, the MSC also acts as a 
liaison with regulators and governments offering vital intelligence on 
crimes at sea, and information on security conditions in foreign ports. 
The Maritime Security Council has been designated as a maritime 
security advisor to both the US State Department, through its Overseas 
Security Advisory Council, and Interpol, the international police 
agency. As a consequence of these roles, the MSC was called on to 
assist in the development of US Sea Carrier Initiative and Super 
Carrier Programs and was instrumental in helping develop sections of 
the Port, Maritime, and Rail Security Act of 2001.
                       Maritime Industry Actions
    It is important to acknowledge that the maritime industry, both the 
sea carriers and the ports, have been working for years to address the 
issue of crime and security in the maritime environment. The passenger 
cruise industry unilaterally developed and implemented access control 
and accountability measures designed to mitigate or deter criminal 
activity through the identification and exclusion of unauthorized 
personnel. Some states, most notably Florida, had begun extensive port 
security programs that have become models for the rest of the nation.
    However, subsequent to the terrorist attacks of September 11, the 
maritime industry's focus changed from mitigation of criminal 
activities to the prevention of terrorism. This has had the effect of 
directing resources at a new and more complex threat, while at the same 
time providing viable safeguards against criminal concerns, such as 
container theft, drug smuggling, and conspiracies to bring in illegal 
aliens.
          Threats and Challenges to Maritime Homeland Security
    While it is readily accepted that our seaports are a critical 
component of the US national infrastructure, a clear understanding of 
how these engines of commerce are protected is not so readily 
appreciated. What is of surprise to many is that it is not the federal 
government that is providing security for our nations seaports, but 
rather it is local governments and port authorities coupled with local 
law enforcement and private security companies. Were it not for local 
governments protecting the seaports themselves, federal agencies such 
as INS, Customs, and the Coast Guard would not be able to perform their 
mission. Therefore, it is of significant concern to the Maritime 
Security Council that the extraordinary needs of port authorities and 
local governments for funding to perform fundamental security 
operations necessary not be overlooked when monies for infrastructure 
security enhancements and recurring operational costs are being 
allocated. Absent state-directed funding and federal reimbursements for 
completed security capital improvements, we can expect that many ports 
will simply be unable to meet the many challenges created as a 
consequence of the horrible events of September 11.
            Maritime Homeland Security: Where Does It Begin?
    As I testified before the US Senate's Commerce Committee in 
October, it would be a catastrophic mistake for us to consider US 
borders and coastlines as our first line of defense against foreign-
based foes. In addition to enhancing domestic seaport security 
measures, the Maritime Security Council believes it is critical to push 
back the boundary of homeland security to foreign ports of origin. 
Particularly in an age of increasingly available Weapons of Mass 
Destruction, it must be seen as a dangerous policy to await the arrival 
of a suspicious cargo into an American seaport before it is subjected 
to scrutiny.
    A program analogous to the Federal Aviation Administration's 
foreign airport security assessment program needs to be developed and 
funded. A foreign seaport assessment program would need to identify 
those ports that fail to meet minimum security standards with such 
standards being agreed to through the UN's International Maritime 
Organization. There is presently movement in that direction by the US 
Coast Guard, the Department of Transportation, and organizations such 
as the Maritime Security Council in meetings with the IMO in London. 
The next critical element would be for the US to spearhead a program 
that would provide technical assistance and, where necessary, financial 
help to those ports that serve as potential points of origin for those 
bent on harming American interests.
    The Maritime Security Council recommends to this Committee that 
every port of origin with ships bound for a US destination should be 
audited at least once every three years, with non-compliant ports being 
audited annually until they achieve compliance. Implementation of this 
program, and the sanctions that would become a part of it, will create 
self-sustaining financial incentives for compliance with these new 
international port security standards.
     Training and Certification of Maritime Security Professionals
    The Maritime, Port and Rail Security Act of 2001 creates a 
mechanism for establishing training and certification standards for 
maritime security professionals. It creates the Maritime Security 
Institute, under the direction of the Federal Law Enforcement Training 
Center, as an international center for training and certification. This 
program would also be open to foreign personnel responsible for 
managing port or vessel security operations. The Maritime Security 
Council is proud to have been instrumental in this component of the Act 
and we believe it will prove to be one of the significant legacies of 
this legislation.
                               Conclusion
    The Maritime Security Council thanks you, Madam Chairwomen and the 
other members of the Committee for the opportunity to provide this 
testimony. We at the MSC stand prepared, as we always have, to assist 
the Committee and its staff on its important efforts, and we will be 
dedicating a significant portion of our International Maritime Security 
Conference, being held in Ft. Lauderdale, March 6-8, 2002, to discuss 
the issues raised in this hearing.
    Thank you.

    Chairperson Feinstein. Thank you very much. I have got a 
burgeoning question, but I will wait.
    It is a pleasure for me to welcome Mr. Rob Quartel of 
FreightDesk Technologies. He is the chairman and CEO of this 
company. The company is a leading provider of Internet-based 
cargo applications for international cargo management. He is 
also a former member of the United States Federal Maritime 
Commission and is recognized as an expert in international 
maritime and U.S. national transportation policy.
    Mr. Quartel, if you would do the same thing, if you could 
enter your statement in the record and just kind of talk on 
where you see the picture and what you think could be done to 
be helpful.

    STATEMENT OF ROB QUARTEL, CHAIRMAN AND CEO, FREIGHTDESK 
 TECHNOLOGIES, INC., AND FORMER MEMBER, UNITED STATES FEDERAL 
             MARITIME COMMISSION, MCLEAN, VIRGINIA

    Mr. Quartel. That would be great. Do you have a copy of the 
slides, Senator?
    Chairperson Feinstein. I do not.
    Mr. Quartel. I wonder if there is a way we can get this so 
you can see it. But I would like to enter the statement into 
the record.
    Let me begin by saying I endorse almost all of the actions 
that people on this panel and the earlier panel have talked to 
about what you do about a port, and I think we all have seen 
each other in different contexts.
    When I walked in here, I said to Deputy Commissioner 
Tischler, who I had not met--and I was glad to meet her--that I 
was the author of the concept, or at least the first person----
    Chairperson Feinstein. Oh, you are the author of pushing 
the borders----
    Mr. Quartel. Pushing the border back.
    Chairperson Feinstein. Oh, you have a doubting Tomasina 
here.
    Mr. Quartel. Well, she said she was the author. She said 
she had thought of it first, and after that, I think I will let 
her be the author.
    Chairperson Feinstein. Oh.
    Mr. Quartel. But, in point of fact, it is something that 
woke me up in the middle of the night, not long after September 
11th, thinking about the volume of trade, how it actually 
operates, and really that is kind of what I would like to talk 
about today.
    I am going to skip through a couple slides because I think 
it goes to this. Everything that people have talked to in terms 
of technology--seals, all of that kind of stuff--I endorse. But 
let me just say that you can seal containers, you can inspect 
the ports, you can put more guards, you can get rid of guns, 
you can do all of the physical things to a port; but none of 
that would stop a weapon of mass destruction from going under 
the Golden Gate Bridge and blowing up. It is a little bit like 
a ball player with a mitt and another guy with a hand grenade. 
The port is the guy with the mitt. Do you want to be the guy 
with the mitt? Is that going to stop the hand grenade?
    The game here, the technology, is to stop the hand grenade 
before it ever gets lobbed at the port, and I think that is why 
it is a combination of technologies. It is a net to capture if 
it gets to the port, it is the technology to stop it----
    Chairperson Feinstein. Let me stop you, because this thing 
seems so flawed to me because you can't--if you do, let's say, 
12 ports, the big ports----
    Mr. Quartel. That is not enough.
    Chairperson Feinstein. It is a signal to everybody. You 
don't ship a tactical nuclear weapon through a big port. You go 
to a small port. So, I mean, how does this solve anything by 
pushing the borders back?
    Mr. Quartel. Well, you are exactly right, but I think we 
need to define what we mean. We don't mean physically pushing 
the border back, and I don't think most people mean actually 
inspecting a container.
    If you take a quick look at this first slide, this is what 
international trade looks like. Typical international trade has 
in it 20 to 30 parties, 30 to 40 documents. It spews data, a 
couple hundred data elements all across the process. And I 
think if you want to deal with a container coming in with a 
bomb, you have to think about it as a piece of the process.
    The Coast Guard has defined what they call maritime domain 
awareness, which is being aware of the domain around the port, 
all critical, all important. When I think about international 
trade, there are really five domains. There is the beginning of 
the cargo, when you have got manufacturers and other people who 
are putting it in the container and moving it to a port of 
lading overseas. You have got that port, which has security 
issues. You have it in motion, over the ocean or in the air, or 
anything else. You have the port of discharge in Los Angeles, 
for example. And then you have an inland movement, and really 
what we are talking about here is a piece of the onion. You 
know, this is a process like an onion. There is one thing you 
do, then another thing you do, then another thing you do, layer 
on layer on layer.
    The quickest, frankly easiest thing you can do is to start 
to capture information, not just data but information on a 
cargo. And you can do that from the minute someone orders it. 
Every purchase overseas generates a purchase order from someone 
in the United States. And, Senator, this is the kind of stuff 
that is not now done.
    If you want to export something to Osama bin Laden, there 
is a denied party list that says you can't do it----
    Chairperson Feinstein. He is not going to buy a tactical 
nuclear weapon at Wal-Mart.
    Mr. Quartel. Right.
    Chairperson Feinstein. You know, he is going to buy it from 
some Russian black marketeer.
    Mr. Quartel. Absolutely. But if I wanted to export 
something to him from the United States, he is on a denied 
list. And I am simplifying it. But there is no comparable list 
that says he couldn't send it to us. So that is kind of a first 
level of data check and kind of the data concept. This is not 
just stopping it at the port. The data concept is to start 
gathering commercial intelligence which can tell you about the 
container, the shipments in it, the people who touched it, who 
paid for it, where it went, where it is going. For example, the 
kind of stuff I would want to know before it ever got to the 
United States is not whether necessarily it originated in 
Karachi, but did it originate in Malaysia via Indonesia where 
you have Muslim dissidents, slipped into the mainstream of one 
of these 12 ports, by the way, you know, one of the biggest 
ports shipping to California, and it is somehow going to get on 
a train, once it gets through the port, and go all the way to 
New York and go by Yankee Stadium when the President of the 
United States is throwing out the ball.
    So it is not just the what of it that you want to capture 
in data, and the contents. It is also the situation. And the 
only way you can do that is by capturing a set of commercial 
information and a set of law enforcement and national security 
information.
    And you asked the question, correctly, do we have a single 
place in the United States Government that captures and 
processes this data, and the answer is no. You know, you have 
got Customs. You have got DOT. You have got Coast Guard. You 
have got Office of Naval Intelligence. You have got DOD. You 
have got all of these guys taking a little piece of the 
problem----
    Chairperson Feinstein. They are all afraid to say it isn't 
adequate now.
    Mr. Quartel. Right, absolutely. So when I look at it, you 
create a commercial database which plugs into the commercial 
system. Remember, it is spewing data; every piece of data you 
would ever need is available somewhere before it ever hits the 
first ship.
    You want to put together law enforcement and national 
security data----
    Chairperson Feinstein. You are talking about contraband 
data now?
    Mr. Quartel. No. This is data on the situation. For 
example, Customs captures the manifest, the ship manifest. Half 
of what is on a ship is called FAK, ``freight all kinds,'' 
which means that it was placed there, it doesn't say what is in 
the container. And in the other half of the data, it is wrong 
half the time. Okay? So to collect the ship manifest, I would 
have before this hearing said it is great, it at least tells 
you what is supposed to be on the ship. Well, 53 percent of 
that doesn't--you know, is wrong, too.
    On the other hand, if you capture a purchase order, it 
tells you who bought it and who paid for it and what it is they 
wanted to get and when they wanted it shipped and who they were 
going to have it moved by. If you capture the transportation 
data, you can find the truck that was hired out of Malaysia to 
move it to the rail, the rail that was hired to move it to the 
ship, the ship--okay, you have got the ship, Customs and Coast 
Guard, Coast Guard has data on who owns the ship and who all 
these guys are. It is not in one place, but that is the 
process.
    Chairperson Feinstein. But there is no purchase order on 
this stuff we are talking about.
    Mr. Quartel. Everything, everything in international trade, 
originates with a purchase order. The issue is that the purpose 
order, yes, is falsified. So what you have to do--and this, you 
know--I collect data. I am not the guy who would run the 
algorithm. But what we know is that if you--here, I will give 
you another quick chart here, and I will shut up so you can get 
to the other people here. But you may have a cargo listed as 
steel rebar out of Poland. Other data will tell you that steel 
rebar is not made in Poland. That is a very simple check. So 
you know that that is a falsified purchase order or falsified 
manifest or bill of lading.
    Chairperson Feinstein. Now, who knows that? Who is getting 
that data? The port?
    Mr. Quartel. Customs could know--well, no one gets all this 
data right now, except the shipper. Kind of one of the messages 
I would like to get to you and the Congress is that shippers 
and buyers and sellers in international trade--and this is how 
I make my living, and other companies like us. They want 
visibility. They want to know that they are going to get what 
they ordered, that it is going to get there when they want it. 
They want to know that it is using the transportation they have 
selected. They may have negotiated a contract. Eighty percent 
of what goes on there is actually subcontracted out to freight 
forwarders and third-party logistics providers. They want the 
same information.
    So people are gradually wanting all the information in the 
commercial sector that I believe the Government would need to 
be able to profile a cargo.
    So if I have one message, it is that all the data is there 
to be able to make decisions. It is not all caught in one 
place, but it is being generated by the commercial process, and 
the Government can get engaged in it. So when we talk about 
profiling, profiling just helps you select which ones you want 
to inspect in Rotterdam and whether you have a Customs guy 
doing it or whether you have the Dutch doing it or somebody 
else. It gets you to a point of intercept, okay? And that is 
really where you want to stop it. That is the way you are going 
to protect the U.S. port.
    I would be happy to talk to all of this in all detail. I 
have, you know, charts on when the data comes in and everything 
else. But a notion of profiling is not that that is the end. 
That is really the beginning. It is trying to stop the guy from 
throwing it.
    Chairperson Feinstein. So you are saying that nothing gets 
on a ship without a purchase order, and if it is an illicit--if 
it is contraband of any kind, the purchase order is forged, and 
that the key is to get at the forgery.
    Mr. Quartel. Right. That is correct. You want to get at----
    Chairperson Feinstein. I want to ask--but we have a vote, 
and I have about 10 minutes to get to the vote. What I would 
like to do, if we could, is hear from Mr. Upchurch, and then 
take a brief recess, and then come back, because it is just us, 
and have an opportunity to discuss this. And I would like your 
reaction to that purchase order issue, Mr. Steinke, if we 
could. So let's just move on to Mr. Upchurch.
    [The prepared statement of Mr. Quartel follows:]

 Statement of Rob Quartel, Chairman and CEO, FreightDesk Technologies 
          and Former Member, U.S. Federal Maritime Commission

    I would like to thank the members of this Committee for their 
invitation today. I'll begin with an assertion that I think should be 
made policy:

         Every container destined to enter or pass through the 
        United States should be treated as a potential weapon of mass 
        destruction; every ship that carries it as a delivery device; 
        and every port and point inland as a potential target.

    While the discussion here today focuses on protecting the port--
natural given the legislation before the committee--the port, frankly, 
is the least of the problem.
    Yes, it's important to protect the security of the physical 
infrastructure, yes we have to worry about the safety of specialized 
vessels and guard against attacks like those which took place on the 
USS Cole, yes, the technology for sealing and tracking containers is 
important. But in terms of the system of intermodal international 
trade--shipping, moving goods around the world in international trade--
the port of entry is just one--not even the most important--piece of 
the puzzle.
    If you think about trade as a process of integrated pieces, then 
the port should be considered the point of last--not first--resort in 
our war on trade terrorism.
    To be blunt about it, nothing we have heard discussed today--
whether it's electronic seals or port inspections or beefed up patrols 
or biometric-aided identification cards or GPS or other physical 
tracking devices on containers or earlier reporting of a ship manifest 
or neutron scanning 2 percent or 20 percent of all containers going to 
the United States--whatever--has more than a small probability of 
stopping a determined terrorist from slipping a lethal shipment into 
the mainstream of international commerce and driving it under the 
Golden Gate Bridge to an end that none of us would like to see.
    That's because the action starts well before the port.
    So, focusing on stopping a weaponized cargo at the US port is too 
little, too late: The port is a potential target, not just a gateway. 
Ports have little interaction with cargoes other than to lift them off 
or on the ship, to store them, or to serve as a border funnel for 
customs activities. Their job is in some respects no different than 
that of a rail yard or similar intermodal exchange node. They are 
either efficient pass-throughs, propelling cargoes on their way to 
their final destination--or, they may become bottlenecks, driving some 
20 percent of the national economy into the ground.
    If we can't allow a weaponized container in a port, neither can we 
allow it on the ship, the principal means of delivering goods in 
intercontinental trade to the United States. Ships suspected to carry 
these weapons--some ships of which today carry the equivalent of 6500 
or more containers--can only be turned back to the point of 
embarkation--not stopped, searched, and accessed for removal of an 
8x8x48 foot 20-ton container while on the high seas

         Interdiction of terrorist activities really needs to 
        begin at the beginning--with the shipper and his customer, at 
        both the physical and transactional start of an order.

    While I fully support the measures designed to protect our seaports 
contained in this legislation, I suggest to this committee that the 
first line of defense in the future isn't the traditional physical 
border the port represents, but a new technology border--a virtual, 
electronic border--that we need to push back overseas.
    So, when we talk about technology in this hearing, I think we have 
to talk about information technology, first--because THAT is the first 
line of defense for our ports.
    The fact of the matter is that we can't inspect every one of the 
17,000 containers that end up in the United States on any given day, 
either here or in the overseas ports in which they originate, without 
destroying the fabric of our economy. But we CAN create a hierarchical 
approach combining physical inspection, human trust procedures and a 
new process of early electronic inspection employing the latest in 
information technologies.
    Why is this electronic border a necessary approach? If I can, let 
me turn your attention to a couple of slides.
    This first slide illustrates a key point: International trade is a 
tremendously complex business. A typical trade will have as many as 20-
25 involved parties--buyers, sellers, inland transporters on both sides 
of the ocean, ocean and other water carriers, middlemen, financiers, 
governments and others--and will generate 30-40 documents. Some 6 
million containers, many carrying cargoes for multiple owners and 
valued on average at $60,000 each, entered the US in the year 2000, on 
ships carrying from 3-6000 containers each. If we were to add a 
physical inspection to one of the very large ships carrying these 
cargoes to the US through the world's hub ports--the Regina Maersk, for 
example--a single hour's delay per 20-foot container would add from 
150-250 man-days (roughly 1\1/2\ to 3 man-years of work shifts) to the 
time it took to offload the 6000 containers riding that one ship.
    Literally millions of people and hundreds of thousands of companies 
worldwide are engaged in the business of moving cargoes 
internationally. In the US alone, there are an estimated 400,000 
importing and exporting companies, 5,000 licensed forwarders and 
customs brokers, perhaps as many as 40,000 consolidators large and 
small, and millions engaged in the transportation industry. Worldwide, 
there are at least in theory some 500 ocean carriers--although probably 
10-15 carry 90 percent of cargoes shipped between continents--an 
estimated 50-70,000 forwarders and tens of thousands more 
intermediaries, not to mention several million companies moving goods.
    This is a process that literally spews data--data on the contents, 
on who touched the cargo, who paid for it, where it's been, where it's 
going.
    And it's a process into which commercial shippers--the people who 
own, buy, or sell a cargo--tap into daily, in one form or another, to 
collaborate on transportation and financial transactions, to exchange 
documents, to meet regulatory requirements of the various jurisdictions 
in which they operate, in addition, of course, to documenting the basic 
buy-sell transaction that begins the shipment.
    So, when I look at what technology you need to protect a US port, I 
look back to the beginning of the process, before the port, before the 
ship, before the port of embarkation, before even sealing the 
container. I look to the buy-sell transaction and the purchase order 
that is generated from it. Then I look to the manufacturer or supplier 
overseas, his manufacturing and supplier processes, how and where he or 
a consolidator somewhere loads the container, when and how it was 
sealed, how it was moved, who touched it, who paid for it--and even 
where it might be going once the cargo reaches the United States. For 
the most part, every bit of that data is available--somewhere and in 
some form, but not necessarily captured in one place by the private 
sector, and certainly not by the US government--but there nonetheless, 
before the cargo ever gets loaded onto a ship bound for a US port.
    Throughout this process, the shippers of the goods are for the most 
part physically out of control of the trade. They've hired freight 
forwarders or consolidators or third party logistics companies to 
handle the business because their expertise is in the manufacturing, 
marketing, and sale of the product. All they really care about at the 
gross level is that they get exactly what they ordered--no more and no 
less--and that it gets there at the time and price promised. Some have 
created intelligent order systems, spent millions of dollars on 
enterprise resource planning and automated customer service systems, 
and others have acquired or constructed internally services like those 
offered by my own company which allow them to track, measure, and steer 
the progress of their goods through the transportation chain, either 
physically or in terms of process and paperwork, the latter actually 
being more important in the manufacturing process than where something 
actually is. As long as they know it's on course, are apprised of 
delays, have the ability to re-plan a move or a manufacturing process 
in the event of a supply chain problem--than they are satisfied. That's 
really all they need.
    The focus of logisticians and companies--particularly American 
companies--over the last several decades has been on making that flow 
faster, cheaper, more transparent, and faster yet. Our success at that 
provides an enormous competitive advantage to many of our companies and 
makes a huge contribution to the reduction in the cost of numerous 
articles and products crucial to everyday life in the United States.
    Some in the government have suggested that, as in aviation, 
security rather than speed might provide the competitive edge for ports 
in the US in the future.
    With all due respect, speed and cost were the two most important 
criteria for the selection of ports and transportation before September 
11--and they will, for all but a handful of shippers--continue to be 
the most important criteria in the future.
    There is a reason for that: Speed equals money.
    Because the manufacturing system knows that, logistics costs have 
steadily declined from 25 percent to lower than 15 percent of GDP over 
the last 20 years. Carrying costs associated just with inventory at 
rest--goods in storage, the response of a manufacturer to uncertainties 
in the supply chain--in 2000 amounted to nearly $400 billion. A number 
of experts have estimated that just a five percent addition to the 
logistics process--thus causing an increase in inventories, the 
response industry will have to take in order to make up for slow 
processing times--would cost the economy an additional $75 billion 
annually. That's the equivalent, by the way, of some 75,000 jobs lost, 
not counting the multiplier effect of these wholly non-productive costs
    Introducing uncertainty, slowing down cargoes through physical 
inspection of every container and every box inside it, otherwise 
derailing the transportation system, is exactly the opposite of what we 
should do if our goal is to maintain a healthy American economy.
    So, the most critical piece of the technology solution to guarding 
our ports, in my mind, is this: Profile cargoes, just as we profile 
people in the passenger airline industry, before they ever get on the 
ship--or plane, truck, or train--bound for the United States and its 
ports.
    The data that the private sector uses to make its processes more 
efficient is the same data that the United States government needs to 
understand the commercial processes underlying a cargo profiling 
process.
    My second slide talks to that process, but in short form, it's 
pretty straightforward.
    In the profiling scheme that I have suggested, commercial data 
would: (1) Be captured prior to loading of a container on a ship, 
train, plane, or truck in international commerce, from the shipper, 
consignee, intermediary, banks, and all others that had an interest in 
or touched or processed the shipment; (2) Combined with certain 
relevant law enforcement and national security information; and, (3) Be 
processed through a form of artificial intelligence (including 
evolutionary computing) to provide a ``profile'' for every container 
and shipment within it. The profiling process would generate a ``go-no 
go'' decision driving further actions--loading on a carrier, physical 
inspection, further profiling, etc.
    The profile would be based not only on what the cargo was said to 
be, but where it came from, its likelihood of being what it is stated 
to be, who handled it from packing through transport to a port, who 
would be handling it afterwards, where it had been and where it was 
going, who had a financial interest in it, etc. The algorithm would 
need to consider not only fact-based data (eg, what the product was and 
who touched it), but situational data--eg, a container originating in 
an unstable country and passing by Yankee Stadium on the day and hour 
the President was scheduled to throw out the first ball.
    Based on some probability calculus, the air, ocean, train, or truck 
carrier could be told that the government either felt the cargo was 
safe to carry--or--that further investigation, including perhaps a 
physical inspection, was necessary. If a carrier then loaded the cargo 
deemed safe and was later told enroute that the cargo might require 
further investigation, then the carrier--having cooperated with the USG 
on the pre-release process--should be held harmless from further 
government sanctions, although it might well have to divert the vessel 
prior to or on arrival in a US port. (Indemnification here is a form of 
positive coercion that avoids the extraterritoriality issue.)
    If a carrier received notification that a shipment was suspect 
prior to loading, it should then be required to arrange to have the 
cargo physically screened, or disclose why not. Screening could be 
carried out by U.S. Customs officials stationed in overseas points, 
foreign officials subject to bilaterals and some level of performance 
auditing, or by the companies themselves, again subject to performance 
auditing and rigorous procedural standards. The actual inspection could 
take several forms, ranging from passively examining the container 
(neutron scanning, motion detection, etc), to employing radiological 
and chemical ``sniffers,'' to breaking the seal and opening it up.
    Each of these methods has costs, risks, and probabilities 
associated with it and would be employed differentially against the 
perceived calculated risk. Screening might, in many cases, consist 
merely of re-checking documentation for inconsistencies and 
communicating with those who provided the documents to clarify the 
issue. Breaking a seal would, however, require some form of 
indemnifying the carrier, including possibly an entry order to do so 
from US Customs. None of these actions, however, have to involve a 
foreign government. The United States has the authority to deny entry 
of vessels that it deems of risk to itself, and to deny entry of goods 
deemed illegal. Providing process incentives to carry out the 
inspection prior to leading the port or embarkation is a legitimate, 
effective form of positive coercion. In the end, however, there is no 
doubt that the support of foreign trading partners and international 
organizations should be solicited, if only because our leading trading 
partners are themselves potential targets and will no doubt feel the 
need for reciprocal protections.
    This raises other issues, of course, one being the question of 
whether or not we would need to place US Customs inspectors inside 
foreign ports of embarkation. My answer is: Maybe yes, maybe no. US 
government agencies frequently place inspectors, expeditors, and agents 
inside the premises of companies in the continental United States, 
sometimes with and sometimes without the invitation of the private 
companies involved. Companies often place employees whose job it is to 
ascertain quality, manage logistics, and to perform other expediting 
services in the home facilities of suppliers or customers, again at the 
invitation of the parties. US Customs inspectors could certainly be 
stationed inside the facilities of major carriers and manufacturers 
overseas, at their invitation, without generating an official response 
from a foreign government, in order to provide processing capabilities. 
Carriers and manufacturers that did this--whether by invitation or by 
USG mandate--could legitimately be considered ``trusted parties'' and 
receive ``fast lane'' treatment on arrival in Customs in the United 
States, assuming that proper cargo security procedures were employed 
across the length of the supply chain.
    The bottom line, however, is that this is NOT about inspecting the 
majority of containers or shipments. The goal, in fact, is to use 
information technology to substantially reduce the need to physically 
inspect containers, and to do so at a point in the logistics process 
that is the least damaging to it economically, and at which diversion 
of a contaminated cargo can be safely accomplished without delaying 
other cargoes.
    Nor, by the way, is this about enforcing US customs compliance 
rules overseas--something that frequently seems to be mistaken for the 
prevention of terrorism in many of the proposals placed on the table. 
This is about determining which cargoes might be a threat to the United 
States and its citizens, not about whether or not US tariff rules are 
complied with. The latter has only a little to do with helping to 
ascertain the former, which is largely a function designed for revenue 
capture. Not only are these not the same things, but, treating this 
process as a means of enforcing customs rules could actually undermine 
the anti-terrorism effort. A legal cargo can become a lethal cargo 
under the proper circumstances. Thus, treating this as a customs 
compliance problem not only doesn't solve the problem, it actually 
lulls the public and the USG into a dangerously false sense of 
security.
    There are three important attributes to this solution and the 
approach I suggest. First and foremost, it taps into the existing 
commercial trade management process and leverages existing 
relationships into a new holistic structure. Second, it is potentially 
fully independent of the need for international cooperation, as it 
requires only the compliance of the US-side of the equation, 
particularly if process compliance was specifically designated to be 
the responsibility of the buyer, a suggestion I have made elsewhere. 
And, finally, it is an approach that makes the greatest use of the 
technologies being developed by the private sector for use by 
commercial customers in a normal but obviously complex operating 
environment.
    All of this is easy to suggest, of course, and somewhat more 
difficult to implement.
    But, to give you an idea of where we actually stand, four existing 
commercial documents already reported in one form or another to Customs 
and the Coast Guard can provide much--but not all--of the data that 
would allow us to profile a cargo based on contents, involved parties, 
and transport mode and path prior to its ever getting on a ship: (1) 
The Shippers Letter of Instruction; (2) Commercial Invoice; (3) 
Certificate of Origin; and (4) The carrier's Bill of Lading. To that I 
would add (5) financial data, perhaps captured through Letters of 
Credit or bank reporting; (6) Inland transportation leg information not 
now captured by ocean carriers or the government, on both sides of the 
supply chain; and perhaps additional information.
    On the commercial side, database structures already exist that are 
designed to integrate data from disparate sources (for example, EDI 
transmissions, faxes, the web, and email) and that, in computer 
parlance, allow you to instantiate a fully attributed shipment. Why a 
shipment? Because trade moves in shipments, first, and only then in 
containers. From the standpoint of profiling, shipment records need to 
be fully attributed--meaning that they need to contain detailed 
information about the shipment including all of the parties that are 
involved in the transaction, the route/itinerary of the shipment, the 
items that are contained in the shipment, the events/status of the 
shipment and its financial terms and any other information that was 
thought necessary. And, the system needs to be able to collect, process 
and integrate this data and to provide the required normalized data 
elements to support container and risk profiling in support of Homeland 
Security.
    Collecting and managing the commercial data isn't rocket science, 
although not a lot of us do it. But it is what the private sector is 
beginning to look for today.
    Analyzing the data IS rocket science, however. But, again, the 
required processes are already in use inside the government and the 
commercial sectors alike--in everything from looking for illicit drug 
traffic to screening genetic samples for new drugs for medical 
purposes.
    Without going into a lot of detail, the analytical process should 
be designed at the simplest level to check against lists--Denied Party 
Screening, for example; and at the most complex level to think, to 
learn, and to detect deviations from what we know in our own experience 
is normal in the operations of international transportation and 
manufacturing--anomalies captured in rules and facts which may pertain 
to both specific and general information, relationships between data, 
expectations and other expertise. Items that violate expectations or 
otherwise contradict human expertise are considered to be more 
suspicious.
    But, of course, cargo profiling is only part of the solution. As 
should be evident from the above description, this is an onion, with 
numerous layers. At varying stages across the process we have to layer 
on passive and physical inspection, physical protection of the ports, 
protection of the cargo integrity from the basic risks of international 
transport--spoilage, tampering, theft--the ability to interdict 
specific cargoes, tracking and visibility solutions, many of which we 
have heard about today--that allow us to maintain not only the 
integrity of the cargo but of the transport system itself once a cargo 
is in motion.
    Cargo profiling is an approach and a system that I believe that the 
Transportation Security Administration at the US Department of 
Transportation already has the authority to implement--a question 
separate from whether or not they have the dollars to do so. (I would 
note that profiling would certainly cost far less and take less time to 
implement than a full system of inspections, electronic seals, etc.) 
TSA needs the support, almost in a sub-contracting role, of the US 
Customs Service, the US Coast Guard, the various modal agencies, and, 
perhaps the US Department of Commerce alike. The data base process 
could perhaps ultimately be embedded into and as an extension of the 
Automated Customs Enforcement (ACE) system that Customs is currently 
building--but which is scheduled to take another five years to deliver. 
The US Coast Guard and other national security and defense agencies 
also have extensive law enforcement and national security data base 
efforts going on, and numerous government data bases could be tapped 
through the new process for relevant data without violating the need to 
maintain the competitive position of individual companies and due 
process for the parties involved.
    I don't believe, however, that we should or need to wait that long 
to implement a robust, commercially relevant, profiling solution. We 
should be looking--today--at other USG data bases, including the so-
called ITDS system being developed several years ago at Treasury, 
outside of Customs, as a possible stopgap; and, we should be looking to 
the private sector as well for information technology accelerators. 
Several groups of commercial and governmental players have suggested 
demonstration projects that would cover ports and inland movements on 
both sides of the traffic on both the East and West Coasts, using 
commercially available information technologies and real-world data and 
cargo movements.
    As a general comment here, I believe strongly that a critical issue 
here will be to obtain voluntary--not just mandatory--commercial 
compliance with all of the parties in the commercial transaction. Many 
of the processes covered here are outside the domain of US law 
enforcement. We can't today make foreign suppliers abide by all of 
these rules, but we can certainly tell their US customers--today--that 
they may face delays unless they know their sources and can validate 
cargo and process integrity. We can't today tell a foreign port that it 
has to purchase millions of dollars worth of screening devices for the 
cargoes destined for the US which our screening picks out as suspect, 
but we can--today--certainly negotiate procedural agreements through 
the IMO and individual American ports and distribution arms can provide 
speed incentives for those that work with us. The ocean carriers barely 
make 1-2 percent ROI, so they will only be driven into bankruptcy if we 
require that they purchase screening machines and add hundreds of new 
security personnel, but we may be able to help them through the 
imposition of a user charge on all cargoes going through US ports, a 
portion of which is used to offset their additional costs. We can't 
today mandate that the carriers for which the US is only one of several 
stops profile all of their cargoes before sailing; but we can no 
doubt--today--find a way to say that if we determine that a cargo is 
found to be suspect the entire ship will be turned back because we 
won't risk the US port.
    In closing, I'd like to reiterate the point with which I began: US 
ports aren't the first line of defense but almost the last.
    This Committee and this government have a real obligation to see 
that no weaponized container ever makes it to the port, period. They 
have an obligation to protect the integrity of cargoes once entered, 
and they have an obligation to their customers--the failure of which to 
provide will destroy their commercial viability and that of the general 
economy--to provide a speedy, low-cost transportation move. I believe 
we have the technical means to tap into the commercial process, to 
profile shipments and containers, and thus, in concert with other 
actions, to see that no container intended to be used as a terrorist 
device ever gets on a ship, a plane, a truck or a train bound for the 
United States. We have the technology to do it, but the process starts 
well before a container ever reaches a port.
    Members of this Committee: When the aviation system went down on 
September 11, we already had a security system, as imperfect as it was, 
in place, which could be re-booted three days later at a higher state 
of readiness.
    However--If a container blew at a port or somewhere else in the 
international transportation chain ending in the United States, this 
nation and its leaders would have no choice but to shut down the entire 
system of trade with our country. We have no security system in place 
in our international trade system comparable to that which pre-existed 
in passenger airline travel that we can re-boot. We have nothing at all 
in place to properly secure over $2 trillion in trade and the millions 
of American jobs associated with it. Electronic seals, tracking, 
additional port security--none of that will solve that problem 
adequately. We DO have the technology available to begin to profile 
shipments aimed at the United States, today. It's not the complete 
solution, but it's an appropriate start.
    Again, I appreciate the Committee's time, and would be glad to 
discuss it further.
        SEVEN THINGS WE COULD BE DOING NOW TO PROTECT OUR PORTS:
    1. We should begin the process of moving to pre-movement data 
filing on the entire shipment process, including not only customs 
compliance filings, but transportation and financial data. And, we 
should begin immediately to tighten the document process. Mandating 
reporting of a manifest four days out is only marginally useful. Better 
would be to mandate filing of all ship manifests for vessels with 
cargoes bound for the US at least 24 hours prior to embarkation from a 
foreign port, even if only in incomplete form, with confirmation at 
final departure. The reality of the ship manifest is that it is useful 
only to document what is believed was loaded on a ship or plane, as a 
chain of custody certification. Over half of what moves on ships moves 
``FAK'' (Freight All Kinds), meaning that the carrier has no idea what 
is in the containers it carries. Of the remaining manifest data, at 
least half is likely to contain inaccuracies. Nevertheless, requiring 
pre-departure filing of a ship manifest will have a certain ``Hawthorne 
Effect'' on the process, meaning that paying more attention to it would 
induce behavioral changes in the process--ranging from fostering 
mistakes by individuals attempting to circumvent the process, to 
exposing inconsistencies in data filings, to reducing errors among 
those attempting to comply legally because of the presumed additional 
scrutiny by government officials.
    2. Shippers or consignees or their agents should be made legally 
responsible for complying with all data mandates on a timely basis. We 
should consider the immediate implementation of a purchase-order entry 
system, in which individuals purchasing goods from overseas should file 
a notification of the purchase and expected entry date and related 
parties early in the process; and they should perhaps in return be 
given an import number against which all subsequent data and 
documentation is filed. This is not a suggestion for an Import License, 
which would require a new bureaucracy, but simply the assignment of a 
number for later data and cargo tracking.
    3. We should make better use of intermediaries in the international 
trade process. Over 80 percent of all cargoes in international trade 
are outsourced in whole or in part to freight forwarders, customs 
brokers, NVO's, consolidators, 3PL's and other who are expert in the 
process. Most of these parties are already licensed by the US Federal 
Maritime Commisson; and their numbers are small (4000 forwarders, for 
example), so their activities could be monitored. Licensing procedures 
should be intensified, perhaps including the addition of background 
checks; and the licensing and oversight of these regulated entities 
moved to the US Customs Service where there are more and better 
resources for this activity. Forwarders and other licensed entities 
should be enlisted today, and issued a set of procedural scrutinizes 
NOW that would allow them to become part of the ``watch'' process.
    4. The US should consider adopting and mandating the use of the 
International Bill of Lading owned by the International Freight 
Forwarders Association (FIATA) as a means of introducing consistency 
into cargo documentation.
    5. We should mandate conversion to electronic data transmission 
(whether by EDI, web, etc) from all modes and players in the 
transportation and trade process by a date certain.
    6. The Transportation Security Administration in DOT should 
formally, publicly be placed in charge of the profiling and 
international trade process. Transportation is the one constant in an 
international movement. The USCG, Customs, and the Office of Naval 
Intelligence should be enlisted as ``sub-contractors'' for various 
parts of the program. The US Department of Commerce should be 
considered as the point at which the PO Entry System is filed, and the 
place from which a ``go-no go'' decision is conveyed from the USG to a 
commercial carrier.
    7. We should begin immediately to test implementation of a 
container profiling process that originates overseas, using 
commercially available data base structures, algorithms, and knowledge. 
The data issues contained in aggregating information on a cargo, its 
movements, the players that touch it, across multiple modes and legs, 
and transmitted by the variety of electronic and non-electronic means, 
have already been solved in large part by the private sector seeking to 
obtain transportation and supply chain visibility and control.

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    Chairperson Feinstein. Mr. Upchurch is the president and 
CEO of SGS Global Trade Solutions. They operate in 140 
different countries. SGS inspects a significant amount of 
containerized cargo bound for the United States and other 
countries around the world, and he is testifying today as Chair 
of the Safe Trade Committee of the Global Alliance for Trade 
Efficiency.
    Thank you very much and welcome.

STATEMENT OF CHARLES W. UPCHURCH, PRESIDENT AND CEO, SGS GLOBAL 
TRADE SOLUTIONS, INC., AND REPRESENTATIVE, GLOBAL ALLIANCE FOR 
              TRADE EFFICIENCY, NEW YORK, NEW YORK

    Mr. Upchurch. Thank you, Madam Chair.
    Madam Chair, in the interest of time and also in the 
interest of your own personal request to cut to the chase and 
propose some solutions, I will disregard much of my prepared 
oral testimony and address some of your specific concerns.
    Chairperson Feinstein. Good.
    Mr. Upchurch. Many of the witnesses here today have talked 
about the need for layers in security, and I believe that there 
is a consensus that that is required. I believe we all agree 
that our ports need to be strengthened, and we need to follow 
through on your own recommendations to be able to detect 
contraband or weapons of mass destruction as they come into the 
port. But the need to push back the border, the need to add 
additional layers as supplementary pieces is also very 
important.
    I think it is very important, the proposal of Commissioner 
Bonner, to go to the ten largest megaports with the latest 
technology in container scanners and also with the latest risk-
profiling techniques and to check containers on a risk 
management basis. This is very important. It is also very 
important in the private sector, particularly with the 
shippers, but also with the manufacturers, the carriers, et 
cetera, to introduce supply chain security standards and to 
implement those vigorously and to audit those so that another 
layer of security can be added.
    The point and the recommendation that I wanted to give you 
today is that there is another layer that can be added. It is 
possible to inspect every container in Karachi or in Kuala 
Lumpur or in Yemen and to verify the integrity of the 
container, to----
    Chairperson Feinstein. By a person that you are 100 percent 
sure has not been bribed?
    Mr. Upchurch. Yes, that is possible to put that level of 
check in. That is what companies like my own do. We do operate 
global mandates for governments. I have managed these programs 
for the last 16 years. They do include container security. We 
do go to inordinate lengths to audit our personnel, to do 
background, to carry out security, to frequently intervene at 
every instance. And then that is not enough. We also have to 
check the container again after it has been inspected to see if 
there are signs of tampering.
    Is it possible to be 100 percent sure? Probably not. But is 
it possible to be fairly sure? Is it possible to take great 
measures and to add another layer of security? Yes, it is.
    Unfortunately--please go ahead.
    Chairperson Feinstein. See, I am still deeply troubled that 
we are going to spend all this money to get this ``push the 
border back'' whereby it is going to touch maybe 80 percent of 
the cargo coming through 12 ports, but that is going to leave 
all these other ports all over the world essentially untended, 
which is exactly where this is going to go, I mean where a 
device is going to go.
    Mr. Upchurch. Which is why I am proposing today that you do 
add this other layer in, that you are able to extend the U.S. 
Government through a global network into these other small 
ports by accrediting the private sector to work with the 
Government to act on their behalf. This can be done through 
accreditation programs. Accreditation programs even generate 
royalties that help fund the very stringent control that the 
U.S. Government would have to place on the private sector as 
they carry this out.
    The private sector works through existing legal entities in 
every country, and they are able to carry out this work without 
the need for any bilateral agreement, so it can be implemented 
very quickly.
    The private sector can invoice the foreign exporter, 
meaning there is no cost to the U.S. Government to implement a 
program like this. Technology is required because once--and 
having managed many of these programs and I have seen many 
things, particularly in Southeast Asia where container fraud is 
raised to an art form, technology is required. it is important 
once the integrity of the container is checked, the goods are 
verified that there are no prohibited goods being loaded into 
the container, it is sealed. But it is important to have 
technology in that container in the form of a transponder with 
sensors that will detect entry, unauthorized entry into the 
container, such as changes to light and air pressure. Because 
once an inspector leaves in the port of Karachi or wherever, 
then it is possible to enter that container again without 
breaking the seal, and it is very difficult to detect. And that 
is where the technology would help greatly. With GPS it can be 
tracked consistently throughout the voyage, from the time the 
inspector leaves until it arrives in the U.S. port. And these 
sensors are very reliable, and they will detect if anyone has 
entered that container, whether they have manipulated the door 
or they have chosen to just simply cut out a panel and re-weld 
it and repaint the container.
    Chairperson Feinstein. Is it possible to make one of those 
sensors a radiologic sensor?
    Mr. Upchurch. Yes, of course it is. Once you have a 
transponder unit, you can put any type of sensor on it that you 
want. I have mentioned two, which are changes to light and air 
pressure, because those are the easiest to detect entry into a 
container. But you could have other sensors on the transponder, 
including a radiological sensor.
    Chairperson Feinstein. Is the transponder inherent in the 
structure of the container? I once went to Evergreen in Taiwan 
where I saw them produce a container 24 hours a day, you know, 
every minute a new container came off the line. Are these built 
in or are they added?
    Mr. Upchurch. They have to be added. In order to carry 
out----
    Chairperson Feinstein. Doesn't that make them vulnerable, 
then?
    Mr. Upchurch. Well, they have to be--they may be added at 
the time that the inspector comes. He may add them himself. It 
may be that the Government and the private sector and the 
shipping companies work together to ensure that containers that 
have these transponder units that are verified at the time of 
inspection are available.
    In order to implement a program like this, legislation is 
required that mandates that containers coming to the United 
States are inspected at the time of loading. This is a critical 
aspect, because we promote trade-efficient, cost-effective, and 
quickly implemented programs. Once a container is looked at 
during the normal flow of trade, which is when the shipper is 
actually moving the goods into the container, then there is a 
very trade-efficient process. The Government would have to 
implement a regulation, legislation, requiring that the 
containers are inspected at the time of loading in the country 
of origin. They would likely want to exempt low-risk countries 
so that you are only targeting high-risk countries as one layer 
in this multi-layer onion that my friend Rob has described. 
This is just one layer, but it is a very important layer. It is 
the most secure foundation layer that you can place, and that 
is to look at every single container coming from high-risk 
countries and then to track those containers to make sure that 
they are not entered into again. And if you put up a piece like 
that with the other layers, which are the supply chain security 
standard that normal trade would need to implement and that 
needs to be audited, with the verification in the major 
transshipment ports that is based on risk management, and with 
the strengthening of the U.S. ports that you are advocating, 
then you begin to have a very good border security strategy.
    Chairperson Feinstein. And this would be financed 
essentially through fees paid by the countries to have their 
ports certified?
    Mr. Upchurch. By trade.
    Chairperson Feinstein. By countries or companies?
    Mr. Upchurch. Companies. Trade, private trade, private 
sector would pay for this. These types of programs exist today. 
There is a WTO agreement that governs these types of programs 
that ensure the right of every country in the world to 
implement these types of trade programs that require inspection 
prior to shipment. Today alone there are several hundred 
shipments from the United States that are being inspected by 
the private sector on behalf of foreign governments to meet 
their particular needs. Those are often involved in Customs 
compliance programs. This is a security compliance program, but 
it is the same thing in terms of the WTO agreement that governs 
this. So it is possible for----
    Chairperson Feinstein. Let me ask you, how many companies 
are there in the world in these ports that you would have to 
secure their cooperation and participation?
    Mr. Upchurch. What do you mean by how many----
    Chairperson Feinstein. Well, you said the companies 
essentially would do this.
    Mr. Upchurch. Well, there are within GATE, which is the 
Global Alliance for Trade Efficiency, some of our members are 
service providers, and there are inspection companies and 
technology providers that have global networks. There are not 
many of them, but there are enough of them that would allow the 
U.S. Government to set up an accreditation program and to 
control those that they accredited to carry it out. They have 
offices in every single country in the world and every port in 
the world.
    Chairperson Feinstein. You see, the thing that worries me 
about all of this, it is sort of like when I went to the border 
between San Diego and Mexico and watched the thousands of 
trucks pound through, and there are people, and yet all it 
takes is for one agent to get bribed by a drug cartel to turn 
his head and wave a truck through. Bottom line, your 
technology--and I appreciate that, but the bottom line, it 
comes down to the human. And I am his appointing authority. I 
am going to pick up the phone and said, Richard, you let a bomb 
come into the Port of Long Beach, you know, don't show up the 
next day, you don't have a job. Or what are you going to do to 
assure me that a bomb isn't going to come into Long Beach? How 
can he ensure with that kind of system? He can't.
    Mr. Upchurch. It is difficult, but the private sector does 
have a risk to manage itself. Typically, for every five 
inspectors there is an auditor, and there is an enormous amount 
of--there is an internal security department that not only does 
internal investigation but does external investigation. Private 
sector security inspection companies have to carry out 
investigations of companies. They have to put together risk 
management databases of all of the non-compliant companies that 
they come across. And that is the type of information that can 
be shared with the U.S. Government. These companies can be the 
eyes and ears of the U.S. Government on the docks of Karachi, 
which is something that is very difficult to do today.
    [The prepared statement of Mr. Upchurch follows:]

  Statement of Charles W. Upchurch, President & CEO, SGS Global Trade 
                   Solutions, Inc., Washington, D.C.

    Madame Chair and distinguished members of the Senate Judiciary 
Subcommittee on Technology, Terrorism and Government Information.
    My name is Charles Upchurch and I am President and CEO of SGS 
Global Trade Solutions, Inc., headquartered in New York. I am also a 
member of the Global Alliance for Trade Efficiency, known as GATE. GATE 
is a multi-national not-for-profit organization focused on improving 
the efficiency and security of trade. GATE represents technology 
solution providers, inspection and certification companies, shippers, 
financial institutions, Fortune 500 companies, manufacturers, importers 
and exporters.
    GATE maintains close and cooperative relationships on customs and 
trade-related issues with the World Customs Organization, the World 
Bank, the European Union, and the Office of the US Trade 
Representative.
    I have been asked today to offer you trade efficient 
recommendations and solutions for the protection of US ports including 
the necessary existing technology.
    In protecting US ports, technology plays an important role in what 
we believe is at least a three step process. The first step is to carry 
out a security inspection of the container at the time of loading; the 
second is to seal the container; and the third, or final step being the 
use of global tracking technology to monitor the cargo while in 
transit.As the Subcommittee is aware, the shipment of goods in 
containers represents a significant security risk as they can hide 
weapons of mass destruction from easy detection. Inspecting containers 
upon arrival is already too late in the supply chain for this 
particular risk. US Customs Commissioner Robert Bonner has recently 
outlined a four step plan to minimize this risk: establishing 
international criteria for containers, pre-screening high risk 
containers, maximizing the use of detection technology, and the 
development of ``smart boxes'' with electronic seals and sensors.
    We support these recommendations which include figuratively 
extending America's borders to allow for the security inspection of 
cargo prior to shipment. However, the potential exists that these 
efforts to improve container security would incur a very high cost to 
the government, would take a significant amount of time to implement 
due to the negotiation of bilateral agreements and would likely hinder 
trade efficiency by requiring changes to current trade patterns and 
processes. We would like to propose ideas that will strengthen these 
recommendations to improve container security while avoiding the 
potential problems.
    It is our recommendation that the Subcommittee consider 
establishing a solid foundation for container security by requiring in 
high risk countries compulsory security inspection at the time of 
loading goods into the container. This is not only the most secure 
method of pre-screening high risk containers but it is also the least 
disruptive to trade as it occurs within the normal logistics process. 
If a container has not been inspected at loading, pre-screening would 
require either scanning or unloading the container in a port area. 
Scanning containers is a useful complementary tool but has limitations 
in its effectiveness as a sole solution and unloading/reloading 
containers is very expensive.
    Once a container has been inspected and sealed at the time of goods 
loading there is still the risk that weapons of mass destruction can be 
introduced into the container. There are many ways to enter a container 
without breaking the seal while evading detection. It is therefore 
critical to monitor containers after inspection and sealing to detect 
any unauthorized entry prior to arrival in the USA.
    Cost effective technology exists to track individual container 
shipments and is already in use to track vehicles today. Small 
inexpensive GPS transponder units can be installed inside containers 
with sensors to detect any changes, such as to light and air pressure, 
that would indicate entry. The transponders would be continually 
monitored by information technology and an alert will only be generated 
for intervention when a sensor indicates container integrity has been 
compromised prior to arrival in a US port.
    The most cost effective and the quickest way for the US Government 
to create a program of compulsory inspections in high risk countries is 
to accredit private sector security inspection companies and technology 
solution providers. Private sector security inspection companies 
operate through existing legal entities in all countries and can 
inspect cargo at the time of container loading within the normal 
pattern of trade. They can also invoice the foreign exporter for the 
cost of the container security inspection and monitoring. The US 
Government can establish sufficient criteria to accredit appropriate 
service providers. Accreditation usually generates a royalty payment 
which could fund the strong control to be exercised by the US 
Government over the service providers.
    The program I have outlined can only be implemented by introducing 
legislation that requires compulsory security inspection in the country 
of exportation of all containers destined for the USA. Under this 
program, the government would likely elect to exempt countries that are 
considered low risk threats. This would provide flexibility in the 
program and focus the compulsory inspections only on high-risk 
countries.
    The Subcommittee may be aware that entrusting security inspections 
to the private sector has already been recommended by a working group 
composed of representatives of the Department of Transportation and the 
US Customs Service in a report to Secretary Mineta, Secretary O'Neill, 
and Governor Ridge.
    We applaud the Subcommittee on its efforts to introduce technology 
into container and port security. On behalf of GATE we request that the 
Subcommittee consider the concept of compulsory container security 
inspection and the use of accredited private sector service providers 
in protecting US ports.
    Thank you for your time and I will be pleased to answer any 
questions you may have.

    Chairperson Feinstein. I am going to take a brief recess. 
If you don't mind staying a little bit, I will just be 5 
minutes, and I am going to ask Ms. DeBusk to say whether she 
thinks that is workable when I come back.
    Ms. DeBusk. Sure, I will be glad to.
    Chairperson Feinstein. Thank you very much.
    [Recess 5:15 to 5:35 p.m.]
    Chairperson Feinstein. Now, because we are small and 
intimate, we can perhaps just talk for a few minutes. I saw the 
gentleman that had to leave, and I am glad he has offered to 
provide help, and I wanted to ask all of you to provide help to 
Senator Kyl's staff and my staff and see if we can't put 
something together.
    Ms. DeBusk, let me ask you this question: There is no 
government that I know of that has tried more to prevent the 
shipping of illegal immigrants in containers than the Chinese 
Government, and yet they have failed to do so. As late as 3 
weeks ago, a container, I gather, came into Los Angeles with 
illegal immigrants aboard.
    If the Chinese Government, with all of their resources, 
can't stop this illegal traffic, what would lead you to believe 
that we can create a system that would stop somebody from 
putting a bomb on one of these containers? And so maybe you 
could respond. Maybe you could respond to this issue with that 
in mind.
    Ms. DeBusk. Sure, I would like to do that, and thank you 
for the question.
    First of all, I think you hit the nail on the head when you 
were suggesting that a solution had to be comprehensive, not 
just 12 ports. And let me just give you a real-life example of 
a situation here in the United States.
    The Port of Miami had a major problem with stolen autos.
    Chairperson Feinstein. Stolen?
    Ms. DeBusk. Autos, and they were being exported from the 
Port of Miami down into the Caribbean. And there were all sorts 
of stolen autos that were being put in these containers and 
exported. So they got one of these fancy X-ray machines, these 
VAC machines, and they started X-raying those containers. All 
of a sudden they had no more stolen autos, but guess what? Port 
Everglades, which did not have one of these fancy X-ray 
machines, all of a sudden had a major problem with stolen 
autos.
    So if you want to have a solution that is based on 
technology or inspections or anything along these lines, it has 
to be comprehensive because, otherwise, the bad guys will just 
go to the weak link in the chain there.
    The second thing that I wanted to comment on is that 
ensuring the integrity of inspectors is a really difficult, 
difficult thing to do if you are thinking about people in 
foreign countries who are inspecting things at foreign ports.
    This issue came up when I was in Government at the Commerce 
Department. The question was whether we should let private 
inspectors check on how U.S. technology was being used in 
foreign countries. And our decision was negative. We said, no, 
the only inspection that is going to count for us is an 
inspection by a U.S. agent. And that is not because we didn't 
want to rely on information from our foreign counterparts, but 
just based on experience there are just lots of things that can 
go wrong in foreign countries.
    The other issue that would have to be looked at very 
closely is who is the client and who is paying the bill, 
because, once again, if there is an inspection agency who is 
being paid by the shipper and they discover at tremendous 
problem--there is, in fact, a nuclear bomb in that container on 
that vessel--it is unlikely they are going to want to go to the 
U.S. Government with that information because, otherwise, their 
client is going to be left with an oceanliner that nobody is 
going to use. Who wants to be using an oceanliner where you can 
put nuclear bombs on it?
    So there is also an inherent conflict of interest that 
would have to be addressed there in terms of who is paying the 
bill for these inspections.
    Chairperson Feinstein. Gentlemen, any comments?
    Mr. Quartel. Can I comment on anything?
    Chairperson Feinstein. Sure. Why not?
    Mr. Quartel. If I can go back to some of what was said, 
too, I also agree with Amanda on this, but what I also would 
not endorse is the notion that you do 12 ports or 10 ports. I 
think the reality is that we get cargos in 300-some ports in 
the United States, and it is sent from several thousand points 
of origin globally. And the beauty of data and commercial 
systems and trade is that it doesn't have to be port or 
anything else specific. If something is coming to the United 
States, you can know who ordered it and paid for it. You can 
know where it was manufactured, and in Asia----
    Chairperson Feinstein. Take the containers with people in 
them.
    Mr. Quartel. You can know that that container originated--
--
    Chairperson Feinstein. How? How? Coming from China, how do 
you know?
    Mr. Quartel. Well, you know, these are--I don't have every 
answer, but I know that a container from China with people in 
it, you can know it is coming out of Tianjin where these people 
may have originated 90 percent of the cases. So that says you 
want to inspect containers coming out of Tianjin. Or----
    Chairperson Feinstein. Don't you think the Chinese are 
doing that?
    Mr. Quartel. Who knows what the Chinese are doing? And I 
don't mean to be flip, but I really honestly, Senator--you 
know, they are very technologically backwards. They substitute 
labor for technology probably too often. They are notoriously 
corrupt in all of these things. So I don't think you or any of 
us can assume that they are doing all the things that we would 
do as a government to stop it.
    But, for example, you would know who the freight forwarder 
was or the consolidator who packed the container before it was 
sealed. That is all information that is contained in a 
transaction, and it can be reported somewhere. And really all 
we are suggesting in our notion of data collection is that you 
have data on every transaction, every place it has been, 
everybody who touched it.
    Chairperson Feinstein. Well, let me interrupt you, just in 
the interest--you are then suggesting a kind of international 
agreement with participating nations or participating ports, 
however you want to do it, but it would be some kind of 
agreement that everybody would enter into?
    Mr. Quartel. I think you could do it much more simply than 
that. I don't think it matters what any other international 
government thinks. The reality is that if you told the American 
shipper who ordered the cargo to be sent to the United States--
and every cargo coming here is bought by an American 
somewhere--that it is his responsibility to see that that cargo 
is secured and that he is responsible for seeing these 19 
different data elements, including all the transportation, all 
the handling, all the finances, all the so-and-so, and report 
it to some authority in the United States Government before it 
ever gets on a ship or a train or a plane, or whatever----
    Chairperson Feinstein. Supposing it is half a container 
sent to Joe Dokes, Joe Dokes is just an individual----
    Mr. Quartel. It is not actually the container. The reality 
is you want to go as far down as a shipment. A single container 
could contain 20 different shipments from 20 different owners.
    Chairperson Feinstein. Okay. So these owners are just 
private individuals.
    Mr. Quartel. Absolutely. And, you know, one of the things I 
would suggest, if you want legislative suggestions, I think one 
of the things you could think about--we already have an export 
license requirement. You could well have a requirement for some 
form of import identification based on a purchase order. As 
soon as you ordered something from overseas, you filed a 
purchase order. Now, I am not saying you create a license 
requirement with a lot of bureaucrats. But even that, giving 
someone an identifier for every transaction coming into the 
United States from the very day it was ordered will make the 
process more simple and have more discipline.
    Chairperson Feinstein. That is not a bad idea, actually.
    Mr. Quartel. There are a number of things you can do like 
that. But, you know, in the end it comes on to the U.S. 
importer. Eighty percent of all transactions in trade are 
outsourced to freight forwarders, Customs brokers, and third-
party logistics providers. But in the United States they are 
all licensed. So there are 4,000 or 5,000 of those licensed by 
the FMC, Federal Maritime Commission, where I used to sit. I 
would move the licensing requirement and I would move them to 
Customs. I would tighten up the licensing requirements. I would 
probably do background checks on freight forwarders and say, If 
you are moving the cargos, you need to know who you are dealing 
with on the other side.
    So, again, it is layers and layers, but there are some very 
specific things you can do. A freight forwarder today will 
typically know who he is dealing with overseas, and if he 
doesn't, then he sort of watches the transaction and he himself 
will probably check the container or ask one of his Customs 
agents----
    Chairperson Feinstein. Is there any shipment that comes in 
without a freight forwarder?
    Mr. Quartel. Yes, probably 20-some percent have--20, 25 
percent have internal company freight forwarders and things 
like that. But you could mandate that a licensed party be 
involved with it.
    Chairperson Feinstein. In other words, that no----
    Mr. Quartel. And Amanda, I know, has some thoughts on it.
    Chairperson Feinstein [continuing]. Shipment comes into the 
United States that doesn't have a freight forwarder?
    Mr. Quartel. Or other licensed agent of the Government 
involved in the process.
    Ms. DeBusk. One of the other things to think about is if 
you want to start doing things abroad, looking at those 
containers abroad or checking to see if Chinese individuals are 
in those containers, spot checks are a wonderful thing. Given 
limited resources, it is, you know, impossible for the United 
States Government to all of a sudden hire enough agents to go 
abroad to every single port. But spot checks are beautiful 
things, and it definitely increases compliance immensely 
because when you know that there is, you know, a one in 10 
chance or a one in 50 chance, or whatever it is, that you may 
be caught, it certainly provides strong deterrence. So a 
combination of cooperation with foreign officials, with private 
sector inspections, backed up by spot checks by U.S. Government 
officials would certainly, you know, move the ball forward in 
terms of our security.
    Mr. Quartel. I wonder if I could make one other quick 
addition to all of that, too, which is, I think the other 
concept that is really important to bear in mind is that a 
legal cargo that comes to the United States legally can become 
a lethal cargo in the right circumstances.
    Chairperson Feinstein. Say that again? A legal cargo can 
become an illegal cargo?
    Mr. Quartel. Can become a lethal cargo.
    Chairperson Feinstein. Lethal. Thank you.
    Mr. Quartel. And by that--for example, we have talked an 
awful lot about radiation, but, for example, fertilizer or 
fertilizer-type chemicals are legal. I don't know all the terms 
and conditions, and there are conditions that would bind it. 
But it is legal to bring those kinds of things into the U.S. 
Now, it would be documented. Customs would say it is fine. 
Frankly, you could probably inspect it, and nothing is in it. 
But let's say a sailor on a ship on the water puts a blasting 
cap and a GPS on it, and all of a sudden it still legal, but it 
is lethal.
    Now, a container can hold 12 to 13 times as much fertilizer 
as Timothy McVeigh's bomb in Oklahoma City. So think about the 
damage one container of a legal cargo could do.
    Now, the beauty and power of information is----
    Chairperson Feinstein. Right under a critical bridge coming 
into a harbor or whatever.
    Mr. Quartel. Yes, ma'am.
    Chairperson Feinstein. Right.
    Mr. Quartel. But the beauty and power of information is 
that you not only want to know what it is, but you can also 
think through the situation in which the shipment or cargo is 
placed. Is it placed in a dangerous situation? Is it coming out 
of someplace where, even though it looks good, you might want 
to worry about terrorists or people in subterfuge and 
subversion there?
    So, you know, this is not a simple problem of analyzing it, 
but I think the message on this is that the data to do it on 
the commercial side is there. It is more than what Customs and 
the U.S. Government gets today. And I think the law enforcement 
data is beginning to be there and the national security data, 
and I have been involved in talking with some of these 
agencies, and they do have issues about how they talk to each 
other. But it can be done.
    Chairperson Feinstein. Do you have any comments, Mr. 
Steinke?
    Mr. Steinke. Madam Chair, I would make a comment in 
agreement with----
    Chairperson Feinstein. Could you move the mike down a 
little bit? Thanks.
    Mr. Steinke. With Rob, that there seems to be a disconnect 
or a lack of integration about information in general, whether 
it be on the Federal side with the myriad of agencies, be it 
Customs, Coast Guard, FBI, INS, who have certain jurisdictions 
within the ports or in the commercial environment with freight 
forwarders, Customs brokers, shipping lines, shippers, et 
cetera. Though I think the industry has tried, I don't see that 
there has been that connection and integration of information, 
and I think that is something----
    Chairperson Feinstein. Do you get any information as the 
chief executive of a huge port, do you get any kind of----
    Mr. Steinke. Traditionally----
    Chairperson Feinstein [continuing]. That something may be 
awry on a ship?
    Mr. Steinke. Senator, we do not get any information other 
than what we may get through our fire department as far as 
checking on hazardous cargo. Traditionally, the FBI or Customs 
or the Coast Guard will not interact with the port because it 
is not within our jurisdiction to know. And many times they 
will specifically not want me as the CEO of that port to know 
what the situation is. They may advise us that they may be 
inspecting, you know, certain terminals on an ongoing basis 
based on certain types of cargo profiles that they have 
identified. But we are not intimately integrated with lots of 
the functions that take place.
    Chairperson Feinstein. Do you think that is a mistake?
    Mr. Steinke. I think we need to have more information from 
a port standpoint than we do now.
    Chairperson Feinstein. I do, too. I mean, you ought to have 
some kind of security clearance to be able to--you have no 
security clearance?
    Mr. Steinke. No, we don't. And, again, we have 
traditionally seen ourselves historically as a transfer point 
and part of this logistics chain. Local port authorities have 
not set policy. We have been charged with the responsibility of 
developing facilities so that terminal operating companies and 
shipping lines can move cargo without delay from one point of 
transfer to another, and that is the roles that we have seen 
ourselves as U.S. ports in for, you know, the last several 
years.
    Chairperson Feinstein. See, I think that role is changing 
because you have really become a guardian, too, and airports 
have--the role has changed. They are not just passive entities 
anymore in all of this. I think that is a real problem. Go 
ahead.
    Mr. Quartel. Well, and to that, I think--and Richard can 
correct me, but the reality is that ports come in all sizes and 
all forms of Government entities. Some ports are largely 
private. Public ports within them, as you well know, have 
private entities at various docks. Some ports are merged with 
airports in terms of governmental authorities.
    Chairperson Feinstein. But he runs the whole shebang.
    Mr. Quartel. In LA/Long Beach.
    Chairperson Feinstein. In LA/Long Beach. That is a huge 
port.
    Mr. Quartel. Right. So, yes, to that point in terms of 
getting the information.
    Chairperson Feinstein. Right. And I realize there are 
little places, but big stuff----
    Mr. Quartel. Well, but I think you made the point----
    Chairperson Feinstein [continuing]. Is going to come in 
there.
    Mr. Quartel. Yes, ma'am. I think you were making the point 
also about the security piece of that. We have a port in 
Richmond, Virginia, up the James River. I don't know whether it 
is public or private. I have a summer house on an island in the 
Chesapeake, and there are 25 docks that a ship could come in 
with a container, a small ship, mind you, but they could bring 
a container in. Now, there is a Coast Guard station around the 
other end of the island, but they are not necessarily going to 
see it.
    So, you know, there are all sorts of ways to subvert the 
system.
    Chairperson Feinstein. That is why you have to keep them 
from coming in loaded with something.
    Mr. Quartel. Yes.
    Chairperson Feinstein. Well, it is a very interesting 
problem, but really challenging. I would really like to find a 
way to use technology, but also to use human beings to really 
create a kind of network that is global that can protect our 
citizens.
    Mr. Quartel. That is right.
    Chairperson Feinstein. And I wonder, would you all be 
willing to work with our staffs, Senator Kyl's staff and my 
staff, and see if we can't come together and be helpful in 
this?
    Mr. Quartel. Yes, I would be glad to do that.
    Ms. DeBusk. Sure.
    Chairperson Feinstein. I would really appreciate it.
    Mr. Steinke. My pleasure.
    Chairperson Feinstein. Is there anything else any of you 
would like to say? No. Then thank you very, very much, and this 
hearing is adjourned.
    [Whereupon, at 5:51 p.m., the subcommittee was adjourned.]
    [Submissions for the record follow.]

                       SUBMISSIONS FOR THE RECORD

        Statement of R. A. Armistead, President and CEO, ARACOR

    I am responding to your request for my thoughts regarding seaport 
security issues and technology that is available to help mitigate the 
threats at our nation's seaports.
                                Overview
     Over 90% of United States international trade comes 
through our nation's seaports.
     Over 70% is shipped in sea cargo containers.
     25 U.S. seaports account for 98% of all container 
shipments.
     The top 50 seaports in the United States account for 
approximately 90% of all the cargo.
    California ports rank high in terms of cargo handled. The ports of 
Long Beach, Los Angeles and Oakland are among the top five ports in the 
U.S. in terms of container throughput; Long Beach and Los Angeles 
regularly rank in the top 10 in the world.
    Seaports are generally uncontrolled facilities, where people can 
freely enter and leave. For the most part, cargo passes through our 
ports without being inspected. Reportedly, only 2% of incoming cargo 
containers are inspected. Thus, duty avoiders, smugglers and terrorists 
have a very high probability of shipping contraband into the U.S. 
without detection. Once outside the seaport, a cargo container can end 
up anywhere in the country without having been inspected or opened. 
Therefore, the seaport is the most effective location for stopping 
incoming contraband.
    Virtually all cargo inspections are performed by customs 
inspectors. They use dogs, drills and, in some cases, physical searches 
involving unloading the cargo and subjecting individual items to 
examination. However, dogs cannot smell ``duty fraud'' and are not 
trained to detect weapons of terrorism. Drill samples provide a random 
check and physical searches of large containers, which require two-to-
three person-days, are rarely done. Thus, even for the 2% of the 
containers that are selected for inspection, there is some chance that 
contraband will escape detection.
                             New Technology
    There are reasons to believe that new technology that has recently 
come on the market can help to mitigate the security threat represented 
by cargo entering our nation's seaports. In particular, x-ray 
inspection systems designed for use at seaports can:
     See through the cargo and detect contraband even if 
concealed behind false walls or in hollow structures.
     Inspect a 20-foot container in less than 30 seconds.
     Continuously inspect a line of containers and trucks.
     Be augmented to automatically detect nuclear weapons or 
special nuclear materials, even if shielded.
    Thus, with the proper logistics, a high percentage of the cargo 
could be inspected to protect against terrorism without severely 
impacting the flow of commerce. It is highly unlikely that resources 
will ever be sufficient for inspecting all of the entering containers. 
Thus, inspection technology at our seaports should be considered as one 
element in a layered defense. Other elements could include inspections 
at the point of shipment, high-integrity seals, the profiling of 
cargoes like done for airport passengers, etc.
    The material that follows takes a closer look at seaport security 
issues; reviews new technology that can assist in addressing the 
threats; and looks at ``barriers'' that impede the introduction of this 
technology.
                         Seaport Vulnerability
    What does a terrorist look for in selecting a target? Probably, 
such things as accessibility, the likelihood of success and the amount 
or ``visibility'' of the loss the U.S. would suffer from a successful 
attack.
    California alone has three of the largest ports in the nation, 
annually handling over 10 million containers carrying tens of billions 
of dollars worth of goods. A terrorist attack that shuts down any of 
these ports for even a few weeks would have enormous consequences to 
California and the nation. Such events could include the sinking of a 
ship in a shipping channel, the explosion of a small nuclear weapon or 
dirty bomb at the port, or the release of a chemical or biological 
contaminant. Both the Los Angeles and the Oakland-San Francisco areas 
contain cities of high worldwide visibility with dense populations and 
high-technology manufacturing centers. An attack on one of these cities 
caused by weapons arriving by cargo container would also have 
devastating consequences.
    The events of September 11 awakened the nation to the fact that we 
are under attack and our nation, which prides itself on the free flow 
of people, goods and ideas, has many areas of vulnerability. At the 
same time that our nation is attempting to address areas of 
vulnerability, terrorist organizations are undoubtedly focusing on 
detecting other areas that have not yet been addressed. The nation's 
leaders have determined that spending tens of billions of dollars on 
airport security is worthwhile, in spite of the economic impact. The 
same resolve needs to be shown toward spending on security at seaports, 
where the risk of catastrophe from imported terror could be even 
greater than at airports.
    If U.S. ports were secure, the nation would benefit in the 
following ways:
     Weapons of terrorism, such as explosives, special nuclear 
materials and nuclear weapons would be prevented from entering the 
country.
     Billions of dollars worth of stolen cars, electronics, 
computers, and other valuable goods would be intercepted before they 
could be shipped out of the country.
     Billions of dollars of additional duties and taxes would 
be collected by detecting fraudulent manifests on imported goods.
     Counterfeit goods would be prevented from entering the 
country.
     Illegal drugs, believed to be entering the U.S. by seain 
increasing amounts, would be kept off our streets.
                   New Technology and Barriers to Use
    New Technology: Over the last five years, several types of new 
nonintrusive inspection systems have come on the market. These systems 
employ x rays, gamma rays or neutrons to screen the cargo for 
contraband. For the most part, the earliest use of such technology was 
along the border with Mexico. At the time of implementation, only low-
energy x-ray inspection systems were available. Though only capable of 
inspecting empty or lightly-loaded trucks, they were considered 
appropriate at the time because of a flow of nominally empty trucks 
coming from the border. However, these low-energy systems have little 
or no application to seaports due to their limited cargo penetration. 
In fact, existing low-energy inspection systems at the Mexican border 
will have to be supplemented to improve security, if the open border 
provisions of NAFTA go into effect.
    At this time, Customs has several systems to choose from that offer 
different combinations of price and performance. Our company (ARACOR) 
manufactures the Eagle ' inspection system which combines 
mobility, relocatability and the highest imaging performance of all the 
systems. It provides cargo penetration that is almost a factor of two 
times greater than its nearest competition and more than three times 
that of the low-energy systems at the Mexican border.
    U.S. Customs Service has made detailed measurements of the 
performance of all of the available cargo inspection systems and graded 
them into four ``performance levels.'' ARACOR's Eagle is the only 
system that has been placed into level four, the highest performance 
category. ARACOR is also working with the DoE National Nuclear Security 
Administration and the DoD Defense Threat Reduction Agency to implement 
combined x-ray and neutron technology for the specific detection of 
drugs, explosives, special nuclear materials and nuclear weapons.
    Barriers to Use: Are these new technologies being quickly 
introduced into use at the nation's seaports? The answer is clearly no! 
There are a number of reasons for the slow adoption rate
     Resistance to New Technology: Since the beginning, Customs 
inspectors have depended on their hands, experience, instincts and 
dogs. To introduce new technology, such as x-ray inspection systems, 
requires that the inspectors be convinced that the technology 
represents an improvement. Some inspectors at ports may resist new 
technology, which requires changes to established procedures and may 
reduce their overtime pay. Moreover, they have to be trained how to 
operate and maintain the systems and analyze the images.
    Budgets: Although they provide a much greater inspection efficiency 
and throughput, the new systems are relatively expensive. Customs has 
not been given a budget that is adequate for adding the required number 
of inspection systems to our seaports. Even if systems were only to be 
placed at the 20 largest US ports, a considerable number of systems 
would be required for inspecting a high percentage of the cargo. The 
Port of Oakland has 11 separate terminals and Los Angeles has 28 or 
more. Until recently, most of the available equipment budget has been 
devoted to the southwest border. Even now, more attention seems to be 
focused on the Canadian border than on the nation's seaports. It almost 
appears that there will have to be an attack at a seaport before much 
attention (and budget) is focused in that direction.
    Mixed Jurisdictions: A number of separate ``groups'' must agree (or 
be forced to agree) before the security threat at U.S. seaports can be 
addressed.
        1. The Administration and Congress: Airport security is our 
        nation's current focus. The seaport security issue cannot truly 
        be addressed until the national ``spotlight'' is focused on it 
        and an appropriate budget is allocated. Legislated milestones 
        for implementing seaport security improvements, such as those 
        in the airport security legislation, will ensure that the 
        necessary measures will be accomplished in a timely manner.
        2. U.S. Customs: Customs will likely have primary 
        responsibility for implementing the ``will of Congress'' as it 
        pertains to seaport security. However, even after Congress 
        provides the budgetary authority, individuals at Customs must 
        take appropriate action. Experience to-date indicates a 
        reluctance to make decisions and take actions that may be 
        questioned. This overly cautious past performance suggests that 
        the move to introduce new technology will likely be made very 
        slowly. Once enabling legislation and budgets are in place, 
        empowered US Customs officials must take the necessary steps to 
        achieve the established objectives and meet the required 
        milestones.
        3. New Organizations and Missions: The events of September 11 
        resulted in the establishment of new organizations, such as the 
        National Transportation Administration and the Office of 
        Homeland Security, and the revision of missions for other 
        organizations. For example, the US Customs Service has changed 
        its focus from interdicting drugs to protecting against 
        terrorism. The organizations affected by these changes are 
        still trying to determine how best to fulfill their missions 
        and combine their talents to work together in a coordinated 
        effort. Hopefully, the uncertainties inherent during this 
        transition period will not hinder effective decision-making and 
        implementation of new initiatives, such as seaport security.
        4. Port Authorities: The primary goal of the Port Authorities 
        is to make money by attracting commerce. They fear that a slow 
        down in the handling of cargo due to inspection would result in 
        the loss of business. At the Mexican border, the US government 
        owns the property that is used for conducting inspections. 
        However, at seaports, Customs is only a tenant. Customs 
        officials have told me that they could not purchase Eagles 
        because Port Authorities would not agree to provide them space 
        for operation! In some cases, land at a port has been set aside 
        for Customs inspections but the location is so remote that the 
        efficiency and cost of inspections are severely impacted. 
        Legislation and/or persuasion are needed to enable Customs to 
        operate cargo inspection equipment at ports in a manner that 
        meets the national security requirements with minimal impact on 
        the flow of goods through the port.
        5. Longshoremen's Union: The Longshoremen who work at the ports 
        must also ``buy into'' new operations, including cargo 
        inspection, which some may not welcome. In the past, they have 
        resisted the introduction of improved inspection technology and 
        allegedly perpetrated acts of equipment vandalism. A 
        Longshoremen's Union strike at one or more seaports could also 
        have a significant economic impact. Therefore, the 
        Longshoremen, have a major influence on port operations and 
        security and must be persuaded to join the nation's fight 
        against terrorism.
    Can these barriers to use be overcome? The answer is definitely 
yes! However, action must start at the top levels of government and 
will definitely require a larger budget for equipment and inspectors.
    I have tried to concisely put forth my views on several topics 
related to seaport security. I hope this material will be of some use 
to the Committee. However, there are additional details that could be 
provided on each topic so, if more is desired, please do not hesitate 
to contact me.

                                

  Statement of Hon. Maria Cantwell, a U.S. Senator from the State of 
                               Washington

    I want to thank Senator Feinstein for chairing this hearing and 
providing this opportunity to discuss the vital issue of seaport 
security.
    Our nation's seaports lie at the heart of our economy and 
transportation system. Yet, they also represent a significant point of 
vulnerability in our national security. Of the over six million 
shipping containers that enter the United States annually, only a mere 
two percent are inspected. While inspecting every container entering 
our ports would unquestionably bring our economy to a grinding halt, 
the impact of a terrorist attack in our ports would be devastating.
    This dilemma illustrates the need to discuss security alternatives 
which integrate new ways of thinking and new technologies. To this end, 
I look forward to hearing testimony from representatives of the 
Department of Transportation, US Customs Service, and US Coast Guard 
today. I also look forward to this Committee and the full Congress 
considering several legislative proposals to strengthen seaport 
security in the near future.
    I was pleased by the Senate's passage of S. 1214, the Port and 
Maritime Security Act of 2001, and I urge the House to consider this 
important piece of legislation on the floor. This bill addresses the 
need for increased security measures for shipping containers at the 
point-of-origin. Focusing on point-of-departure and mandating advance 
shipping manifests represent security measures that are proactive 
rather than reactionary.
    My home state of Washington boasts the largest locally controlled 
port system in the world with over 70 ports ranging dramatically in 
size, infrastructure, and purpose. In Washington, ports play an 
integral role in our state's economy as the nexus for international 
trade and a leading provider of high-quality jobs for our residents. In 
fact, one out of every four jobs in Washington state is dependent upon 
trade facilitated by seaports.
    Securing these seaports and our ports nationwide is essential to a 
functioning economy and public safety. It is an issue most deserving of 
our attention, and I would like to thank Senator Feinstein again for 
bringing it to the forefront today.

                                

  Statement of Anthony Acri, CEO, International Microwave Corporation

    International Microwave Corporation (IMC) submits the following 
testimony in response to the February 26, 2002, Senate Judiciary 
Committee, Subcommittee on Technology, Terrorism and Government 
Information, hearing on ``Securing Our Ports Against Terror: 
Technology, Resources and Homeland Defenses.''
    I want to thank Senator Feinstein for holding this hearing and 
bringing national attention to this important issue. Our nation's 
seaports have insufficient security and may be vulnerable to terrorist 
attack. The tragic and unanticipated events of September 11 have 
brought matters of national security into sharp focus. But the Senator 
identified this problem two years ago when she said ``many of the 
problems at seaports are due to insufficient federal oversight and lack 
of personnel and technology. We should do more to combat crime and 
fraud at seaports and reduce their susceptibility to terrorist 
attack.''
    Senator, you are right. Ports lack sufficient security, and 
technology is the solution. This week's testimony made clear that the 
primary area of port security concern is cargo and container 
inspection. But, none of the witnesses focused on two emerging threats 
that will be exacerbated by increasing inspection of arriving cargo: 
(1) physical security at port facilities; and (2) the shortage of 
security personnel. Increased inspection of shipping containers means 
fewer personnel overseeing the physical security of port facilities. 
Given these manpower limitations, the answer lies in the use of 
technology.
    Amanda DeBusk testified that a study by the Interagency Commission 
on Crime and Security at U.S. Seaports (the ``Commission'') found that 
significant criminal activity was taking place at most of the twelve 
seaports surveyed. The Commission also found that the state of security 
at seaports ranged from fair to poor. Over 12 million containers arrive 
at U.S. seaports each year, and only one to two percent of all cargo is 
inspected. In that small portion of inspected containers, law 
enforcement officials have found secreted huge caches of illegal drugs, 
contraband weapons, and illegal aliens.
    To address this problem, regulators have been focusing on 
increasing the inspection of containers and pre-screening cargo in 
foreign ports of shipment. But Congress must consider what the 
witnesses left unaddressed: increased oversight of containers may 
decrease physical security of ports by drawing personnel away from 
surveillance and security patrol of port grounds. Increased inspection 
and oversight of containers may provoke a rise in theft at port 
facilities, as lawbreakers seek to steal or retrieve smuggled 
contraband. If facility integrity measures are not in place, there will 
be nothing to deter such an increase in criminal activity.
    In our opinion, effectively increasing port security will not work 
unless improved security measures are deployed across all aspects of 
port operation - cargo inspections accompanied by employee 
credentialing, and increased physical integrity of port facilities.
    As the Senator pointed out, most seaports lack basic security 
technology, such as video surveillance, and do not even conduct 
internal or perimeter vehicle patrols. At the Port of Oakland, one of 
the nation's busiest ports, only one or two piers have 24-hour closed 
circuit TV security, and most of the port remains unguarded at night 
except for occasional visits by a lone Oakland policeman. The 
Commission study recommended that seaports be governed by certain 
minimum physical security standards covering fences, lights and gates. 
As Rear Admiral Kenneth Venuto, U.S. Coast Guard Director of Operations 
Policy stated in his testimony, effective port security ``is built on 
principles of awareness. . . . Awareness helps focus resources and 
provides efficiency to prevention.''
    There is no better way to increase awareness and security than 
adopting a comprehensive video surveillance program. Video surveillance 
technology maximizes sight in a time of decreased personnel. America's 
seaports need to install video technology currently used along our 
borders that acts as a `force multiplier,'' allowing one person's eyes 
to do the work of many.
    For example, IMC's enhanced surveillance system is fast becoming 
the most popular and widely accepted video monitoring system used by 
government and private industry. IMC's system combines single or dual 
long range day cameras and thermal imaging night cameras on customized 
poles that can scan a twelve square mile area, 360 degrees, 24 hours a 
day, in any kind of weather. Video signals are transmitted to a central 
surveillance facility via microwave or fiberoptic cable, where security 
personnel can manipulate remote cameras, monitor highresolution screens 
for suspicious activity, and direct mobile forces. As an affixed or 
portable system, IMC WatchTowers can be used in numerous capacities, 
including protecting ports, bases, embassies, nuclear facilities, 
airports, or borders. IMC's WatchTower system has become known as ``the 
force multiplier'' because it enables security forces to use fewer 
people to watch more territory and better supervise field response 
teams.
    In the fall of 2000, the Immigration and Naturalization Service 
(INS) and the U.S. Border Patrol awarded IMC a $200 Million, four-year 
turnkey contract to design, manufacture, install and maintain the 
WatchTower system along U.S. borders. IMC's WatchTowers are securing 
our borders from illegal aliens and drug trafficking while protecting 
the safety of our federal agents and Americans living along the border. 
A Texas Border Patrol Agent-in-Charge called IMC's WatchTower ``the 
best technology I've ever seen in my entire career.'' Use of this 
proven effective technology can easily be expanded from its current 
employment by the U.S. Border Patrol to address the problem of securing 
U.S. seaport facilities.
    The U.S. Department of Transportation (DOT) will shortly begin 
accepting applications from ports for grants to enhance seaport 
security under the new Port Security Grants program administered by the 
Maritime Association (MARAD) and the U.S. Coast Guard, on behalf of the 
Transportation Security Administration (TSA). The grant category for 
enhanced facility and operational security at ports, including physical 
security, should not be minimized.
    It is essential that America's ports are the safest, most secure 
port facilities in the world. The ``emerging threat'' against the 
United States has, in fact, emerged. In our opinion, the next emerging 
threat to our nation will be the shortage of qualified law enforcement 
personnel and the well-document lapses of civilian security employees. 
Initiatives such as the Port Security Grants program should prioritize 
the use of technologies that maximize the individual capabilities, such 
as ``the force multiplier'' of the WatchTower system, where one person 
can be the eyes of ten.
    We thank the Committee for this opportunity to testify and are able 
to meet with you to further discuss the national security and 
information landscape, and how IMC has contributed to real security 
solutions.

                                

  Statement of Michael Nacht,\1\ Professor, University of California, 
                                Berkeley

    Madame Chairperson, it is a privilege to submit this testimony for 
inclusion in the Congressional Record.
---------------------------------------------------------------------------
    \1\ Michael Nacht is Dean and Professor of Public Policy in the 
Goldman School of Public Policy at the University of California, 
Berkeley. He is a member of the Threat Reduction Advisory Committee to 
the Office of the Secretary of Defense where he chairs a panel on 
Combating Terrorism Using Weapons of Mass Destruction.
---------------------------------------------------------------------------
    The events of September 11 and subsequent acts of bio-terrorism are 
a startling wake-up call for the need to enhance the protection not 
only of the American people, but of our vital industrial assets. 
Protection of critical infrastructure has now been established as a top 
priority of the Office of Homeland Security. A key element of this 
infrastructure is our network of major port facilities. The ports that 
ring the East, West and Gulf Coasts are vital economic engines whose 
safe and smart operations are essential for American participation in 
the global economy.
    Still, more than five months after the terrorist attack, a great 
deal needs to be done immediately if we are to safeguard these 
facilities from terrorism and crime. It is essential to realize that 
increasing the efficient operation of the ports will produce enhanced 
security.
    Failure to protect these facilities could have catastrophic 
effects. For example, a chemical high explosive coated with radioactive 
material that was detonated in a major port during peak work hours 
would likely produce prompt fatalities far in excess of those at the 
World Trade Center on September 11. And the psychological effects of 
the attack-skyrocketing uncertainty worldwide about the safety of US 
ports--would have a profoundly deleterious impact on US maritime trade 
and therefore on the health of the entire national economy.
    Consider the situation on the West Coast. The ports at Los Angeles 
and Long Beach, Oakland, Seattle, Tacoma and Portland handle 
containerized cargo that support nearly four million workers throughout 
the United States. In 2000 almost $260 billion of containerized exports 
and imports transited through these ports, creating total business 
revenue of $723 billion, equivalent to 7% of the nation's gross 
domestic product. Credible estimates suggest that international trade 
between the United States and Asia will double in the next decade, 
producing dramatic increases in these measures of economic activity, 
assuming maritime trade remains unimpeded.
    The ports face formidable challenges, however. These include 
inadequate protection against terrorist attack and criminal activity; a 
shortage of available land for expansion; large numbers of trucks 
entering the ports that add significantly to road congestion and air 
pollution and whose queues increase port vulnerability to terrorism and 
crime; and inefficient use of available technologies and work practices 
that reduce productivity in the container yards and cost the maritime 
industry as much as $1 billion annually. But a number of feasible 
modifications could be implemented drawing on existing operations at 
ports in Singapore, Hong Kong, the Netherlands, the United Kingdom and 
elsewhere.
    The key point is that the utilization of existing simple and basic 
technologies can facilitate the seamless flow of information, 
eliminating errors and delays currently introduced by human 
intervention. Both the security and the productivity of the ports would 
be enhanced significantly if these technologies were applied and 
existing work practices were modified.
    Indeed much of what should be done at the West Coast ports is 
already standard practice at some East Coast and Gulf Coast ports as 
well as at many facilities abroad. What is needed, therefore, are not 
radically new technologies or procedures.
    If we fail to put into practice these easy-to-understand and easy-
to-implement technologies, we do so at our own peril.
    A Snapshot of Current West Coast Port Operations \2\
---------------------------------------------------------------------------
    \2\ For a more detailed account of port operations and needed 
adjustments see Michael Nacht, ``Working Smarter, Faster, Safer: 
Technological Innovations and Adjusted Work Practices for Enhanced 
Security and Productivity at West Coast Ports,'' October 26, 2001.
---------------------------------------------------------------------------
    There is no technological ``silver bullet'' that will magically 
revolutionize port operations. But there are a number of applications 
of existing technology that would collectively and over time have a 
dramatic impact on the security and productivity of the ports.
    Consider the basic elements of current West Coast port operations. 
Each port has a number of terminals that are utilized by one or more 
global carriers. About 20 operators have 50-80% of global capacity and 
an even higher percentage of traps-Pacific capacity.\3\ Trucks, mostly 
operated by independent trucking companies, arrive at the ports in 
large numbers early on weekday mornings. Most carry container loads to 
be placed on ships for export. They also pick up containers that have 
arrived as imports. Some trucks arrive empty (called ``bobtails'') to 
pick up containers.
---------------------------------------------------------------------------
    \3\ The largest is Maersk-Sealand, a Danish firm that, at the 
beginning of 2000, had 236 ships and carried more than 565,000 TEUs, 
about 8% of the world fleet. Many of the carriers are privately owned, 
some are government-backed, and still others are a combination. There 
are numerous forms of cooperation among the carriers. Particularly 
notable are ``alliances'' among carriers that foster customer focus, 
produce cost advantages, and encourage sharing of facilities and 
equipment. See Container Shipping Industry: Moving the Box-Shifting the 
Paradigm, October 2000, Ing Barings Asian Regional Research. pp. 6-7.
---------------------------------------------------------------------------
    At the gate to the terminal, the trucker provides information to a 
clerk identifying himself, his load, and the load he plans to pick up. 
If everything is in order, the clerk instructs the trucker where to 
drop his container and where to pick up his new load.
    Clerks have information stored in computers about the location of 
containers in the yard that have been off-loaded from ships. If 
everything is not in order, the trucker pulls off to the side to a 
``trouble area'' where he works out with another clerk the issues that 
have precluded him from entering the yard.
    The amount of time the trucker has to wait to enter the yard is the 
``queuing time.'' The amount of time the trucker spends in the yard 
before leaving is the ``trucker dwell time.'' Productivity of the 
terminal is directly related to the number of containers, or TEUs, 
handled per area per unit of time, the minimization of queuing time, 
and the minimization of trucker dwell time, among other measures.
    In the meantime, the containers on ships are off-loaded by 
stevedores who operate large, ship-to-shore gantry cranes. Some 
containers are placed on wheeled chassis and are parked in the yard by 
longshore tractor operators. Other containers are taken to specified 
locations in the yard and stacked on the ground, usually three-to-four 
high. Some of the containers are eventually removed from the yard by 
trucks, usually for delivery to destinations not far from the port. 
Others are placed on railroad cars for intermodal transportation to 
destinations distant from the port.\4\
---------------------------------------------------------------------------
    \4\ Note that sometimes trucks take containers from the terminal to 
locations for consolidation with other containers rather than for 
delivery. Then these containers are loaded on to trains for transit 
elsewhere. This process is known as ``transloading.''
---------------------------------------------------------------------------
    It is not unusual for containers to be misplaced. Containers in 
this category are labeled ``unable to locate'' or UTL. In some West 
Coast terminals it is estimated that 610% of the containers in the yard 
are UTL.
    Efficient movement of the containers in the yard and high-accuracy 
knowledge of the location of each container obviously affects the dwell 
time of truckers. If containers are left at the yard in excess of an 
agreed period of time, the trucker is charged a fee (a ``demurrage'' or 
late charge) that is either paid by the trucker or his employer.
    What then is to be done? Here are six recommendations.
    1. Trucker Identification and Registration System
    Today, truck driver identification is determined by the clerk at 
the gate, and is subject to the imperfections of human inspections. it 
is the norm that only when the truck driver reaches the gate is his 
identity made known. Driver identification is determined by the clerk 
at the gate, and is subject to the idiosyncrasies of individual human 
inspections. Instead, each driver should be issued a port-specific 
picture identification card with driver license number, vehicle 
registration, work permit, safety record, and insurance information.\5\ 
A registry should be established that holds this information for all 
truckers permitted to enter the facilities of a given port.
---------------------------------------------------------------------------
    \5\ See Thomas Ward, ``Improving Container Transport Security,'' 
September 2001.
---------------------------------------------------------------------------
    2. Port Personnel Smart Card Authentication System
    A smart card system using ``biometrics'' can perform identification 
and authentication almost instantaneously using electronic fingerprint 
identification, facial geometry, signature recognition and voice 
recognition. Every port employee and trucker authorized to enter the 
port area should be issued a smart card [a plastic card the size of a 
credit card with a power computer chip embedded within it containing 
relevant information (e.g., driver license number) and unique biometric 
information (e.g., fingerprint)]. The chip would be programmed to 
permit each individual access only to pre-authorized sector of the 
port.
    The system would have to be implemented in such a fashion as to 
minimize interference with the rapid movement of the containers through 
the yard, which is essential for high terminal productivity.\6\
---------------------------------------------------------------------------
    \6\ In general, implementation of systems to enhance security will 
increase operating costs and could introduce new strains on deliveries. 
See Claudia Deutsch, ``Agents of Recovery Under Stress,'' The New York 
Times, October 9, 2001, pp. C1, C14.
---------------------------------------------------------------------------
    3. Trucker Appointment System
    A number of ports worldwide, including some on the East Coast, have 
introduced systems in which each container pick-up from or delivery to 
the terminal is conducted on an appointment basis. An electronic record 
of a planned pick-up or delivery would be provided to the gate control 
personnel before the truck arrived at the terminal (``pre-filing of 
information''). This record would include driver identification and 
insurance information; pickup and delivery authorization; trucking 
company identification; booking data; container identification; special 
handling (for example, hazardous material identification or 
refrigerated container setting) information; and seal numbers (all 
containers currently are closed with traditional security seals that 
can only be cut with extremely heavy bolt cutters to minimize 
tampering). The record could be tied to a universal transaction number 
that would be used to track container movement from origin to 
destination.\7\
---------------------------------------------------------------------------
    \7\ This system is not novel. It is already widely used by 
warehouse personnel of major retail corporations in the United States 
who handle large amounts of freight by truck each day.
---------------------------------------------------------------------------
    Some trucks could be pre-authorized to proceed through the gate 
without stopping. There are terminals in Los Angeles/Long Beach that 
already use an elementary version of this system for ``bobtails'' 
(trucks with chassis but no containers). With this method bobtail 
arrival is scheduled in advance by fax. When the bobtail approaches the 
terminal it does not wait in the standard gate queue but travels along 
a passing lane and enters the yard after the normal identification 
security check without otherwise stopping, thus reducing appreciably 
the overall queuing time for the terminal.
    The appointment system should also be linked to an ``appointment 
window.'' Drivers would have a specific 30-minute time, for example, in 
which to enter the terminal. These appointment windows would be 
established through internet communication in which truckers could 
determine both the status of the container to be picked up and the 
availability of an appointment at the marine terminal. If they were 
running early or late, the driver would communicate with terminal 
personnel by cell phone to determine if they could adjust their arrival 
time. By staggering the arrival of trucks using a computer-generated 
algorithm, there would be substantial reductions in road congestion 
outside the terminal, queuing time, and dwell time.
    Again, it is important to stress that reduction of road congestion 
outside the terminal, queuing time, and dwell time all contribute to 
increased security as well as enhanced productivity.
    4. Electronically Read Tamper Evident Seals
    Special security seals, termed ``electronically read tamper evident 
seals,'' should be required for installation on all containers. Coupled 
with a global positioning system connection, they could provide real-
time evidence of seal tampering to a container monitor at the 
terminal.\8\
---------------------------------------------------------------------------
    \8\ Container security is a major problem in itself, related 
closely to the security of ships as they enter port. This involves U.S. 
Coast Guard operations and other issues that are not addressed in this 
testimony.
---------------------------------------------------------------------------
    5. Container Intelligence
    Currently, painted markings are the only external form of container 
identification. At most terminals, closed circuit television monitors 
are used by gate clerks to read license plates and container numbers. 
Still the waiting time at the gate can be appreciable.\9\ One 
improvement would be to install optical character recognition (OCR) 
readers at the terminal gates that would record the container number 
and add it to the terminal's database. Alternatively, all containers 
could carry electronic tags that emit signals received by antenna at 
the gate and record the appropriate information. If the electronic tag 
were connected to a differential global positioning system, the 
location of the container once in the yard would be known with almost 
perfect accuracy. Implementation of either approach would reduce 
waiting time at the gate appreciably and lower the risk of mistakes 
associated with a casual labor force (see 6. below).
---------------------------------------------------------------------------
    \9\ In many instances, current work practices at the gate involve 
unnecessary human involvement that is inefficient and time-consuming. 
The system employed in many terminals is analogous to a bank customer 
obtaining funds at an automatic teller machine, acquiring a receipt for 
his transaction, but then having to go into the bank to have the teller 
validate that the receipt is genuine.
---------------------------------------------------------------------------
    At present the assignment of yard equipment at most terminals is 
based on the experience and intuition of the longshoremen. With precise 
knowledge of container location and the implementation of an 
appointment system, the assignment of yard equipment could be optimized 
with a straightforward, computer-generated algorithm.
    To enhance container intelligence these measures must be coupled 
with the screening of containers closer to the point of origin (not in 
US ports). Measures to strengthen cooperation with ports worldwide have 
merit and should be seriously considered.
    6. Automated Dispatch Hall and Dedicated Work Force
    For many years until today, the procedure for longshoremen work 
assignments has been predicated on gathering workers each morning at a 
central location within the harbor area, providing assignments to each 
individual, and then scattering the workers throughout the port to 
their particular workstations. This approach has three major 
disadvantages: it is very time consuming, it leads to continuously 
changing work assignments (a ``casual work force''), and it reduces 
security since the current system makes it easier for non-authorized 
personnel to enter the yard. Instead, an automated dispatch hall should 
be established in which all workers are issued valid identification 
cards and every effort is made in advance to match worker skills with 
positions that need to be filled. Where at all possible, continuity 
would be emphasized so that a dedicated, steady work force would be 
deployed throughout the port area. Workers would know in advance where 
they are to work, thereby eliminating the waiting time each morning 
from arrival at the dispatch hall to arrival at the workstation. And 
they would build up a pattern of consistency in their assignments that 
would enhance their skills and provide more efficiency, predictability, 
and productivity in container yard operations.
    The Congress needs to exercise its vital watchdog role to ensure 
that these recommendations are implemented as rapidly as possible. It 
is not melodramatic to conclude that we procrastinate at our peril.

                                

                      Statement of Port of Oakland

    The Port of Oakland welcomes the opportunity to provide this 
written testimony before the Senate Judiciary Committee's Subcommittee 
on Technology, Terrorism and Government Information. We applaud the 
Subcommittee for holding this important hearing. We at the Port of 
Oakland are working diligently to improve security at our maritime 
facilities in the wake of the terrorist attacks of September 11, 2001. 
In conjunction with the U.S. Coast Guard and our maritime tenants we 
have already instituted a number of new interim security procedures and 
protocols, as well as begun planning for more permanent measures.
    Since September 11t'', the U.S. Coast Guard has instituted a wide 
range of security measures on all ships entering U. S. ports. In the 
San Francisco Bay, these measures include the establishment a security 
zone from the San Francisco Bay entrance seaward to 12 nautical miles. 
Vessels are screened and profiled according to risk, with high-risk 
vessels being boarded and escorted. Some vessels are also boarded and 
escorted at random.
    In addition, 1/2 mile security zones have been established in areas 
of San Francisco Bay adjacent to San Francisco International Airport 
and Oakland International Airport. Persons and vessels are prohibited 
from entering these zones without permission from the local Captain of 
the Port. The Bay Area Coast Guard Office was the first Coast Guard 
Division to institute this new Sea Marshal program. It continues to 
implement the program throughout the San Francisco Bay Area.
    The Port of Oakland's terminal operators in the wake of the 
September 11th attacks immediately implemented a wide variety of 
terminal security and protective measures. These include:

        1. Limiting access to facilities by visitors to vessels, tours, 
        port contractors
        2. Scheduling appointments by vendors, contractors, suppliers 
        for needed vessel or terminal services.
        3. Installing new security warning signs at gates and 
        entrances.
        4. Enhancing gate security procedures to stop all private 
        vehicles, checking ID's
        5. Preventing passengers in delivery trucks from entering the 
        facility.
        6. Checking and verifying documentation of all hazardous cargo 
        before allowing entrance to facilities.
        7. Increasing the number of roving security guards to check all 
        fenced perimeters as well as the waterside of the terminal.

    Working with other ports on the West Coast, the Port of Oakland has 
been working closely with the U.S. Coast Guard and its terminal 
operators in further developing interim security guidelines that would 
set minimum standards for all Port facilities in the U.S. Coast Guard's 
Pacific Area [California, Oregon, Washington, Alaska, Hawaii and Guam]. 
The Port established a local Seaport Security Committee, inviting 
terminal operators and shipping line representatives, the local Captain 
of the Port, Port Pilots, local police, as well as representatives from 
the U. S. Customs Service and the Immigration and Naturalization 
Service (INS) to review and provide input as the guidelines were 
developed. These interim guidelines were authorized on January 28, 2002 
and will take effect over the next several months. It is anticipated 
that these guidelines will remain in effect until permanent regulations 
are published, we hope, in the next year.
    The Seaport Committee is also exploring the feasibility of a new 
identification system required for all port workers within Oakland and 
San Francisco Bay, as well as working with the Oakland Police 
Department to determine appropriate levels of increased patrol and law 
enforcement presence within the Port area. The Port has also 
volunteered to participate in a Maritime Administration-sponsored 
smart-card identification system prototype evaluation.
    Port staff and terminal management staff are updating facility 
security plans and developing a listing of facility security 
improvements that will be required to come into compliance with federal 
regulations when fully implemented. The Port's operations staff in 
cooperation with the Port's terminal operator tenants have completed a 
physical survey of all marine terminal facilities and initiated service 
requests to repair or upgrade fences and other physical security 
measures as appropriate. The Port has also identified more major 
security infrastructure projects that will be needed to enhance Port 
security. These include:

----------------------------------------------------------------------------------------------------------------
       Item                                      Description                              Estimated cost million
----------------------------------------------------------------------------------------------------------------
           1.       Emergency communication system for U.S.C.G./Oakland Police/U.S.                     .30
                    Customs/ Terminal Operators/Port and Terminal-to Terminal telephone/
                                                               radio alert system.
           2.                              Armored gates/spikes to prevent egress.                     2.50
           3.                                     Radiation readers at exit gates.                      .70
           4.       Surveillance cameras and improved terminal security lighting, port-               12.30
                    wide; video surveillance of key entrance corridors to Port area.
           5.       Improving/replacing terminal fencing with k-rail/cables, fiber-optic              13.60
                                                                     alert systems
           6.       Hardening/under grounding key high-voltage utility lines/port area                11.80
                                                                     sub-stations.
           7.                   Smart Card Access Control system and installation.                     4.50
           8.          Augmenting Oakland Police emergency Response capability and                     2.80
                                  installation of Police sub-station in Port area.
           9.        Crash barriers/armored gates to prevent Access [high security                     9.30
                                                                      requirement]
          10.       Miscellaneous security enhancements Port-wide and construction                    10.20
                                                                    contingencies.
                                                                              TOTAL ESTIMATED COST   $68.00
----------------------------------------------------------------------------------------------------------------

    Other California Ports costs have cited similar costs related to 
additional security measures ranging from $25 million to more than $100 
million depending on the size and activity of the Port.
    Prior to September 11th the Port's security resources were 
primarily invested in preventing crime and cargo theft. Since September 
11th, our focus has changed to incorporate the potential threat of 
terrorism. Perhaps the biggest challenge facing our industry in 
addressing this security issue is the fact that there has not been a 
clearly defined threat to the nations' seaports. Given the increasing 
volumes of people and goods moving through our seaports, the U. S. 
government and the international community has no credible way to 
reliably detect and intercept illegal and dangerous people and goods 
that move through our maritime and surface transport networks.
    Seaports cannot be separated from the international transportation 
system to which they belong. Ports are, in essence, nodes in a network 
where cargo is loaded on or unloaded from one mode--a ship--to or from 
other modes--trucks, trains, and on occasion, planes. Efforts to 
improve security within the port, therefore, require that parallel 
security efforts be undertaken in the rest of the transportation and 
logistics network. Port security initiatives must be harmonized within 
a regional and international context. Unilateral efforts to improve 
security in California ports, for example, without similar efforts to 
improve security in the ports of our neighbors will lead shipping 
companies and importers to ``port-shop"; i.e., to move their business 
to other market-entry points where their goods are cleared more 
quickly. Finally, Ports should not be viewed as a primary line of 
defense in an effort to protect the U.S. homeland. A credible security 
system should identify and take the steps to preserve the flow of trade 
and travel that allows California and the U.S. to remain open and 
competitive in today's global market.
    Regarding on-going drug interdiction efforts that Senator Feinstein 
and the Subcommittee are examining, we can tell you that the number of 
drug and weapon seizures at Bay Area seaports has not drastically 
changed in the past year.
    The U.S. Coast Guard and the U.S. Customs Service are the federal 
agencies primarily responsible for drug interdiction. The Coast Guard 
conducts inspections at sea, whereas the U.S. Customs Service actively 
searches for drugs in containers that reach U.S. ports. Since September 
11th, there have only been a few incidents of drug smuggling at the Bay 
Area ports--two occurred in San Francisco. None have occurred in 
Oakland.
    It is our understanding that although there has been a decrease in 
manpower devoted to drug interdiction at the U.S. Customs Service, due 
to a new focus on security issues, the reduction has not taken away 
from the U.S. Customs Service's commitment to intercepting illegal drug 
shipments into the United States.
    The California National Guard has recently been brought into this 
effort. The Guard will be loaning a mobile container inspection machine 
that searches for drugs and weapons (vehicle and cargo inspection 
systems). We expect to have the use of this machine and six National 
Guard personnel for the month of March.
    The Port of Oakland thanks the Subcommittee and Senator Feinstein 
for the opportunity to submit this testimony. We look forward to 
working with you as we work to insure that our nation's ports as safe 
as possible for the benefit of all the American people.

                                

    Statement of John H. Warner, Jr., PhD, Corporate Executive Vice 
President and Director, Science Applications International Corporation 
  (SAIC), and James Winso, Corporate Vice President, General Manager 
   Security Products, Science Applications International Corporation 
                                 (SAIC)

    After the September 11, 2001 terrorist attacks, SAIC completed an 
internally-funded, fast-paced study to determine ways to improve our 
country's port security and to deal with the millions of containers 
entering our country each year. A team of experienced counter-terrorism 
experts with domain expertise in weapons of mass destruction (WMD) and 
maritime trade was convened for this study. This statement provides a 
brief summary of the results of this study.
    About 20 million containers enter the U.S. each year through our 
port and border crossings. Approximately 40% of the containers entering 
U.S. portsenter through the major California ports. Our study focused 
on the WMD threats with emphasis on nuclear weapons, but with some 
consideration of biological weapons also. We examined several threat 
scenarios, global transportation, various security related 
technologies, as well as institutional involvement and barriers for 
improving port security. An overall system architecture for improved 
port security was developed. Significant results are summarized below:

    1. The problem is complex and an overall systems level approach is 
needed with both short term and long term objectives.
    2. There is a strong difference between the nuclear threat with 
intended detonation in a harbor versus the nuclear threat for intended 
movement of the weapon to another part of the country. Obviously, the 
weapon intended for detonation in a harbor needs to be identified and 
neutralized well prior to harbor entry and ship unloading.
    3. Long term, and for threats for targets interior to the U.S., 
while non-intrusive inspection or intrusive inspection can take place 
entirely in the U.S., some degree of cooperation of countries exporting 
to the U.S. is important for vetting containers based on their history 
and the identity of the people, organizations and countries involved in 
transporting them to the U.S. Inspection, tagging, sealing and tracking 
technologies are useful in such a process. A process could be 
established to vet containers depending on the conditions of origin and 
transport. The vetting process would determine which containers needed 
the more disruptive, intrusive inspection at the U.S. port. Processes 
to minimize disruption of trade for this concept were developed.
    4. Long term, and for threats where the U.S. port is the target, 
the above concept fails because high confidence is needed in 
understanding which containers might be threats prior to entry into 
U.S. waters. Inspection must occur either at the point of origination 
or offshore from the U.S. Containers could be inspected by a certified 
inspection agency at loading and then sealed externally or internally 
or both. Non-certified containers would need 100% non-intrusive 
inspection prior to entry into U.S. waters. This could be far more 
disruptive to trade. By a suitable combination of rule making and 
carrier operated inspection processes, economic incentives in the form 
of ease of entry into U.S. ports, reduced trade violations and enhanced 
revenue collection, such a concept could be made attractive and could 
actually facilitate legal commerce. However, the ability to gain the 
cooperation of trading partners for such inspections may 'require the 
U.S. to reciprocate by inspecting all containers leaving the U.S. and 
bound for agreement countries.

    The above concepts need to be studied in far more detail and any 
implementation would take time, as well as the cooperation of trading 
partners. Obviously, some partners would be more cooperative than 
others. However, recently the world went through the Y2K problem and 
cooperation was achieved to insure that ships entering U.S. ports were 
Y2K compliant prior to entry. Although a smaller problem, the 
incentives were established to encourage safe operation and navigation 
of ships in U.S. ports. The U.S. Coast Guard working with international 
maritime organizations played a strong role in achieving this 
cooperation.
    The U.S. cannot afford to wait for a ``silver-bullet'' 
comprehensive solution to our port security problems before we act. 
Short term, more non-intrusive inspection is important for containers 
arriving in the U.S and this should be done as soon as possible. At 
present, only a very small percentage of containers are inspected at 
the U.S. entry ports due to the high manpower requirements for 
physically unloading and reloading containers. Technologies and 
products are available today, which, if properly used, could make 
substantial improvements to U.S. port security without such high 
manpower requirements.
    As one example, SAIC produces the VACIS (Vehicle and Cargo 
Inspection System) in our San Diego facilities. The U.S. Customs 
Services has purchased over 80 VACIS units and has been implementing 
them at an accelerated rate for the past three years. These non-
intrusive inspection systems have been deployed by U.S. Customs along 
the land borders with Mexico and Canada and are also being deployed in 
U.S. seaports. They have proven their effectiveness over the last 
several years by enabling significant seizures of contraband entering 
the U.S. The mobile VACIS version appears to be particularly well 
suited to be used at U.S. ports, since the unit can be easily moved to 
the ships being unloaded and the inspection time is minimum. Thus, 
containers can be inspected without impacting the flow of commerce in 
the ports.
    Pioneered by the U.S. Customs Service in 1994, the SAIC VACIS 
system has become the world's most advanced gamma-ray inspection system 
for cargo containers (e.g., trucks, railroad cars, shipping containers, 
etc.). VACIS uses naturally occurring gamma rays to inspect an entire 
container in a matter of seconds even while the container vehicle is in 
motion. The system emits a narrow, low intensity gamma beam that is 
directed at a highly sensitive detector array. As this beam penetrates 
a moving or stationary object, a computer generates a high-resolution 
image of the container under inspection. SAIC's patented technique 
allows reconstruction of this Radiographic Image of the contents of the 
container with an extremely small amount of Ionizing Radiation (a 
dosage equivalent to that received in one minute of aircraft flight). 
This image is generated by custom software that was developed by SAIC's 
image processing scientists and engineers specifically for this 
application.
    Designed for simplicity of operation and maintenance, all of SAIC's 
modular gamma ray systems have a minimum of moving parts, easily 
replaceable components and easy-to-use software. Each individual 
component has been proven in countless commercial applications and, in 
fact, the availability rate of the over 50 VACIS units deployed by U.S. 
Customs has been demonstrated at over 95% over the last four years. 
VACIS' simple yet effective design and proven operational success means 
VACIS offers easy installation, reduced training time, with minimal 
maintenance and repair. All of these features have supported U.S. 
Customs ambitious program for implementing an effective cargo-screening 
program.
    Other technologies and products are available for sensing different 
emissions or other characteristics associated with various threats. For 
example, one version of VACIS will allow imaging while simultaneously 
detecting radiation emitted from the container. Other sensors, with 
various degrees of effectiveness, exist for chemical detection.
    In summary, an overall systems level approach to the problem of 
increasing our port security is important to achieve the proper degree 
of security without causing strong barriers to commerce. Achieving long 
term objectives will take time and effort. However, technologies are 
available today to achieve major improvements in port security and meet 
shorter-term objectives with only minor impact on the flow of commerce.

                                   - 
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