[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
CUSTOMS BUDGET AUTHORIZATIONS AND OTHER CUSTOMS ISSUES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TRADE
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
JUNE 17, 2004
__________
Serial No. 108-52
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
23-795 WASHINGTON : 2005
_____________________________________________________________________________
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, JR., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM MCCRERY, Louisiana JIM MCDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHIL ENGLISH, Pennsylvania LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona EARL POMEROY, North Dakota
JERRY WELLER, Illinois MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON TRADE
PHILIP M. CRANE, Illinois, Chairman
E. CLAY SHAW, JR., Florida SANDER M. LEVIN, Michigan
AMO HOUGHTON, New York CHARLES B. RANGEL, New York
DAVE CAMP, Michigan RICHARD E. NEAL, Massachusetts
JIM RAMSTAD, Minnesota WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington XAVIER BECERRA, California
WALLY HERGER, California JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania
JIM NUSSLE, Iowa
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
.................................................................
C O N T E N T S
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Page
Advisory of June 7, 2004, announcing the hearing................. 2
WITNESSES
U.S. Department of Homeland Security, U.S. Customs and Border
Protection, Hon. Robert C. Bonner, Commissioner................ 6
U.S. Department of Homeland Security, Hon. Michael J. Garcia,
Assistant Secretary for U.S. Immigration and Customs
Enforcement.................................................... 20
______
Retail Industry Leaders Association, and Target Customs Brokers,
Inc., Michael D. Laden......................................... 39
General Motors Corp., and Joint Industry Group, Kevin M. Smith... 46
C.H. Powell Co., and National Customs Brokers and Forwarders
Association of America, Peter H. Powell, Sr.................... 49
National Treasury Employees Union, Colleen M. Kelley............. 54
National Association of Foreign-Trade Zones, and Port Freeport,
Phyllis Saathoff............................................... 60
Border Trade Alliance, and Yellow-Roadway Corp., Sandra Scott.... 65
SUBMISSIONS FOR THE RECORD
American Association of Exporters and Importers, statement....... 69
American Trucking Associations, Inc., Alexandria, VA, statement.. 77
Customs and International Trade Bar Association, Melvin S.
Schwechter, letter............................................. 81
Grocery Manufacturers of America, statement...................... 82
International Freight Forwarders and Customs Brokers Association
of New Orleans, Inc., Metairie, LA, John T. Hyatt, statement... 83
National Retail Federation, statement............................ 84
U.S. Association of Importers of Textiles and Apparel, Laura
Jones, letter.................................................. 87
U.S. Business Alliance for Customs Modernization, Timothy Van
Oost, letter................................................... 88
CUSTOMS BUDGET AUTHORIZATIONS AND OTHER CUSTOMS ISSUES
----------
THURSDAY, JUNE 17, 2004
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:09 a.m., in
room 1100, Longworth House Office Building, Hon. Philip M.
Crane (Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON TRADE
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
June 07, 2004
TR-5
Crane Announces Hearing on Customs Budget Authorizations and Other
Customs Issues
Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade
of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on budget authorizations for fiscal
year (FY) 2005 and FY 2006 for the Bureau of Customs and Border
Protection (CBP) of the U.S. Department of Homeland Security (DHS) and
the Bureau of Immigration and Customs Enforcement (ICE) of DHS, and on
other Customs issues. The hearing will take place on Thursday, June 17,
2004 in the main Committee hearing room, 1100 Longworth House Office
Building, beginning at 10:00 a.m.
Oral testimony at this hearing will be heard from both invited and
public witnesses. Witnesses are expected to include representatives
from CBP and ICE. However, any individual or organization not scheduled
for an oral appearance may submit a written statement for consideration
by the Subcommittee or for inclusion in the printed record of the
hearing.
BACKGROUND:
Budget Authorizations:
The President's budget proposal provided FY 2005 funding for CBP at
$6.2 billion and ICE at $4.0 billion. On May 20, 2004, Chairman Crane,
along with Reps. Rangel (D-NY), Shaw (R-FL), Levin (D-MI), and Ramstad
(R-MN), introduced H.R. 4418, the ``Customs and Border Security Act of
2004,'' authorizing appropriations for FY 2005 and FY 2006 for CBP and
ICE at the level requested in the President's budget proposal.
Other Customs Issues:
Reorganization in DHS: On November 25, 2002, the President signed
into law legislation (P.L. 107-296) creating a new DHS. On March 1,
2003, the former U.S. Customs Service was divided into two new agencies
within DHS. Customs inspectors, canine enforcement officers, and import
specialists were merged with immigration inspectors, border patrol
agents, and agriculture inspectors to create the Bureau of CBP. Customs
investigators and personnel in the air and marine operations were
merged with immigration investigators, Federal air marshals, and
members of the Federal protective service to create the Bureau of ICE.
Issues for the Subcommittee to address involve whether the new agencies
are functioning effectively, whether trade functions are being given
sufficient priority now that the agencies are integrated into a
department whose primary mission is security, and whether adequate
resources are devoted to customs functions.
Customs-Trade Partnership Against Terrorism (C-TPAT): In November
2001, CBP initiated C-TPAT, a program in which private companies
improve the security of their supply chains in return for the reduced
likelihood that their containers will be inspected for weapons. In the
first year of the program, Customs enrolled more than 1,700 companies
in C-TPAT, and interest in the program continues to increase. In July
2003, the U.S. General Accounting Office (GAO) issued a report
regarding the expansion of C-TPAT in which it identified a number of
concerns with the program. First, although C-TPAT expected to hire more
than 150 additional staff, Customs has not devised human capital plans
to meet long-term staffing needs. Second, while Customs has established
performance measures based on the quantity of operational efforts, it
has not developed any measures of program achievement. Issues for the
Subcommittee to address involve the effectiveness of this program in
enhancing security and facilitating trade, whether performance measures
exist to determine the effectiveness of the program, and whether
companies are receiving the anticipated trade benefits of the program.
Customs Modernization: The current Customs automation system, the
Automated Commercial System (ACS), is an aging system that has
experienced several ``brownouts.'' Customs is in the process of
replacing ACS with the Automated Commercial Environment (ACE). Some of
the main differences between ACS and ACE are that ACE will use a single
integrated system, modern standards, processes, techniques, and
language, and will be compatible with commercial software. CBP predicts
that by the end of the 2004, the number of ACE users will reach 20,000
and the number of ACE accounts will reach 1,100.
In addition, CBP is in the process of integrating the International
Trade Data System (ITDS) with ACE. ITDS was chartered in 1995 to
facilitate information processing for businesses by accommodating the
more than 100 Federal agencies that need access to international trade
data. Currently, traders are required to provide this information to
each individual trade agency using a variety of different automated
systems, a multitude of paper forms, or a combination of systems and
forms. With ITDS, traders will submit standard electronic data for
imports or exports only once to ITDS. Then, ITDS will distribute this
standard data to the pertinent Federal agencies that have an interest
in the transaction for their selectivity and risk assessment. ITDS will
provide only the data that is necessary to an agency's mission.
There are several issues for the Subcommittee to consider relating
to customs modernization: (1) whether ACE's design and architecture
will meet future requirements, including the requirements of other
agencies participating in the ITDS program; (2) whether the current
participation by Federal agencies in the ITDS program is adequate and
whether additional resources are required to facilitate participation;
(3) the timing of the expansion of ACE; and (4) the role of the trade
industry in building ACE.
FOCUS OF THE HEARING:
The hearing will focus on budget authorizations for FY 2005 and FY
2006 for CBP and ICE. In addition, the hearing will address other
Customs issues, including: the creation of CBP and ICE and the
integration of the former U.S. Customs Service into DHS, the C-TPAT
program, Customs automation and modernization efforts and the
mechanisms needed to fund them, and general Customs oversight issues.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Requests to be heard at the hearing must be made by telephone to
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In view of the limited time available to hear witnesses, the
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Chairman CRANE. The Committee will start our hearing, and I
would like to welcome Commissioner Bonner and Assistant
Secretary Garcia this morning. It has been just over a year
since the former U.S. Customs Service was incorporated into the
U.S. Department of Homeland Security (DHS) and we are at a
critical juncture in the evolution of the agencies that were
created in that transfer, U.S. Customs and Border Protection
(CBP) and U.S. Immigration and Customs Enforcement (ICE).
The Customs Service has a long and distinguished history.
It was the first agency of the Federal Government to be created
over 220 years ago to collect revenue and to ensure that
imports flow smoothly across the border. Today, Customs
collects more than $20 billion in revenue each year. Over the
years, Customs has taken on many other functions because of its
unique border presence. Fighting against illegal drugs,
transshipped tee-shirts and Rolex knock-offs are just a few of
these other functions.
In the wake of the terrorist attacks on the United States,
the role of Customs in guarding our borders against chemical,
biological, and conventional weapons has become more prominent.
While I supported the creation of the new department, I shared
the concern of many of my colleagues on the Committee that this
move could damage the critical trade function of Customs.
To address that concern, the Committee on Ways and Means
made recommendations that were accepted in the legislation to
prohibit consolidation, discontinuation, or diminution of
Customs functions, resources, or staffing. The Committee noted
in a letter transmitting its views and recommendations on the
legislation that the primary function of the Customs Service
has always been revenue collection and trade facilitation.
By contrast, in its fiscal year 2003 performance and annual
report, CBP states that CBP's priority mission is to prevent
terrorists and terrorist weapons from entering the United
States. The trade mission has slipped down. The CBP notes
further that CBP also continues to perform its traditional
missions, including seizing illegal drugs and other contraband,
apprehending people who attempt to enter the United States
illegally, protecting our agricultural interests from harmful
pests and diseases, collecting duties, and enforcing our trade
and immigration laws at our borders.
The ICE lists its mission as follows, quote, ``To prevent
acts of terrorism by targeting the people, money, and materials
that support terrorist and criminal activities.'' Obviously,
preventing terrorism is an enormously essential mission and it
is only natural that when a department's central mission is
homeland security, the agencies of that department will be
judged on their ability to support that central mission and
will shift their focus accordingly. However, with international
trade comprising nearly 25 percent of our gross domestic
product, CBP's mission to move goods across the border in a
smooth, efficient, and predictable manner cannot be relegated
to a mere supporting role. Instead, it is a vital part of our
economic strength and viability.
On May 20, 2004, I introduced legislation along with
Congressmen Rangel, Shaw, Levin, and Ramstad authorizing
appropriations for fiscal year 2005 and fiscal year 2006 for
CBP and ICE. This legislation is a regular part of this
Committee's authorization process, necessitated by the
expiration at the end of this fiscal year for the existing
authorization for the former U.S. Customs Service. It is also a
part of our ongoing process of exercising oversight and
focusing on the critical importance of the efficient flow of
trade across our borders. I hope during this hearing the
Subcommittee can address some of the challenges faced by CBP
and ICE and I look forward to hearing the testimony. Now I
yield to our Ranking Minority Member, Mr. Levin.
Mr. LEVIN. Thank you, Chairman Crane. As mentioned, this is
a hearing relating to an authorization bill that was introduced
by a number of us on a bipartisan basis. The hearing this
morning relates to some of the entities, but not all, that are
subject to the authorization bill. When we worked on this some
time ago, there were concerns about the reorganization and what
it would mean for the Customs Service and for their traditional
functions, including those that relate to Customs enforcement.
So, some of our issues today, no doubt, will relate to how is
it working out. What is the impact of the security emphasis,
and we fully understand that, within this new department and
the other traditional activities of the Customs Service
relating to the movement of people, goods, and cargo across our
borders. So, we will have a number of questions and we look
forward to the testimony. Thank you.
Chairman CRANE. I thank you, and now we yield to Mr. Bonner
and Mr. Garcia for their presentations.
STATEMENT OF THE HONORABLE ROBERT C. BONNER, COMMISSIONER, U.S.
CUSTOMS AND BORDER PROTECTION, U.S. DEPARTMENT OF HOMELAND
SECURITY
Mr. BONNER. Thank you, Mr. Chairman, Mr. Levin, Ms. Dunn,
and Mr. Becerra. I am pleased to appear before you today to
discuss CBP, perhaps then very briefly the President's 2005
budget request for CBP. One of the most important ideas of the
reorganization that led to DHS was, as Secretary Ridge has put
it, to create ``one face at the border,'' or one agency for the
borders, and that started on March 1, 2003, just over 15 months
ago, when all immigration inspectors of the former U.S.
Immigration and Naturalization Service (INS), all of the
agriculture border inspectors of the Animal Plant Health
Inspection Service, the entire Border Patrol merged with the
bulk of U.S. Customs, the former U.S. Customs Service, to form
CBP, an agency within DHS responsible for managing and securing
our Nation's borders.
The CBP is the largest actual honest-to-goodness merger of
people and functions taking place in DHS, and with
approximately 42,000 employees, that is about one-fourth of all
the personnel of DHS, which I would submit to you is not
surprising when one considers how important the security of our
borders is to the security of our homeland. By unifying the
border agencies, a good government reform that has been
advocated by many independent studies over the years, we are
and will be more effective and more efficient than we were when
border responsibilities were fragmented literally into four
different entities in three different departments of the
government, as they were before March 1, 2003, before the
creation of DHS.
I want to tell you, Mr. Chairman, we are well on our way to
successfully completing this historic merger. In the last year
alone, we have done everything from designating 1 port director
for each of the 300-plus ports of entry into the United
States--land ports, seaports, airports--whereas before March 1,
2003, there had been 2 port directors or 3 port directors
reporting in to different departments of the government. We
have rolled out 1 CBP officer uniform for all CBP inspectors at
our ports of entry, and nearly all 19,000, more or less, of the
frontline inspectors, CBP inspectors, will be in the 1 uniform
by July, by next month, and most already are.
The priority mission, as you indicated, Mr. Chairman, of
CBP is, and I think has to be, preventing terrorists and
terrorist weapons from entering the United States. However, we
recognize that we need to carry out that mission without
stifling or choking off the flow of legitimate trade or travel
that is so vital to our country's economy. I have often said
that part of our mission is a twin mission or twin goals, and
that is increasing security but also the facilitation of trade.
I might say in that regard that that facilitation of trade
remains an important, a very important part of the traditional
mission of CBP.
At CBP, we recognized actually--you know, the priority
mission of U.S. Customs became anti-terrorism security before
the creation of DHS. I can tell you, as Commissioner of
Customs, it became the priority mission of U.S. Customs on the
morning of 9/11. It wasn't just the creation of DHS. We also
have seen that the goals of security and facilitation are not
mutually exclusive, or they don't have to be. At CBP, we are
and we continue to pursue smart border initiatives that do
both. For example, rather than inspecting every container
shipment that is arriving in the United States, which would
have the effect, in my judgment, of virtually shutting down our
economy, we have taken actions to ensure that we identify all
of the high-risk containers and we inspect all of them rapidly
using state-of-the-art technology.
In this regard, we are obtaining advance electronic data on
nearly all shipments coming to the United States. We are using
our automated targeting system to identify all high-risk
shipments. We are inspecting all high-risk shipments for
terrorist weapons using non-intrusive inspection technology and
radiation detection technology.
We are also employing a layered defense or extended border
strategy. For example, through the Container Security
Initiative (CSI), we are pushing our zone of security beyond
our physical borders by placing CBP personnel to work with
other governments to target, identify, and inspect high-risk
containers destined for the United States before they are
loaded on board vessels at foreign seaports heading for our
country.
Under the Customs-Trade Partnership Against Terrorism (C-
TPAT), we have partnered with the private sector, with Members
of the trade, and they have, our partners have increased their
security, their supply chain security from foreign loading
docks to our ports of entry, and those C-TPAT partners who have
partnered with us have and will receive expedited processing at
and through our ports of entry.
The development of Automated Commercial Environment (ACE),
by the way, Mr. Chairman, remains a priority of CBP and it is
at full throttle. The year 2004 is a pivotal year for ACE. The
program will experience its greatest amount of growth to date
and increase functionality, providing significantly improved
capabilities to both the government and to the trade community.
There are nearly 150 trade accounts participating in ACE
representing more than 29 percent of the value of annual
imports into the United States.
Just briefly, our total budget increase request for 2005 is
$190 million. This funding would provide CBP about $25 million
for CSI, about $15 million to expand C-TPAT, $50 million for
radiation detection equipment at our entry points to detect
against radiological and nuclear weapons, $20.6 million in
enhancements to the Automated Targeting System to improve our
capabilities to identify high-risk goods and high-risk
travelers for inspection and greater scrutiny, approximately
$64 million for Border Patrol surveillance and sensor
technology, and $10 million for unmanned aerial vehicles
(UAVs), to deploy and operate UAVs to detect illegal border
crossing.
I want to thank you, Mr. Chairman and Members of this
Committee, for the strong support of CBP and DHS. Working
together, I am confident that CBP and DHS will succeed both in
our efforts to better secure our border against a terrorist
threat and at the same time facilitate the movement of
legitimate trade across our borders. Thank you, Mr. Chairman.
[The prepared statement of Mr. Bonner follows:]
Statement of The Honorable Robert C. Bonner, Commissioner, U.S. Customs
and Border Protection, U.S. Department of Homeland Security
I. Introduction and Overview
Chairman Crane, Ranking Member Levin, Members of the Subcommittee,
it is a privilege and an honor to appear before you today to discuss
Customs and Border Protection's (CBP) FY 2005 budget request.
I want to begin by expressing my gratitude to the Committee on Ways
and Means for the support it provided for important initiatives
implemented by CBP last year. That support enabled CBP to make
significant progress in protecting our country against the terrorist
threat, as well as to facilitate safe and secure legal trade. I also
want to thank Congress for the support it provided in creating the new
Department of Homeland Security, and the new U.S. Customs and Border
Protection within that Department. As the head of CBP, I look forward
to working with you to build on these successes.
The priority mission of CBP is to prevent terrorists and terrorist
weapons from entering the United States, while at the same time
allowing the expeditious flow of legitimate trade. That extraordinarily
important priority mission means improving security at our physical
borders and ports of entry, but it also means extending our zone of
security beyond our physical borders--so that American borders are not
the first line of defense.
We must do this while continuing to perform our traditional
missions well. These missions include apprehending individuals
attempting to enter the United States illegally, stemming the flow of
illegal drugs and other contraband, protecting our agricultural and
economic interests from harmful pests and diseases, protecting American
businesses from theft of their intellectual property, regulating and
facilitating international trade, collecting import duties, and
enforcing U.S. trade laws. In FY 2003, CBP processed 26.1 million trade
entries, collected $24.7 billion in import duties, seized 2.2 million
pounds of narcotics, and processed 412.8 million pedestrians and
passengers and 132.2 million conveyances.
We must perform all of this important security and border-related
work without stifling the flow of legitimate trade and travel that is
so important to our nation's economy. In other words, we have ``twin
goals'': Building more secure and more efficient borders.
Our total program increase request for FY '05 is $223 million.
These funds will help CBP fulfill its priority mission of preventing
terrorists and terrorist weapons from entering the United States. As
Commissioner, I will also devote needed funds to support the automation
and information technology programs that will improve overall
operations of the agency, and I will devote funds to support the
traditional missions for which CBP is responsible.
Mr. Chairman, although I will touch on each of these areas in my
statement, and outline the actions CBP has taken or is planning to take
in each, I want to point out that in many cases, funds spent in one
area have a direct and positive impact on other areas. For example,
funds spent on automation and information technology provide invaluable
assistance to our priority mission of preventing terrorists and
terrorist weapons from entering the United States. Also, funds spent on
our priority mission often result in improvements in our effectiveness
and efficiency in carrying out our traditional missions, such as
interdicting narcotics, and vice versa.
By way of summary of the FY '05 budget for CBP, I can tell you that
the program increases we are requesting include:
$25 million for the Container Security Initiative, which
will support the continued expansion of the program, including the
stationing of CBP personnel in additional key international seaports to
examine high-risk cargo before it is placed on ships bound for the
U.S.;
$15 million for the Customs-Trade Partnership Against
Terrorism to increase supply chain security and expedite the clearance
of legitimate trade;
$50 million for Radiation Detection and Non-Intrusive
Inspection Technology to detect weapons of mass destruction;
$21 million for Targeting Systems Enhancements to
identify high-risk travelers and goods for inspection while allowing
the vast majority of law abiding travelers and commerce to continue
unimpeded;
$64 million for Border Patrol Surveillance and Sensor
Technology for the expansion of the remote video system along the
southern and northern borders to detect illegal crossings and to
increase the effectiveness of agents responding to such crossings;
$10 million for Unmanned Aerial Vehicles to develop,
procure, deploy, and operate a system of unmanned aerial vehicles to
support the Border Patrol by detecting and monitoring illegal border
crossings; and
$5 million to support the International Trade Data System
(ITDS) to revolutionize the way international trade data is collected,
disseminated, and used.
In my statement, I will discuss these programs and others that CBP
has been working on during the past year. I would like to begin,
though, with a brief update for the Subcommittee on the status of CBP
after one year.
II. Customs and Border Protection at One Year
On March 1st, the Department of Homeland Security celebrated its
one year anniversary as a Department. The anniversary marked the
successful transfer of approximately 42,000 employees from the U.S.
Customs Service, the Immigration and Naturalization Service, and the
Animal and Plant Health Inspection Service (APHIS) to the new Customs
and Border Protection agency in the Department of Homeland Security.
CBP is the largest actual merger of people and functions within the
Department of Homeland Security. Indeed, about one-fourth of the
personnel of DHS are housed within CBP. That is not surprising
considering how important the security of our borders is to the
security of our homeland.
A. One Face at the Border
To create CBP, on March 1, we took a substantial portion of U.S.
Customs and merged that with all of the immigration inspectors and
Border Patrol from the former INS, and inspectors from the Department
of Agriculture's APHIS. This means that for the first time in our
country's history, all agencies of the United States Government with
significant border responsibilities have been integrated and unified
into a single federal agency responsible for managing, controlling and
securing our Nation's borders.
At CBP, we are creating, as Secretary Ridge has called it, ``One
Face at the Border''--one border agency for our country. In the year
following its creation, CBP has made significant strides toward
unification. And America is safer and its border are more secure than
they were when border responsibilities were fragmented in three
different departments of government, as they were before March 1,
2003--before the creation of the Department of Homeland Security.
On March 1, 2003, CBP designated one Port Director at each port of
entry and put in place a single, unified chain of command. This was the
first time there has ever been one person at each of our nation's ports
of entry in charge of all Federal Inspection Services. And in terms of
an immediate increase in antiterrorism security, on Day One, all
frontline, primary inspectors at all ports of entry into the United
States were equipped with radiation detection devices. Since March 1,
2003, all inspectors have also received antiterrorism training.
Last year, we began rolling out unified CBP primary inspections at
international airports around the country, starting with U.S. citizens
and Lawful Permanent Residents. Unified primary means that the CBP
inspector in the booth will conduct the primary inspection for all
purposes--immigration, customs, and agriculture. Launched at Dulles,
Houston, JFK, Newark, LAX, Atlanta, Miami, San Francisco, unified
primary is now operational at all major international airports. This is
a major step forward in eliminating the process of travelers
potentially having to ``run the gauntlet'' through three separate
inspection agencies. Although legacy customs and immigration inspectors
have assumed interchangeable roles at the land border ports of entry
for years, this is the first time unified primary has been done on a
national scale at our country's airports.
Along with unified primary, we have also developed and are
implementing combined anti-terrorism secondary which leverages the
expertise and authorities of both legacy customs and immigration to
conduct a joint secondary inspection of passengers deemed high-risk for
terrorism. CBP has also begun to coordinate and consolidate our
passenger analytical units--the units that identify potential high-risk
travelers for inspection. Again, this brings together the customs and
immigration experience and authority to more effectively and
efficiently identify and interdict individuals who pose a possible
terrorist risk.
B. Unifying Symbols and the CBP Officer Position
Since July 2003, we have begun rolling out a new CBP uniform and
patch for all CBP inspectors at our Nation's ports of entry. It will
replace the three different customs, agriculture, and immigration
inspectional uniforms and patches. The new uniform and patch represent
our most visible unifying symbols to the American public. The new
uniform is being implemented in four phases. In the first phase,
completed as of October 1, 2003, all CBP managers and supervisors
converted to the new uniform. Other CBP uniformed personnel will be
phased in at various points with implementation scheduled to be
complete by July of this year.
All of these actions are helping us unify and become more effective
as an agency. Perhaps our most significant step toward achieving ``One
Face at the Border,'' though, was announced by Secretary Ridge on
September 2, 2003: the rollout of the new ``CBP Officer'' position. As
of October, 2003, we stopped hiring and training legacy ``immigration''
or ``customs'' inspectors and began hiring and training a new group of
``CBP Officers,'' who will be equipped to handle all CBP primary and
many of the secondary inspection functions, in both the passenger and
cargo environments. We are also deploying CBP Agriculture Specialists
to perform more specialized agricultural inspection functions in both
these environments.
C. Integrated Training
Training is a very important component to the roll out of the CBP
Officer. We have created a new 14 week, 71-day basic course that
provides the training necessary to conduct primary processing and to be
familiar with secondary processing of passengers, merchandise, and
conveyances in all modes of transport--air, sea, and land. The new CBP
Officer course was built from the 53-day basic Customs inspector course
and the 57-day basic Immigration inspector course, with redundancies
removed, and with additions to address anti-terrorism and CBP's role in
agriculture inspection. The training also supports the traditional
missions of the legacy agencies integrated in CBP. Our first CBP
Officers were hired on September 22, 2003, and they immediately started
training at the Federal Law Enforcement Training Center (FLETC).
D. Enhanced Security Between Ports of Entry
We have also worked very hard to improve the security of our
country between the ports of entry. We have revised and refocused the
Border Patrol's National Strategy, which had previously been focused on
preventing the flow of illegal aliens and drugs between ports of entry
on our border with Mexico. It now includes an aggressive strategy for
protecting against terrorist penetration, at both our northern and
southern borders.
We have started implementing this Strategy. On 9-11, there were 368
authorized positions for Border Patrol agents for the entire northern
border. In the last year, we have added almost 500 agents to the
northern border, giving us more than 1,000 total--exceeding the goal I
set soon after March 1, 2003. This staffing increase will better secure
our border against terrorist penetration.
We are doing more than just adding staffing. We are adding sensors
and other technology that assist in detecting illegal crossings along
both our northern and southern borders, including Remote Video
Surveillance (RVS) systems. These RVS systems are real-time remotely
controlled force enhancement camera systems, which provide coverage
along the northern and southern land borders of the United States, 24
hours per day, 7 days a week. The RVS system significantly enhances the
Border Patrol's ability to detect, identify, and respond to border
intrusions, and it has a deterrent value as well.
We have seen gains in security by the creation of CBP. For example,
the Office of Field Operations and the Office of the Border Patrol are
now able to quickly and easily share equipment and information to
support one another, and have done so on many occasions, whether it be
the use of radiation detection equipment at higher threat conditions,
or the use of truck imaging equipment to detect and deter human
smuggling.
III. Meeting Our Twin Goals: Building More Secure and More Efficient
Borders
As the single, unified border agency of the United States, CBP's
mission is vitally important to the protection of America and the
American people. In the aftermath of the terrorist attacks of September
11th, we have developed numerous initiatives to meet our twin goals of
improving security and facilitating the flow of legitimate trade and
travel. Funds from the FY '05 budget will help us expand those
initiatives and to begin new ones to ensure further protection of both
the American people and the American economy. Our strategy in
implementing these initiatives involves a number of factors, including:
(A) constantly improving and expanding our targeting systems to better
screen more people and goods entering and departing the U.S.; (B)
pushing our ``zone of security outward'' by partnering with other
countries; (C) pushing our ``zone of security outward'' by partnering
with the private sector; (D) deploying advanced inspection technology
and equipment at our ports of entry to detect weapons of mass
destruction; and (E) deploying advanced detection and monitoring
equipment between our ports of entry to detect illegal crossings.
A. Enhancing our ability to identify high-risk people and cargoQ02
Information is one of the most important keys to our ability to
increase security without stifling legitimate trade and travel. Good
information enables us to more accurately identify--or target--what is
``high risk,'' defined as a potential threat, and what is low risk or
absolutely no risk whatsoever. The separation of high risk from no risk
is critical because searching 100 percent of the cargo and people that
enter the United States would unnecessarily cripple the flow of
legitimate trade and travel to the United States. What is necessary and
advisable is searching 100 percent of the high-risk cargo and people
that enter our country. To do this, we need to be able to identify what
is high risk, and do so as early in the process as possible. CBP has
several programs and initiatives that help us accomplish that task.
Advance Electronic Information
Since September 11th, CBP has taken numerous steps to ensure that
it has the information it needs, at the right time, to identify all
high-risk people and shipments destined for the U.S. As a result of
these efforts, and the strong support of the Congress, CBP now has,
among other authorities, the statutory authority to require Advance
Passenger Information and Passenger Name Record data on all people
flying into and out of the United States, as well as advanced,
electronic manifest data on cargo destined for or departing the United
States. CBP has worked aggressively to promulgate and implement
regulations pursuant to these enabling statutes. For example, we are
currently implementing regulations requiring advance, electronic
manifest (or similar) data on virtually all cargo coming into the U.S.
by any mode (rail, truck, aircraft, vessel), whereas this data was
previously provided on a voluntary, and very limited basis. These
requirements should be fully implemented by early FY '05.
National Targeting Center (NTC)
The NTC began around the clock operations on November 10, 2001,
with a priority mission of providing tactical targeting and analytical
research support for Customs' anti-terrorism efforts. As personnel from
Customs, the INS, and the USDA came together on March 1, 2003, under
the umbrella of CBP, the NTC mission broadened commensurately with the
CBP role in support of Homeland Security.
The NTC is primarily staffed by CBP Officers and analysts that are
experts in passenger and cargo targeting for air, sea, and land
operations in the inbound and outbound environments. The NTC develops
tactical targets--potentially high-risk people and shipments that
should be subject to a CBP inspection--from raw intelligence, trade,
travel, and law enforcement data. NTC also supports CBP field elements,
including CSI personnel stationed in countries throughout the world,
with additional research assets for passenger and cargo examinations.
In January 2003, the NTC staff relocated to a state-of-the-art
facility. The new facility is designed to accommodate representatives
from all CBP disciplines, including representatives from the Office of
Border Patrol, the Office of Intelligence, and the Office of
Information and Technology, as well as liaison staff from the law
enforcement and intelligence communities. The NTC has developed
relationships with the Office of Naval Intelligence and the U.S. Coast
Guard via an exchange of personnel with the National Marine
Intelligence Center. NTC has also exchanged personnel with the
Transportation Security Administration, the Department of Energy, and
provided targeting expertise to the DHS Operations Center.
The funding sought in FY '05 will enable the NTC to continue to
expand its infrastructure and personnel to meet the needs of CBP as we
see continued increases in passengers and commercial shipments coming
to the U.S. It will also enable the NTC to continue to play a central
role in interagency activities related to identifying high-risk people
and cargo.
Automated Targeting System
The Automated Targeting System (ATS), which is used by NTC and
field targeting units in the United States and overseas, is essential
to our ability to target high-risk cargo and passengers entering the
United States. ATS is the system through which we process advance
manifest and passenger information to pick up anomalies and ``red
flags'' and determine what cargo is ``high risk,'' and therefore will
be scrutinized at the port of entry or, in some cases, overseas.
The funding increases sought for ATS in the FY '05 budget will
allow for the continued improvement of the system as well as provide it
with the capacity to process the electronic data related to the ever-
increasing number of people and goods entering the United States. For
example, the funding will allow us to develop and implement a version
of ATS that, for the first time, will be able to identify potentially
high-risk travelers in passenger vehicles. It will also be used to
upgrade our passenger targeting system by improving the amount of
government data that the system can access and analyze as well as
provide us with the capacity to train more people on the use of the
system. On the cargo side, the funding will permit ATS to increase its
capacity and upgrade its capabilities by utilizing cutting edge
information analysis technologies developed by CBP and the private
sector.
B. Pushing our Zone of Security Outward--Partnering with Other
Countries
Container Security Initiative (CSI)
To meet our priority mission of preventing terrorists and terrorist
weapons from entering the United States, I believe CBP must ``push our
zone of security outward''--so that our borders are not the first line
of defense to keep terrorists and terrorist weapons out of the U.S. We
have done this by partnering with other countries on our Container
Security Initiative (CSI), one of the most significant and successful
homeland security initiatives developed and implemented after 9-11.
Almost 9 million cargo containers arrive at U.S. seaports annually.
Under CSI, which is the first program of its kind, we are partnering
with foreign governments to identify and inspect high-risk cargo
containers at foreign ports, before they are shipped to our ports and
pose a threat to the U.S. and to global trade.
The four core elements of CSI are:
First, identifying ``high-risk'' containers, using ATS
and the 24-hour rule, before they set sail for the U.S.
Second, pre-screening the ``high-risk'' containers at the
foreign CSI port before they are shipped to the U.S.
Third, using technology to pre-screen the high-risk
containers, including both radiation detectors and large-scale imaging
machines to detect potential terrorist weapons.
Fourth, using smarter, ``tamper-evident'' containers--
containers that indicate to CBP officers at the port of arrival whether
they have been tampered with after the security screening.
CSI continues to generate exceptional participation and support.
The goal for the first phase of CSI was to implement the program at as
many of the top 20 foreign container ports--in terms of volume of cargo
containers shipped to United States seaports--as possible. Those ports
account for nearly 70 percent of all cargo containers arriving at U.S.
seaports. Today, the governments representing 19 of the top 20 ports
have agreed to implement CSI, and I am confident that we will reach
agreement with the 20th port very soon.
We announced the second phase of CSI in June 2003. Under CSI Phase
II, we will implement CSI at other foreign ports that ship a
significant volume of cargo to the United States, and that have the
infrastructure and technology in place to support the program. We have
already signed CSI agreements with Malaysia, Sweden, South Africa, and
Sri Lanka. Once we have Phase II implemented, we anticipate that CSI
will cover approximately 80 percent of the containers coming to the
U.S.
Right now, CSI is operational in those foreign ports from which a
majority of all cargo containers destined for the United States are
shipped.
I want to express my gratitude to the Committee members for their
support of CSI in FY'04. With the $25 million increase in funding that
we are requesting for CSI in FY '05, we will have CSI in place and
operational at as many as 40 seaports around the world.
Immigration Security Initiative Officers (ISI)
Recently, we have started applying the concept underlying the
Container Security Initiative (CSI), i.e., pushing our zone of security
beyond our borders, to the movement of people traveling to the United
States. This effort originated with the legacy INS and its Immigration
Control Officer (ICO) program. Through CBP, this continuing effort is
being cultivated to better address the worldwide threat of terrorism.
The responsibility of the ISI program is to: 1) prevent the onward
movement of people identified as presenting a security threat to the
carrier or passengers on international flights destined to the U.S.; 2)
disrupt and deter the smuggling of special interest aliens,
fraudulently documented aliens and/or otherwise inadmissible aliens
destined to the U.S.; 3) provide advance notice of passengers to
authorities at onward destinations whose true identity and purposes
warrant a closer inspection; 4) collect law enforcement intelligence on
known or suspected criminal aliens and smugglers; 5) apprehend and
prosecute these individuals, through cooperation with host governments
and other U.S. law enforcement agencies; and 6) provide training in
fraudulent document detection, migration trends, passenger assessment
and related topics to host governments and carrier personnel. The ISI
will fulfill its responsibilities in accordance with the code of
conduct for Immigration Liaison Officers (ILO) of the International Air
Transport Association/Control Authority Working Group (IATA/CAWG).
Canada, Australia, the United Kingdom and the Netherlands have
existing ILO programs stationed around the world. In concert with our
international partners, the INS launched Operation Global Shield in
October of 2002, deploying officers to numerous locations within major
transit hubs in Central and South America, Europe, and the Far East.
Operation Global Shield was a considerable success, resulting in 2,971
interceptions within a five-month period.
CBP is now building upon the lessons learned from Operation Global
Shield as well as the experiences of our international partners to
improve the ISI concept to better respond to the threat of
international terrorism. The U.S. currently has over 70 legacy
immigration personnel overseas; many of who are engaged in ISI related
activities on a part time basis. CBP will work with these personnel to
hone their skills to aid in the effort in preventing potential
terrorists from boarding aircraft destined for the U.S.
C. Pushing our Zone of Security Outward--Partnering with the Trade
Customs-Trade Partnership Against Terrorism (C-TPAT)
The Customs-Trade Partnership Against Terrorism (C-TPAT) is a
voluntary partnership between CBP and industry to secure international
supply chains from end-to-end. Through C-TPAT, participants develop and
maintain secure supply chains from the foreign factory floor to the
ultimate destination in the U.S. CBP, in return, offers C-TPAT
shipments expedited processing and provides C-TPAT participants with
other benefits.
The program is rigorous. In order to join C-TPAT, a company must
conduct a self-assessment of its current supply chain security
procedures using C-TPAT security guidelines developed in partnership
with logistics and security experts from the trade. A participant must
also commit to increasing its supply chain security by addressing any
vulnerabilities that exist. Perhaps most importantly, participants also
make a commitment to work with their business partners and customers
throughout their supply chains to ensure that those businesses also
increase their supply chain security. By leveraging the influence of
importers and others on different participants in the supply chain, C-
TPAT is able to increase security of U.S. bound goods at the time of
container stuffing. This reach--to the foreign loading dock--is
critical to the goal of increasing supply chain security.
Although C-TPAT is a partnership, we are not simply taking the
participants at their word when it comes to their supply chain
security. As a former President once said: ``Trust, but verify.''
Applying this lesson, we have created a cadre of specially trained
supply chain security specialists to validate the commitments made by
C-TPAT participants--to ensure that they are increasing supply chain
security as they have promised CBP. These specialists meet with
personnel from C-TPAT participants and their business partners and
observe the security of their supply chains, including security at
overseas loading docks and manufacturing plants. Through this process,
we work with C-TPAT participants to identify ways that they can further
increase their supply chain security and we ensure that companies that
are not honoring their commitments lose their C-TPAT privileges.
C-TPAT is currently open to all importers, cross-border air, sea,
truck, and rail carriers, brokers, freight forwarders, consolidators,
non-vessel operating common carriers (NVOCCs), and U.S. Marine and
Terminal operators. We are currently enrolling certain foreign
manufacturers in the C-TPAT program as well, and we will continue to
develop ways to include this important element of the supply chain in
the program. The intent is to construct a supply chain characterized by
active C-TPAT links at each point in the logistics process.
As of March 12,2004, the C-TPAT participation and validation
numbers are as follows:
[GRAPHIC] [TIFF OMITTED] T3795A.001
Free and Secure Trade (FAST)
Building on C-TPAT, we have created the Free and Secure Trade
(FAST) program with Canada and Mexico. This program increases the
supply chain security of goods moving across our land borders and also
facilitates the movement of legitimate commerce by aligning customs
processes on both sides of the border and offering the most expedited
customs processing available on the land border. To be eligible for
FAST processing, importers, carriers, and manufacturers (on the
southern border) must participate in C-TPAT and must use a FAST-
registered driver. Because each participant must meet C-TPAT supply
chain criteria and the driver must be vetted by CBP (including
exhaustive database checks and a personal interview), the FAST program
substantially increases the security of supply chains across our
northern and southern borders. And because FAST relies on advanced
electronic data transmissions and transponder technology, CBP can offer
FAST shipments the most expedited clearance procedures available today.
With these procedures in place, CBP can focus its security efforts and
inspections where they are needed most--on high-risk commerce.
FAST is currently operational at 11 major northern border crossings
and 2 major southern border crossings. The program will expand to
additional locations in FY '05.
I would like to thank the Committee for its consistently strong
support for C-TPAT and FAST. The $15 million funding increase we have
sought for C-TPAT in FY' 05 will enable us to continue to expand both
programs by enrolling additional participants. It will also allow us to
add a substantial number of supply chain security specialists to our
ranks, thereby ensuring that as the program grows, we will be able to
conduct an appropriate number of validations. As a result, we will
substantially increase the security of our international supply chains.
D. Using Technology to Detect Weapons of Mass Destruction at our Ports
of Entry
As trade increases, CBP's reliance on Non-Intrusive Inspection
(NII) technology to secure the borders becomes more and more critical.
Only by using NII technology to speed the inspections process for
weapons of mass destruction and contraband can CBP meet its twin goals
of increasing security and at the same time facilitating trade.
CBP uses various technologies in different combinations to
substantially increase the likelihood that a nuclear or radiological
weapon or weapons grade material will be detected. In addition, CBP
uses NII technology to detect and interdict narcotics, currency and
other contraband secreted in large containers and commercial shipments.
Technologies deployed to our nation's land, sea and air ports of entry
include large-scale X-ray and gamma-imaging systems--systems that can
image the contents of an entire container in seconds. These systems
include the Vehicle and Cargo Inspection System (VACIS), Mobile VACIS,
Truck X-ray, Mobile Truck X-ray, Rail VACIS, Mobile Sea Container
Examinations Systems and the Pallet Gamma-ray System. In September
1996, our first large-scale NII system, a Truck X-ray, became
operational in Otay Mesa, California. Today, we have 145 large-scale
NII systems deployed.
In addition, we have developed and begun implementing a national
radiation detection strategy. Pursuant to that Strategy, we are
deploying nuclear and radiological detection equipment to include
personal radiation detectors (PRDs), radiation portal monitors (RPMs)
and next generation radiation isotope identifier devices (RIIDs). In
combination with our layered enforcement strategy--working overseas to
prevent the proliferation of nuclear materials and to detect them
before they are shipped to the U.S.--and our use of multiple inspection
technologies, these tools currently provide CBP with significant
capacity to detect nuclear or radiological materials. Our FY '05
request for $50 million would provide CBP with the funding to continue
to purchase and deploy the technologies needed to implement its
national radiation detection strategy.
E. Using Technology to Detect and Monitor Illegal Crossings Between our
Ports of Entry
Integrated Surveillance Intelligence System (ISIS)
ISIS is a critical part of CBP's strategy to build smarter borders.
By using remotely monitored night-day camera and sensing systems, the
Border Patrol can better detect, monitor, and respond to illegal
crossings. This, in turn, is critical to the Border Patrol's ability to
increase its apprehension capabilities, particularly along our northern
border. As a result, the deployment of ISIS is a critical component of
the Border Patrol's revised National Strategy to prevent terrorists
from entering the U.S. and to gain control of our nation's borders.
ISIS consists of three independent components: 1) the remote video
surveillance (RVS) camera system; 2) sensors; 3) the Integrated
Computer Assisted Detection (ICAD) database. The RVS system integrates
multiple color, thermal and infrared cameras, which are mounted on
various structures, into a single remote controlled system. The network
of sensors consists of seismic, magnetic and thermal devices used to
detect and track intrusions. ICAD software components assist in the
coordination and data collection of agent deployment in response to
sensor alarms.
The $64.1 million in ISIS funding sought in '05 would enable CBP to
broaden substantially its ISIS coverage of the northern and southern
borders--to deploy the system where no ISIS coverage currently exists.
This is important because Border Patrol experience has shown that in
locations where ISIS is deployed, fewer agents can do a better job of
securing the border. ISIS acts as an important force-multiplier that
allows Border Patrol agents to remotely monitor the border and respond
to specific illegal border crossings rather than having to exhaustively
patrol an area adjacent to the border. By contrast, Border Patrol
operations without ISIS support are not only less effective, they are
more resource-intensive and less safe for Agents.
Unmanned Aerial Vehicles (UAVs)
Like ISIS, Unmanned Aerial Vehicles (UAVs) are both an important
part of the smarter border strategy and an essential element of the
Border Patrol's revised National Strategy. UAVs equipped with
sophisticated on-board sensors have the potential to provide
unparalleled surveillance capability. UAVs provide long-range
surveillance. As a result, they are especially effective force-
multipliers because they have the capacity to remain on station much
longer than other airborne assets, and are particularly useful for
monitoring remote land border areas where patrols cannot easily travel
and infrastructure is difficult or impossible to build.
UAVs will perform missions involving gathering intelligence on
border activities was well as conducting surveillance over open water
along the Gulf Coast, the Florida peninsula and the Great Lakes region
on the northern border. The high endurance of the larger classes of
UAVs permits uninterrupted overnight or around-the-clock coverage, and
the size and operating altitudes can make UAVs effectively undetectable
by unaided human senses. UAVs will also contribute to enforcement
effectiveness and officer safety by providing communications links for
coordinating multiple units on the ground is important in remote border
operating areas.
The $10 million in funding sought for UAVs will enable CBP to
capitalize more fully on the UAV research that has taken place in a
military context, and to apply UAVs in support of the Homeland Security
mission. The funding would allow CBP to deploy and operate a system of
unmanned aerial vehicles in support of the Border Patrol and other
components of Customs and Border Protection. The use of UAVs will
complement the other intrusion detection and intelligence gathering
components of the border surveillance network to meet the mission of
stopping the illegal entry of terrorists, smugglers and others into the
United States.
IV. Automation / Information Technology
Mr. Chairman, no discussion of a successful strategy to protect the
American people and the American economy in the 21st century would be
complete without consideration of the central importance of automation
and information technology to CBP's mission.
A. Automated Commercial Environment
The Automated Commercial Environment (ACE) is an important project
for CBP, for the business community, for our country, and for the
future of global trade. If done properly, it will reform the way we do
business with the trade community. It will also greatly assist CBP in
the advance collection of information for targeting high-risk cargo to
better address the terrorist threat. And in doing so, it will help us
expedite the vast majority of low-risk trade.
The successful implementation of ACE has been and continues to be
one of my top priorities as Commissioner. Increasing support from
Congress and the Administration for ACE has been essential to the
development of the new system. Funding of $319 million in FY '04 has
enabled us to continue development and begin to deliver on the first
installment of ACE benefits to the trade community. Indeed, since my
testimony last year, I can tell you that the development of ACE and the
efforts to put its capabilities to work on America's borders have
continued full throttle while CBP works with the Homeland Security
Investment Review Group to analyze the existing IT systems being used
by DHS agencies, identify redundant technology investments, and plan
for the DHS's IT architecture. Among many other accomplishments, this
past year brought ACE release 2 to the public for the first time.
Currently, 50 importer accounts and related CBP personnel have access
to the ACE Secure Data Portal to conduct their CBP business
transactions on-line. This portal provides reliable, secure, high-speed
access to critical information. When fully deployed, this will be the
basic tool by which all users within the trade community and government
access ACE.
I want to thank Congress again for its past support of ACE. The
continued support of ACE with $322 million in funding for FY '05 will
enable us to keep pace with our schedule for ACE releases in 2004 and
2005. Those include:
Summer 2004--Release 3 (Account Revenue: Periodic
Statements and Payments): Initial account revenue will be enabled,
allowing accounts to centralize payment processing and utilize periodic
statement and payment capabilities as well as ACH Credit and Debit.
Winter 2005--Release 4 (Truck Manifest and e-Release):
Cargo Processing will be introduced with the implementation of
Automated Truck Manifest and Preferred & e-Release for trucks. This
will allow for quicker entry for pre-filed and pre-approved cargo.
B. International Trade Data System (ITDS)
One important, fully integrated component of ACE is the
International Trade Data System (ITDS). The ITDS initiative is an e-
Government strategy being designed developed, and deployed jointly with
ACE that will implement an integrated, government-wide system for the
electronic collection, use, and dissemination of the international
trade transaction data required by the various trade-related federal
agencies.
ITDS will simplify and streamline the regulation, promotion, and
analysis of international trade. It will also assist importers,
exporters, carriers, and brokers in complying with federal trade,
transportation, and other regulations by streamlining business
processes. ITDS is customer focused and will serve as the government's
``single window'' into international trade data collection and
distribution.
In conjunction with ACE, ITDS will also improve risk assessment. By
centralizing and integrating the collection and analysis of
information, ACE will enhance CBP's ability to target cargo, persons,
and conveyances. The trade data will allow for advanced inter-agency
assessment of risks and threats to determine which goods and people
must be scrutinized. In addition, Through ACE, the ITDS will be capable
of linking the government's law enforcement and other databases into
one large-scale relational database that tracks all commerce crossing
our borders. ITDS thus extends the functionality of ACE by bringing
together critical security, public health, public safety, and
environmental protection agencies under a common platform.
The $5 million increase we are requesting in the FY '05 budget for
ITDS will allow us to ensure integration of ITDS with key federal
agencies, and keep us on schedule to have full functionality rolled out
by winter 2006-2007.
V. Other Traditional Missions
Although CBP's priority mission is preventing terrorists and
terrorist weapons from entering the United States, we know that we
must--and will--accomplish that priority mission while continuing to
perform our traditional missions well. Included among those missions
are our responsibilities for interdicting drugs, apprehending
individuals who enter the United States illegally, regulating and
facilitating international trade, and protecting U.S. agricultural and
economic interests from harmful pests and diseases.
A. Drug Interdiction
Our counterterrorism and counternarcotics missions are not mutually
exclusive, and one does not necessarily come at the expense of the
other. The initiatives we have put in place to prevent terrorists and
terrorist weapons from entering the United States have enabled us to be
more effective in seizing other illegal contraband, including illegal
drugs. Indeed, one of the first results we saw after implementing ATS
for commercial trucks on the land border was a large narcotics seizure
from a targeted shipment. And, it is worth noting that the lessons we
have learned in our battle against international drug trafficking will
help us in the fight against international terrorism.
It would be a grave mistake for drug traffickers and other
criminals to misinterpret our focus on terrorism as a weakening of
resolve on other fronts. If anything, we have made life even more
miserable for drug smugglers as we have intensified our overall
presence along America's borders. Our heightened state of security
along America's borders has strengthened, not weakened, our
counternarcotics mission. As we have added staffing for both inspectors
at the ports of entry and Border Patrol Agents between the ports of
entry, acquired more inspection technology, conducted more questioning
of travelers, and carried out more inspections of passengers and goods
in response to the terrorist threat, we have seized greater amounts of
narcotics. In FY '03, for example, we seized more than 2.2 million
pounds of illegal drugs, and made some of the largest individual
seizures ever recorded by officers safeguarding our borders.
Effective coordination between inspectors at the ports of entry and
agents who carry out investigative activities is essential to the
success of our counternarcotics mission. For that reason, CBP will
continue to cooperate closely with special agents from U.S. Immigration
and Customs Enforcement to carry out this mission.
B. Apprehending individuals entering illegally between the ports of
entry
The Office of the Border Patrol is specifically responsible for
patrolling the 6,000 miles of Mexican and Canadian international land
borders and 2,000 miles of coastal waters surrounding the Florida
Peninsula and the island of Puerto Rico. Its primary task is securing
America's borders between official ports of entry by preventing the
illegal entry of people, goods, and contraband across our borders.
The Border Patrol relies on agents, enforcement equipment (such as
a fleet of specialized aircraft and vehicles of various types),
technology (such as sensors and night vision cameras), tactical
infrastructure (such as roads and vehicle barriers), and intelligence
to carry out its mission. Applied in the correct combination, these
resources can effectively deter, detect, monitor, and respond to
illegal border crossings, as we have seen in locations such as the San
Diego Sector and during operations such as Desert Safeguard.
In FY '03, the Border Patrol played a key role in safeguarding the
United States from the entry of terrorists, criminals, and illegal
immigrants. Among the 931,557 people apprehended by the Border Patrol
in FY '03 were:
Two Indian aliens illegally in the United States who were
wanted in Canada for attempted murder after they allegedly tied-up,
tortured, doused in gasoline, and lit a person on fire;
One of the ten most wanted criminals in Texas;
An Iranian citizen illegally in the United States with an
extensive criminal history and who may have been involved in bomb
making and other serious illegal activity at the time of his arrest at
the San Clemente checkpoint;
A Turkish citizen illegally in the United States who may
have been involved in serious illegal activity at the time of his
arrest at McAllen International Airport; and
An alleged resident of the United Arab Emirates illegally
in the United States who may have been involved in serious illegal
activity at the time of his arrest in Louisiana.
Building on these gains, and drawing on the lessons we learned
during Desert Safeguard, CBP is working with other agencies and the
Mexican Government to implement the Arizona Border Control Initiative
this year. Under this initiative, CBP will substantially reduce the
number of illegal entries that occur in Arizona this year and, as a
result, will reduce the number of deaths that occur as aliens try to
cross the Arizona desert during the warmest months of the year.
C. Preventing individuals from entering illegally at the ports of entry
With respect to preventing individuals from entering the country
illegally at the ports of entry, CBP continues to stop hundreds of
thousands of people a year who are inadmissible into the U.S. for a
variety of reasons, including prior immigration violations, criminal
history, or the possession of false or fraudulent documents.
We are helped in this effort by our close work with the Department
of State to ensure CBP inspectors have the tools they need to verify
the identity of visa holders and the authenticity of visas issued by
the Department of State. Data on holders of immigrant visas is
transferred electronically to ports of entry. When the electronic
record is updated to reflect an immigrant's admission at a port of
entry, that data is transferred electronically to the Bureau of
Citizenship and Immigration Services (CIS) for production of a
permanent resident card and creation of the immigrant file.
More importantly, with the successful implementation of US VISIT at
our international airports earlier this year, CBP officers now have
access to photographs and data transmitted electronically by the
Department of State relating to holders of nonimmigrant visas. This
permits officers on the primary line to review visa application data
and verify the identity of the holder. This has virtually eliminated
the possibility that a traveler could use a false or fraudulent visa to
enter the U.S..
D. Regulating and facilitating international trade
CBP maintains responsibility for regulating and facilitating
legitimate international trade. As I mentioned earlier, many of the
initiatives CBP implements serve the twin goals of increasing security
and facilitating trade. With the right level of industry partnership
and the right combination of resources, we can succeed not only in
protecting legitimate trade from being used by terrorists, we can
actually build a better, faster, more productive system of trade
facilitation for the U.S. economy.
We have continued to work with the trade on these matters over the
past year, and we will continue to do so in the year ahead. For
example, we worked with all segments of the maritime trade to make
changes to the 24-hour rule and our computer systems to better
facilitate the movement of sea containers in our domestic seaports and
to inland destinations. We also worked very closely with the trade to
craft and implement our Trade Act regulations, and we will continue
this process during the rest of this year. Finally, we have partnered
with the trade and technology companies to design and test a smarter,
more secure sea container. More importantly, members of the trade are
using this container. Through C-TPAT, we have partnered with several
large importers to begin using these containers, and we expect to see
their use rise substantially in the months ahead.
E. Protecting U.S. agricultural and economic interests and the food
supply
CBP now overseas the enforcement of the laws and regulations
pertaining to the safe importation and entry of agricultural food
commodities into the U.S. The traditional goals of the Agriculture
Inspections (AI) program have been to reduce the risk of introduction
of invasive species into the U.S., protect U.S. agricultural resources,
maintain the marketability of agricultural products, and facilitate the
movement of law-abiding people and commodities across the borders.
Accordingly, inspecting potentially high-risk travelers and cargo is
critical to keeping the prohibited items out of the U.S., monitoring
for significant agricultural health threats, encouraging compliance
with regulations, and educating the public and importers about
agricultural quarantine regulations.
With the creation of CBP, the AI program has expanded its focus to
include a new priority mission of preventing potential terrorist
threats involving agriculture. Indeed, the threat of intentional
introductions of pests or pathogens as a means of biological warfare or
terrorism is an emerging concern. To address this threat and to enhance
its traditional AI missions, CBP has already begun using the Automated
Targeting System, and its collective expertise regarding terrorism and
agriculture, to strengthen our ability to identify shipments that may
pose a potential risk to our agricultural interests.
In addition, CBP has worked closely with the Food and Drug
Administration (FDA) to implement the Public Health Security and
Bioterrorism Preparedness and Response Act of 2002 to guard against
threats to the food supply. In the last several months, we have
modified our electronic data collection systems to collect data from
the trade required under the Bioterrorism Act, implemented a joint
risk-management system for food shipments with FDA that builds off or
Automated Targeting System, and commissioned CBP officers to utilize
FDA authorities in certain circumstances at the ports of entry. These
efforts have built on our priority and traditional missions to make the
food supply more secure, and will be supported in part by the targeting
funding sought in the FY '05 budget.
VI. Conclusion
Mr. Chairman, Members of the Subcommittee, I have outlined a broad
array of initiatives today that, with your assistance, will help CBP
continue to protect America from the terrorist threat while fulfilling
our other traditional missions. Because of your support, and because of
the creation of DHS and CBP, we are far safer today than we were on
September 11th. But our work is not complete. With the continued
support of the President, DHS, and the Congress, CBP will succeed in
meeting the challenges posed by the ongoing terrorist threat and the
need to facilitate ever-increasing numbers of legitimate shipments and
travelers.
Thank you again for this opportunity to testify. I would be happy
to answer any of your questions.
Chairman CRANE. Thank you, Commissioner. Now, Secretary
Garcia.
STATEMENT OF THE HONORABLE MICHAEL J. GARCIA, ASSISTANT
SECRETARY FOR U.S. IMMIGRATION AND CUSTOMS ENFORCEMENT, U.S.
DEPARTMENT OF HOMELAND SECURITY
Mr. GARCIA. Thank you, Mr. Chairman. Good morning. Good
morning, Mr. Levin, distinguished Members of the Subcommittee.
It is a pleasure to be with you today to discuss the
integration of the former U.S. Customs Service into ICE within
DHS, as well as to discuss the resources required to carry out
our mission. At the Committee's request, my remarks today will
focus on how ICE has integrated the legacy Customs mission into
our agency as well as address how we are prioritizing and
funding that Customs mission.
Within ICE, the Office of Investigations continues the
legacy Customs mission through investigations of criminal
violations that involve national security; financial and
smuggling crimes, including commercial fraud; intellectual
property rights violations; illegal arms exports; narcotics and
other forms of smuggling; cyber crimes; child pornography; and
child exploitation.
We understand that after September 11, keeping sensitive
U.S. technology and weapons out of the hands of terrorists and
world regimes has never been more important. The ICE helps
protect national security by preventing the illegal
importation, exportation, and transfer of weapons of mass
destruction, arms munitions, and critical technology. In fiscal
year 2003, ICE launched hundreds of cases, investigations, into
the illegal export of arms and strategic technology.
The ICE also protects the integrity of the U.S. trade
system through enforcement of trade laws. One way we do that is
through identification, disruption, and dismantling of
organizations that smuggle contraband and people into the
United States, including targeting organizations that commit
commercial fraud. In fiscal years 2003 and 2004, ICE special
agents were responsible for the seizure of approximately $238
million in fraud-related merchandise, 280 arrests, 210
indictments, and 135 convictions for fraud violations.
Identifying and eliminating vulnerabilities in U.S.
financial and trade systems is the goal of ICE's Cornerstone
operation. Cornerstone is an excellent example of how we are
integrating those Customs authorities within ICE, and as a
result, we are more effective in identifying vulnerabilities in
the financial and trade sectors, vulnerabilities that
terrorists and other criminals might exploit to earn more, or
store illicit proceeds to finance their other operations.
Terrorists can earn money through intellectual property
violations and other commercial fraud, such as cigarette
smuggling, export violations, and cyber crime; move illicit
proceeds through unlicensed money brokers, insurance fraud, and
bulk currency smuggling; and store their money through the
purchase of gold and other precious medals.
Through Cornerstone, we have made tremendous progress in
the fight against financial crime and money laundering. In just
over 1 year, ICE has seized nearly $309 million in suspect
currency and we have affected nearly 1,700 arrests. I would
like to tell you just a few stories behind these numbers,
stories that show the potential for terrorists and other
criminals to earn, move, and store proceeds through this type
of criminal activity.
In Operation Meltdown, ICE worked with the Internal Revenue
Service to uncover a scheme in which jewelers were converting
proceeds of drug sales into the equivalent value in gold. They
then melted the gold and fashioned it into things like hammers
and wrenches and shipped the items to Colombia, where it was
sold and converted back to cash. This investigation resulted in
23 arrests.
In another recent case, ICE investigations uncovered a
scheme in which an Egyptian-born investor was allegedly routing
cash from the militant terrorist group Hamas through the New
Jersey investment firm into various business charities and real
estate ventures in the United States. It is believed that he
then diverted millions of dollars in proceeds from these
investments to Hamas and other terrorist organizations. Since
the statute of limitations had expired on most of his financial
transactions, he was in prison on immigration charges after we
discovered that he made false statements on his immigration
applications. This case is an excellent example of how ICE is
using every tool at our disposal, including our authorities
under the immigration law, to shut down money laundering
networks.
Before turning briefly to the budget request, I would like
to mention another ICE division that continues another
important legacy Customs division, and that is the Air Marine
Operations (AMO) Division. Within ICE, AMO is a stand-alone
division that provides air space security, law enforcement
support, and an interdiction capability, and has become an
integral part of the ICE and DHS mission.
The Customs mission within investigations and AMO are well
represented in the President's 2005 budget, which will continue
to strengthen ICE's efforts to protect the homeland as well as
continue its traditional enforcement missions. The President's
2005 budget request seeks slightly more than $4 billion for
ICE, $302 million more than in fiscal year 2004, which
represents an increase of 8 percent for the integrated customs
and immigration enforcement mission.
I am confident that the ICE request for fiscal year 2005
will enable ICE to continue its aggressive enforcement of
customs laws. By cross-training all of our approximately 5,500
special agents, we increase the resources available to enforce
our broad authorities, including those authorities exercised
under Cornerstone and our other legacy Customs programs and
priorities.
The President's 2005 budget also seeks $373 million in AMO
appropriations and seeks $40 million in enhancements. While
many challenges lie ahead for ICE, we continue to build a
premier law enforcement agency from the powerful tools and
authorities we have been given. I look forward to working with
the Subcommittee as it completes the budget process for fiscal
year 2005. Mr. Chairman and Members of the Subcommittee, this
concludes my prepared statement, and of course we would be
happy to answer any questions you have.
[The prepared statement of Mr. Garcia follows:]
Statement of The Honorable Michael J. Garcia, Assistant Secretary for
U.S. Immigration and Customs Enforcement, U.S. Department of Homeland
Security
I. Introduction
Good morning, Chairman Crane, Mr. Levin, and distinguished Members
of the Subcommittee. It is a pleasure to be with you today to discuss
the integration of the former U.S. Customs Service into Immigration and
Customs Enforcement (ICE) within the Department of Homeland Security
(DHS), as well as discuss the resources required to carry out our
mission.
ICE is comprised of some of our Nation's oldest and most
recognizable law enforcement agencies. Even though we are a new agency,
ICE remains committed to enforcing and enhancing the traditional law
enforcement mandates of our legacy agencies while at the same time
using all of our resources and authorities in the fight for homeland
security.
The mission of homeland security is to address vulnerabilities--
vulnerabilities that expose our borders to infiltration, our financial
systems to exploitation and that weaken our national security. The ICE
mission is to implement pro-active initiatives aimed at closing
vulnerabilities and strengthening national security.
At the committee's request, my remarks today will focus on how ICE
has integrated the legacy Customs mission into our agency, as well as
address how we are prioritizing and funding the Customs mission. I will
focus on the two key divisions within ICE, which received legacy
Customs missions: the Office of Investigations and the Office of Air
and Marine Operations.
II. Office of Investigations (OI)
OI investigates criminal violations that involve national security,
financial and smuggling crimes including commercial fraud, intellectual
property rights, illegal arms exports, narcotics and alien smuggling,
human trafficking, cyber crimes and child pornography and child
exploitation. OI has 27 principal field offices throughout the United
States and approximately 50 international offices throughout the world.
In the post 9/11 world keeping sensitive U.S. technology and
weapons out of the hands of terrorists and rogue regimes has never been
more important. The National Security Investigations Division oversees
investigative programs designed to protect our national security by
preventing the illegal importation, exportation, and transfer of
weapons of mass destruction, arms munitions and critical technology. In
FY 2003, ICE launched roughly 3,000 investigations into the illegal
export or arms and strategic technology. ICE agents have had some
incredible successes. To cite but one example, last year our agents
uncovered the sale of missile and fighter jet components to an Iranian
front company. Among the items allegedly exported were components for
Hawk missiles, F-14 fighter jets, F-5 fighter jets, F-4 fighter jets,
C-130 military aircraft, military radars, and other equipment.
Another way ICE protects the integrity of the U.S. trade system is
through enforcement of trade laws under the Smuggling and Public Safety
Division, which oversees programs designed to identify, disrupt, and
dismantle organizations that smuggle contraband and people into the
United States, including targeting the organizations that commit
commercial fraud. The Commercial Fraud Unit investigates violations of
trade laws involving: (1) in-bond diversion; (2) forced child/prison
labor; (3) health and safety concerns; (4) textiles; (5) environmental
crimes; (6) tobacco smuggling; (7) anti-dumping/countervailing duties;
and (8) North American Free Trade Agreement (NAFTA) enforcement.
In FY 2003 and FY 2004, ICE Special Agents were responsible for the
seizure of approximately $238 million dollars in merchandise, 280
arrests, 210 indictments, and 135 convictions for fraud violations.
Identifying and eliminating vulnerabilities in our financial and
other parts of our trade system is the responsibility of the Financial
Investigations Division. This division leads the ICE initiative known
as ``Cornerstone,'' a comprehensive law enforcement initiative that
partners with the private sector to identify vulnerabilities in both
the trade and financial sectors. I would like to spend a few extra
minutes to discuss Cornerstone and give you some examples of the
successes we have had in shutting down homeland security
vulnerabilities.
Cornerstone
As I mentioned at the opening of my remarks, the ICE mission is to
close vulnerabilities that could be exploited by criminals or
terrorists. These vulnerabilities could be in the trade system, the
financial system or the Immigration system. By enforcing the law and
maintaining the integrity of these systems, we help close these
vulnerabilities. Cornerstone is an excellent example of how we are
integrating customs and immigration authorities and, as a result, we
are more effective in identifying vulnerabilities in the financial and
trade sectors--vulnerabilities that terrorists and other criminal
organizations might exploit to earn, move or store illicit proceeds to
finance their operations.
Terrorists can earn money through intellectual property violations
and other commercial fraud such as cigarette smuggling, export
violations, and cyber crimes; move illicit proceeds through unlicensed
money brokers, insurance fraud and bulk currency smuggling; and store
their money through the purchase of gold and other precious metals.
Through Cornerstone we have made tremendous progress in the fight
against financial crime and money laundering. In just over one year,
ICE has seized nearly $309 million in suspect currency, and we have
effectedmade nearly 1,700 arrests.
I'd like to tell you a few stories behind these numbers: stories
that show the potential for terrorists to earn, move and store their
proceeds through this criminal activity. In Operation Meltdown, ICE
agents worked with the IRS to uncover a scheme in which jewelers were
converting the proceeds of drug sales into the equivalent value in
gold. They then melted the gold and fashioned it into things like
hammers or wrenches, and then shipped the items to Colombia where it
was sold and converted back to cash. Our investigation of this case
resulted in 23 arrests.
Last summer ICE agents investigated a case in which a Brooklyn
jeweler was arrested for illegally transferring $30,000 that was
intended as a down payment on a shoulder-fired anti-aircraft missile.
ICE agents also shut down a business in Manhattan that had illegally
funneled $33 million to Pakistan, in addition to selling fake passports
and travel documents.
In another recent case, ICE investigators uncovered a scheme in
which an Egyptian-born investor was allegedly routing cash from the
militant terrorist group Hamas through his New Jersey investment firm
into various businesses, charities, and real estate ventures in the
United States. It is believed that he then diverted several million
dollars in proceeds from these investments to Hamas and other terrorist
organizations. Since the statute of limitations had expired on most of
his financial transactions, he was imprisoned on immigration charges
after we discovered that he had made false statements when he applied
to become a naturalized U.S. citizen.
This case is an excellent example of how ICE is using every tool at
our disposal--including our authority to enforce immigration law--to
shut down money laundering networks and put their operators out of
business. In fact, it is interesting to note that in 122 of our
financial cases and in 119 of our drug smuggling cases we were able to
add immigration violations to those financial or drug-related
investigations.
Traditionally, criminals engaged in the manufacture, distribution
or sale of counterfeit and pirated products reap large profits with a
relatively low risk of prosecution. As a result, IPR crimes are
vulnerable to exploitation by terrorists and other criminal
organizations. Cornerstone aims to change that equation through
aggressive enforcement of IPR law. In FY 2003 ICE IPR investigations
resulted in 132 arrests and 60 convictions. Working with U.S. Customs
and Border Protection (CBP), our enforcement efforts resulted in 6,500
seizures of counterfeit merchandise, with a Manufacturers Suggested
Retail Price (MSRP) of $94,019,227. In the first six months of FY 2004,
ICE agents executed 272 seizures of counterfeit merchandise, with an
MSRP of $18,967,325 and effected 123 arrests for IPR violations.
A recent IPR investigation conducted by ICE New York, ``Operation
Executive,'' identified individuals and organizations that were
responsible for the large-scale smuggling of counterfeit trademark
merchandise into the United States from the People's Republic of China.
The deals were brokered through middlemen in Lebanon. This organization
is suspected of being responsible for the importation of 100 containers
of counterfeit goods with an MSRP of $400 million dollars. ICE agents
arrested 14 subjects, seized containers valued at approximately $24
million dollars, and seized nearly $100,000 in currency.
Tobacco smuggling also provides a lucrative source of funding for
terrorists and other criminal organizations. In January of this year,
ICE dismantled the largest nationwide tobacco smuggling organization to
date and arrested 15 defendants. The 92-count indictment charged the
defendants with tobacco smuggling and money laundering, among other
offenses. The organization was responsible for the movement of more
than 10,000 cases of counterfeit and contraband cigarettes and over 100
cases of liquor worth approximately $20 million dollars.
Child Pornography/Child Exploitation
Before ending my discussion of Investigations, I want to highlight
another area where ICE has been particularly successful. ICE has
aggressively pursued its customs mission of protecting children against
exploitation--either through the trade in child pornography or through
the child sex tourism. In July 2003 ICE launched Operation Predator to
protect children from human traffickers, child pornographers and other
predatory criminals. This operation combines the immigration
authorities to arrest and deport felons with convictions for sex
offenses with the customs child pornography authorities. In less than
one year, we have arrested 3,023 predators. As part of Operation
Predator, ICE has an ongoing investigation into subscribers of
commercial child pornography websites. This investigation has yielded
344 domestic investigations and 108 arrests, as well as 384 foreign
arrests during FY 2004. ICE has prioritized arrests in these
investigations by targeting first those who have access to children
such as pediatricians, camp counselors, and others in positions of
trust in the community. ICE has also targeted predators who travel
abroad to have sex with minors. Through enforcement of the Protect Act,
ICE made the first five arrests under this year-old statute that
prohibits travel from the United States for child sex purposes.
III. Office of Air and Marine Operations (AMO)
Under the former U.S. Customs Service (USCS), AMO was a support
component within USCS Investigations that focused mainly on drug
interdiction. In ICE, AMO is a stand-alone division that provides
airspace security, law enforcement support, and interdiction
capabilities and has become an integral part of the ICE mission. AMO
has over 1,000 employees with just over half of that number serving as
pilots, marine enforcement officers and aviation enforcement officers.
AMO maintains a fleet of 133 aircraft and 82 vessels to protect the
Nation and the American people against the terrorist threat and the
smuggling of narcotics and other contraband.
An essential element of these deployments is the work carried out
by the Air and Marine Operation Center (AMOC), located in Riverside,
California. This state-of-the-art center is linked to a wide array of
civilian and military radar sites, aerostats, airborne reconnaissance
aircraft and other detection assets, which provide 24-hour, seamless
radar surveillance throughout the continental United States, Puerto
Rico, the Caribbean, and beyond. AMOC allows ICE to identify, track,
and support the interdiction and apprehension of those who attempt to
enter U.S. airspace with illegal drugs or terrorist objectives.
AMO has also provided airspace security for a variety of events
including the 2002 Winter Olympics, the 2003 and 2004 Super Bowls and
is supporting airspace security efforts in the National Capital Region.
In addition, AMO augments Coast Guard port security patrols and
provides transportation and surveillance support for the FBI, ATF and
Secret Service. AMO also provides enhanced airspace security during
periods of high alert.
IV. Budget Request for FY 2005
The President's FY 2005 budget will continue to strengthen ICE's
efforts to protect the homeland, as well as continue its traditional
enforcement missions. The President's FY 2005 Budget request seeks
$4.011 billion for ICE, $302 million more than FY 2004, which
represents an increase of 8 percent. This request for ICE includes
resources to support border, air and economic security activities. I
would like to specifically discuss with you the FY 2005 requests for
the Office of Investigations and Air and Marine Operations.
The OI budget request for FY 2005 includes $1.046 billion for
investigations and intelligence programs. I am confident that the
request for FY 2005 will enable ICE to continue its aggressive
enforcement of customs laws. By cross training all of our approximately
5,500 special agents, we increase the resources available to enforce
our broad authorities, including Cornerstone and other priorities.
The FY 2005 President's budget seeks $374 million in Air and Marine
Operations (AMO) appropriations and seeks $40.5 million in total
enhancements, including:
$28 million for Increased P-3 Flight Hours. P-3 aircraft
are critical to interdiction operations in the source and transit zones
as they provide vital radar coverage in regions where mountainous
terrain, expansive jungles and large bodies of water limit the
effectiveness of ground-based radar. This request will increase P-3
flight hours from 200 to 600 per month.
$12.5 million for Long Range Radar. Primary Long Range
Radar provides position information (geographic/altitude) of airborne
objects and flight data information to civil aviation, defense, and law
enforcement agencies. ICE uses the radar to receive data for drug
interdiction efforts along the southern border.
V. Conclusion
The FY 2005 budget request for ICE supports the President's
National Strategy for Homeland Security, the framework for
accomplishing our complex mission to protect the homeland, and ICE's
mission to enforce customs and immigration laws.
While many challenges lie ahead, we continue to build a
professional law enforcement agency from the powerful tools and
authorities we have been given. I look forward to working with the
Committee as it completes the budget process for FY 2005.
Mr. Chairman and Members of the Subcommittee, this concludes my
prepared statement. I would be happy to answer any questions you may
have at this time.
Chairman CRANE. Thank you, Mr. Secretary. Commissioner
Bonner, at a recent briefing, CBP presented us with its mission
statement. The first three bullet points were entirely devoted
to security. Trade concerns were not mentioned until the fourth
point, and even there, the focus was on enforcing laws rather
than facilitating trade, stating, quote, ``We steadfastly
enforce the laws of the United States while fostering our
Nation's economic security through lawful international trade
and travel,'' close quote. What assurances can you give this
Committee that CBP is sufficiently prioritizing trade
facilitation?
Mr. BONNER. Well, first of all, Mr. Chairman, I would say
that that mission statement, of course, is the mission
statement that is put out to the frontline employees. I think
correctly understood, I have stated it many times that not only
am I personally committed to trade facilitation and the trade
issue and the trade side of Customs, but Customs and now CBP is
strongly committed to its trade facilitation role.
I think I have made that very abundantly clear, both in my
conversations with the trade community, and I have many--I was
just actually up yesterday to the American Association of
Exporters and Importers convention in New York. I think every
manager in CBP understands that an important part of our
mission is not just security but it is trade facilitation and
that those things don't have to be mutually exclusive. We also
have, by the way, Mr. Chairman, I think a very good outreach
program through our Office of Trade Relations at CBP.
Last, I would just say that the issues of security and
trade facilitation are interrelated issues. We look at them as
it is not that it is either one or the other, that we have to
perform our security mission at the border, and that is prevent
terrorists or terrorist weapons from entering. At the same
time, we have to do it in a way that maintains the movement,
the free flow of movement of trade and people into the United
States. So, these are interrelated issues and that is the way
we have viewed them. That is the way we have approached them
with our initiatives since 9/11, and that is the way we will
continue to approach them, and that is that there is a strong
focus not just on the security side, but also on how we
facilitate the movement of goods and trade into the United
States.
Chairman CRANE. Thank you, Commissioner. Secretary Garcia,
in the ICE fiscal year 2005 budget brief, it appears that every
new initiative being pursued by ICE is in the area of
immigration. There are no new Customs initiatives planned for
fiscal year 2005. Is the current level of resources dedicated
to customs enforcement sufficient given the dramatic increase
in trade volume?
Mr. GARCIA. Thank you, Mr. Chairman. To go to the budget,
several points. One, there are increases for Air and Marine,
traditional Customs mission. You are correct that there is no
enhancement directly targeted to any particular Customs
program. If you step back from the budget numbers and you look
at what we are trying to accomplish under the President's
fiscal year 2005 budget, you see that resources are being given
to Detention and Removal Division within ICE in order to free
up agents and agent hours that are now performing things like
institutional removal in prisons.
Look back and see our 5,500 agents cross-trained, our Title
VIII authority being used to leverage some of our Customs
programs, and you will see, I believe, a dramatic increase in
the ability of ICE to dedicate agent hours to all our programs
as a result of that shift in responsibilities to Detention and
Removal. You also see an enhancement for International Affairs.
I know, Mr. Chairman, that you are well aware of the important
work that our international offices do in terms of the
traditional Customs enforcement mission.
I would like to give one example of this force multiplier
leveraging idea with Title VIII and it is in the inbound
diversion area. Traditionally, Customs has looked at the
materials involved in inbound diversions. We are now going
forward with a program to look at the bonded warehouses, the
foreign trade zones, looking at the people who have access to
this material, looking at immigration violations that can be
used to leverage our cases in this area and make us more
effective. That is just one example of how we are using this
force multiplier concept, the Title VIII concept, in our
Customs authorities, and I think a very successful program will
follow from that and that effort.
Chairman CRANE. Thank you, and my last question is for both
of you. The Trade Act of 2002 (P.L. 107-210) required the
former U.S. Customs Service to implement a cost accounting
system to identify expenses incurred in commercial and non-
commercial operations by September 30, 2003. The Committee
noted in its accompanying report that the Customs Service is
currently unable to answer fundamental questions about how it
spends money. It is my understanding that this cost accounting
system has not been implemented. Do CBP and ICE plan to
implement the accounting system required by law, and what is
your anticipated timing for implementing this system?
Mr. BONNER. Let me take a stab at that, because first of
all, several years ago, U.S. Customs, now CBP, implemented a
Cost Management Information System. That system is in place and
that is a system that is--whereby it is capable to determine
how money is spent and what activities it is spent on. I have
that capability right now, and we have certainly had it before
September 30, 2003.
There may be a question here, and I want to get back to
you, Mr. Chairman, on this, but there may be a question here as
to how you fully account for, let us say, frontline inspector
time in terms of what it is devoted to, and this gets into the
issue, by the way, of the interrelationship between the
commercial or non-commercial, between security and trade
facilitation. If you have inspectors and you are extending more
overtime to staff, more lanes to keep them open so that you can
do your security but at the same time keep commercial trucks
rolling across the border from Canada into the United States,
it is serving both functions.
So, there may be an issue of cost accounting here, how you
allocate the cost, let us say, of that inspector time. However,
we do have a cost accounting system, and I can assure you, we
can break down our costs and expenditures by types of activity.
So, what I would like to do is to, if I could, get back to you
in writing on your question just to make sure that I am
accurate in terms of my response and that my response is
complete.
[The information was not received at the time of printing.]
Chairman CRANE. Very good. Do you have any comments, Mr.
Garcia?
Mr. GARCIA. Certainly, Mr. Chairman, we continue to work
with Commissioner Bonner and CBP to put that system in place
and would be happy to join with Mr. Bonner in his written
submission to the Committee.
Chairman CRANE. Very good. Thank you. Mr. Levin?
Mr. LEVIN. Thank you. Let me mention, the schedule on the
floor today is somewhat changed and a bill that came through
this Committee just a couple days ago is coming up not tomorrow
but today, and I think the debate on the rule on it perhaps has
already started. So, if we move in and out of the hearing, it
will be more than we expected to occur.
Commissioner, let me ask you about the problem of
collecting duties, anti-dumping duties. Your report, I think it
was in March, the report that came from Customs indicated that
over $100 million of duties were uncollected last year from or
relating to imports from China. You laid out a number of
problems relating to it, and then you took some steps
internally, within your agency. Let me ask you, as a result of
that, how is it different today than it was before when these
duties were uncollected?
Mr. BONNER. Well, you are correct, Mr. Levin, that we have
set in motion a number of steps to identify why there has been
the collecting shortfall, and it is substantial, with respect
to anti-dumping duties, and these are mainly on products
originating in China and they are mainly agricultural products.
There are a lot of things about the system that resulted in
that shortfall and they were everything from, by the way, a
default of a surety bond company, and so that is an issue I am
addressing with the U.S. Department of Treasury to make sure
that surety bond companies are adequately capitalized, but
there was a large surety company that defaulted on bonds that
related to anti-dumping duties.
Probably, the more central problem is the fact that there
is a wide difference in terms of the preliminary anti-dumping
duty assessment of the U.S. Department of Commerce and its
final anti-dumping duty, and by the time it assesses this much
larger final anti-dumping duty at the end of the line, it
becomes very difficult to collect. So, we are taking some
measures to address it.
I don't have--this is something in process. I think we will
be able to do better. By the way, we are never going to totally
close this gap for a number of reasons. I don't think you could
ever get close to 100 percent collections here because of the
system, but we can do better and I believe we will do better.
However, I think you are going to have to give us a little bit
more time and see how we do throughout the remainder of this
fiscal year and into next fiscal year.
Mr. LEVIN. Aren't there some steps that could have been
taken immediately, for example, relating to the sureties? The
agency, the government does set the standards and does have the
ability to implement them. Aren't there some steps that could
have been taken promptly?
Mr. BONNER. Well, I think the main step that we are looking
at taking would be to make sure that there are individual
surety bonds at the time of the preliminary assessment and they
are more adequate to cover the likely anti-dumping duty
assessment that would be made.
Mr. LEVIN. You could do that right now, though----
Mr. BONNER. Well, I need--I have to coordinate that with
Commerce, Mr. Levin, and that is what we are doing, so that
is----
Mr. LEVIN. How long is that going to take?
Mr. BONNER. I don't think long. I think we are----
Mr. LEVIN. The report was in March and it is now mid-June.
These moneys don't go into the government. Under the law, they
go to American entities that have been hurt. So, essentially,
the moneys that are being lost are moneys being lost by
citizens, either individual or corporate citizens. Let me just
ask you, there is legislation introduced to move over to a cash
system. What is the position of the government on that?
Mr. BONNER. I think you always have the opportunity to move
to a cash bond. I don't see any reason to do that if you do
have an adequate surety bond and you have a surety company that
can stand behind the bond if there is a default. There may be
circumstances where you need to have a cash bond. I guess I
would say right now, and I am speaking, I will tell you, off
the cuff, that I do not believe that we would need to go to a
cash bond requirement if we were satisfied that there was a
surety that was standing behind the potential liability for the
anti-dumping duties that was viable and adequately capitalized.
Mr. LEVIN. Let me finish. My time is up. There is an
urgency here and I don't think the excuse will be useful much
longer to say, ``We need more time.'' Steps need to be taken--
--
Mr. BONNER. We are taking steps, Mr. Levin, and I----
Mr. LEVIN. What is your goal to resolve this issue the
best----
Mr. BONNER. Well, I am hopeful that we will resolve part of
the issue in a few weeks. We have discussed the surety bond
issue with Treasury. We are also discussing with Commerce, the
issue of once an anti-dumping duty is imposed, that new
entities are formed, new Chinese companies that ship the same
product and that sort of thing, so that we are moving faster
and more quickly to take action against essentially the evasion
of the anti-dumping duties.
By the way, we have had a working group at CBP that has
been hitting this issue hard. We have engaged Commerce on this
issue. I think some of the things that we are going to do will
materialize in the very near term, and within not months, but
sooner than that.
Mr. LEVIN. We will be looking.
Chairman CRANE. Ms. Dunn?
Ms. DUNN. Thank you very much, Mr. Chairman. Welcome,
gentlemen. I wanted to first of all make a request, and you are
certainly free to comment on it if you would like, and then I
have a couple of questions.
Commissioner Bonner, you talked about the need to make
security adjustments, make them more effective without
interrupting trade or tourism. In my area of the country,
Seattle, the cruise business is growing rapidly. More ships are
sailing from Seattle to Alaska and that is very important for
our economy, because otherwise they would be sailing from
Vancouver, B.C., to Alaska.
Most cruise ships depart Seattle and make a very quick
stop, sometimes as little as for 4 hours, in Vancouver or
Victoria before heading up to Alaska. Most foreign passengers
go through the United States Visitor and Immigrant Status
Indicator Technology (U.S. VISIT) program prior to arrival in
Washington State. Since the cruise ship stopped in Vancouver or
Victoria, foreign passengers must once again go through the
U.S. VISIT program before they arrive in Seattle. Our sense is
that this is duplicative.
We certainly appreciate the need to balance protecting our
security with allowing for the flow of people between
countries, but I would ask that you take a look at this and see
if the U.S. VISIT program, see how it affects the cruise
industry and get back to me on this. You are certainly welcome
to make comment now if you would wish.
Mr. BONNER. I would be happy to get back to you because I
want to make sure I fully understand the fact that there is
another U.S. VISIT requirement for foreign passengers that, let
us say, embark at Seattle and you are going up to Alaska via
Canada. It may be that there is another requirement when they
re-enter the United States in Alaska, but let me look into this
issue for you and then we will get back to you. If there is
something that we can do, consistent with the objectives of the
U.S. VISIT program, with respect to ameliorating its impact on
the cruise industry, we will. I will get back to you one way or
the other.
[The information was not received at the time of printing.
Ms. DUNN. I appreciate that, because it is taking away from
passengers' time to do a little shopping, whatever they enjoy
doing. Particularly, it is another hassle factor that could, we
think, be a competitive problem for us.
Could you also, you talked a bit about the ACE program in
your testimony. Could you tell us where that stands? What
changes are being undertaken to accommodate new cargo security
requirements that would allow Customs to monitor security
compliance more effectively?
Mr. BONNER. The ACE program, we are actually into the third
release of its functionality, and that is, by the way, a
release that permits us for the first time ever to go to
account-based processing with the trade community, and so this
is actually one of the promises of ACE and we are actually in
the training and testing phase of that right now with about 41
different importers. Beyond that, the next release of ACE will
be the Electronic Truck Manifest, Commercial Truck Manifest
system that we hope to roll out in November.
Beyond that, we do see a very significant role for ACE with
respect to improving our essentially selectivity and targeting
for risk purposes those shipments that pose a potential risk
for security or for enforcement purposes as opposed to the vast
majority which don't pose a risk. So, this actually allows us
to focus on the relatively few shipments that pose a security
risk and to expedite the processing of the vast majority that
don't. That is, again, how security and facilitation actually
interrelate.
We are already doing that with our somewhat antiquated
Automated Commercial System (ACS), our old system, but ACE will
permit us to, I believe, to vastly improve our targeting of
potential commercial shipments that pose a risk for the
terrorist threat and potentially other threats to our country.
We are in the process of developing that as part of ACE and the
rollout there will begin--it probably is not going to begin
this year for ACE. It will begin sometime next year.
Ms. DUNN. One last question. Our ports play an important
role in the Pacific Northwest. Very close to my district, there
are two major ports, the Port of Seattle and the Port of
Tacoma. They are very involved with our trade with Asian ports
and would be very important to our economy if--critical to our
National economy, as we discovered last year when there was a
terrible problem on the West Coast that didn't allow goods to
come into our ports.
In the event that a terrorist incident results in the
closure of one or more ports, how is Customs working with other
agencies both within and outside DHS to develop a plan to
divert cargo to other ports and reopen the ports affected as
quickly as possible?
Mr. BONNER. We are working--first of all, of course, the
action that we would take, DHS would, of course, be related to
a specific terrorist incident or potentially some intelligence
with respect to a potential terrorist incident. The CBP is
working very closely within DHS and particularly with the U.S.
Coast Guard in terms of essentially the contingency planning,
if you will, for what we would do based upon certain kinds of
scenarios, both--This would include, by the way, potentially
keeping the flow of container shipments coming to all of our
seaports, including the Ports of Seattle and Tacoma,
notwithstanding some terrorist incident, if, for example, we
had the opportunity to, as we have in many cases now, to screen
those containers for security purposes before they are on-
loaded in vessels in Singapore and Hong Kong moving to the
Ports of Seattle or Tacoma or Los Angeles. So, we have some
contingency planning that is being built into CSI that even in
times of stress with respect to the terrorist threat, that we
could keep the flow of trade going, and that would be very
important to our economy and, frankly, to the world economy
that we be able to do that.
We also are able to, as a contingency plan, because we are
building in security through the private sector through our
partners in the C-TPAT, we are in a position to--we may well be
in a position to permit C-TPAT shipments into the United States
where a C-TPAT partner has elevated the security, the supply
chain security, at its foreign supplier or vendor and we have
been able to verify or validate that that has happened.
So, we want to--essentially, we are building a security
system that can allow trade to continue, notwithstanding a
terrorist incident, even a terrorist incident that might
involve a seaport of the United States. Coast Guard and CBP are
probably the main players here with DHS apparatus and we are
working on those issues, I can assure you, Ms. Dunn.
Chairman CRANE. Mr. Becerra?
Mr. BECERRA. Gentlemen, thank you for your testimony and
for being here with us. Congratulations on the work that you
have been able to accomplish. Let me ask a number of questions.
Let me start first with port security and our shipping cargo
issues that we still confront with our containers. In the Los
Angeles area that I represent, we have some 12 million shipping
containers that go through the ports of Long Beach and Los
Angeles in 1 year. It is the busiest port in the Nation, third
busiest in the world. My understanding is that we are still
trying to deal with or grapple with the issue of how we inspect
these massive containers, but when you consider that there are
some 12 million coming through those 2 ports in 1 year, it
becomes an overwhelming scenario to consider.
My understanding is that at one point, as recently as
perhaps last year, we were inspecting at most about 1 to 2
percent of all those shipping containers that were coming
through our ports in this Nation. I believe the number is
somewhat higher but still far less than 10 percent of all those
millions and millions of containers that are coming into this
country.
The issue I want to raise is one relating to the incident
that occurred in Israel, in the Ashdod Port in Israel, where
individuals concealed themselves in a container, thereafter
were able to escape from the container and, in essence, they
killed several people and caused quite a bit of damage and
violence in Israel.
What is to stop that from happening here, and what are we
doing with regard to empty containers, because my understanding
is that the only containers we inspect are loaded containers
and there are issues about the chain of custody of those
containers from the point that they are supposedly loaded to
the point that they are unloaded in our docks. My first
question would be, what are we doing about empty containers? My
understanding is, right now, there is no requirement under law
and not necessarily any particular policy on the part of
shippers to inspect empty containers among the millions of
containers that are coming into this country.
Mr. BONNER. Well, first of all, we have full authority and
do inspect empty containers. All the containers we look at, Mr.
Becerra, are essentially the containers that we think pose a
potential risk for the terrorist threat. Just to start off
with, you know, the question to me isn't whether it is 1 or 2
percent. I am not sure it was ever that low. It really doesn't
matter. The question is, are we searching the containers that
pose a potential risk, particularly for the terrorist threat?
We have, since 9/11, we have mandated that we receive
advance manifest information with respect to every oceangoing
cargo container that arrives at every seaport of the United
States. That is a 24-hour role. We get that information not 24
hours before arrival at a U.S. seaport, but 24 hours before
that container is even loaded on board a vessel outbound to the
Port of Los Angeles or the Port of Long Beach or any other U.S.
seaport.
We screen every container based upon our automated
targeting rules, which are based upon the strategic
intelligence that we have with respect to the areas of threat
for potential concealment of terrorist weapons or terrorists
themselves. We also use some anomaly analysis, as well, to
identify those containers that we think pose a potential risk.
We inspect, at least through x-ray screening and radiation
detection, 100 percent of those, every one of those. You are
right----
Mr. BECERRA. A 100 percent of those that you suspect----
Mr. BONNER. That we have identified as, based upon risk
analysis, potentially posing a threat for terrorism, terrorist
risk.
Mr. BECERRA. What percentage of the total number of
containers does that represent?
Mr. BONNER. I can say that the total number of containers
that we are inspecting right now through security inspection or
otherwise, but some kind of an inspection or examination, is
close to about 6 percent of all of the sea containers arriving
in the United States.
Again, the question is not whether it is 6 percent or what
the percentage is. Are we inspecting the right ones? I think we
have a system to identify the at-risk containers, including
potentially empties, and here is the point. As good as the
Israelis are, and the Israelis are as good at security as any
country in the world, if not the best, but the Israelis, that
container that came into the Port of Ashdod actually came in, I
believe, initially from Italy, went into the Gaza, was unloaded
in the Gaza, came back into the Port of Ashdod as an empty from
Gaza.
Now, I can tell you that our targeting system would say, we
are going to x-ray it. We are going to inspect that container
because it is coming from a very high-risk area. It is going to
get a risk targeting score that is going to require an
inspection. So, we are doing something beyond what even the
Israelis are doing, at least with ocean-going cargo containers,
to identify those containers that pose a security risk.
I think this is the right approach. As I say, I know some
people say, well, let us inspect all 12 million of those
containers that come into the Port of Los Angeles or the Port
of Long Beach or the Port of Seattle or Tacoma, but the reality
is we ought to be smart about this using strategic
intelligence, knowing something about where a container is
coming from, who is shipping it, who the importer is and that
sort of thing, make an assessment of those containers that pose
a potential risk and then inspect all of those, and that is
what we are doing upon arrival in the United States and through
CSI we are extending our border out now to 18 foreign seaports
where we are able to target and do that before those containers
are loaded outbound on vessels to the United States.
Mr. BECERRA. Thank you.
Chairman CRANE. Mr. Shaw?
Mr. SHAW. Thank you, Mr. Chairman. I would like to pose a
continuing problem which Customs is well aware of that we have
down in south Florida with people taking their boats over to
the Bahamas. A little known portion of the law has recently,
since
9/11, been enforced, the enforcement of which really makes no
sense at all, and that is that returning vessels from offshore
not only have to call in and report back in, that they are back
in the United States, but within so many hours they have to
present themselves in person to the Customs folks, or is it
Immigration? Anyway, they have got to present themselves.
Your people have been very helpful in trying to accommodate
particularly fishing tournaments and things of this nature over
time, which I really appreciate, but I don't think we have hit
upon a satisfactory solution to the problem. It is perfectly
obvious that if somebody is up to no good, that they are not
going to call in and tell us that they are back, whether it be
smuggling drugs or whether it be some type of terrorist
activity.
We have been trying to seek a solution. We have been trying
to do it in concert with the Customs and Immigration people.
What exactly has transpired on that? Can we look for some
legislation? The problem is actually in the legislation. It is
not in the bureau, and I want to make that very clear, but the
legislation makes absolutely no sense in its application.
Now, I know that up on the Canadian border, which Ms. Dunn
was talking about just a few minutes ago, particularly on the
East Coast, perhaps on the West Coast too, that there is some
accommodation for people. People will go on their boat and get
in their boat and go up to Canada to have dinner or vice-versa
or visit friends and nothing is made of it. However, when you
go to the Bahamas, you seem to have a problem coming back and I
would like to just inquire as to what suggestions you might
have, what progress we have made on this point. Mr. Bonner?
Mr. BONNER. One thing that may be progress, and that is
that for purposes of both Customs and Immigration, it is just
one agency you have to deal with now, CBP. You don't have to
deal with two different agencies. That said, there may be this
legal requirement that if it is a non-U.S. citizen, non-lawful
permanent resident, they may have to present themselves to
Immigration when they----
Mr. SHAW. No, I am speaking of U.S. citizens at this point.
I don't want to complicate it with non-citizens.
Mr. BONNER. Okay. That does uncomplicate it. I will say
this. One of the issues that we are looking at is how we could
institute essentially a trusted and vetted, let us say,
pleasure boater or small boat program that would----
Mr. SHAW. Something like we are going to do at the
airports?
Mr. BONNER. Well, it is something like we are doing right
now with Canada with respect to--and Mexico with respect to
people that are in vehicles, automobiles. We have what is
called the NEXUS program in Canada in which Canadian citizens
and U.S. citizens are eligible to apply, give some personal
data about themselves. We run them both against terrorist and
criminal indices and we also personally interview them for 20
to 30 minutes to make sure that there is no issue with respect
to terrorism, there is no issue with respect to smuggling of
goods, and then they get essentially a NEXUS card.
It is called NEXUS Marine, basically, but taking that
concept and applying it to the small, the pleasure boat
situation, and this would be both south Florida and it would be
also, by the way, the Great Lakes, Puget Sound, every place
where we have small boats, that we pre-identify a group of
people that have been essentially enrolled into a trusted or a
vetted, if you will, passenger program so that they could do
probably a call-in rather than a personal actually contact with
Customs and Immigration, which is now a CBP officer.
We are not there yet. We are trying to work out some of the
details of how we would do that, but that is something that we
are looking at as, I think, a potential kind of smart solution
to the kind of issue that you are raising here, because then
you have got boaters who, again, how do we identify them? Is
there some sort of an radio frequency or something we can read?
Then you have the group of boaters that we know we are not
concerned about for terrorism purposes or for smuggling of
drugs, which has been a problem historically in South Florida--
--
Mr. SHAW. You have the problem--you may have the people
that frequently frequent the Bahamas and go back and forth, but
perhaps the buddies that they took fishing with them didn't fit
that profile. The point that I am making, and I compliment you.
That is certainly progress. However, the problem that I see is
that if there is a terrorist threat on this or if there is a
drug threat on this, then we should be at the ports that these
people come back into. It used to be that inside--speaking of
Fort Lauderdale and Port Everglades, you used to have a place
you could check in with Customs just as you came into the port
so it didn't inconvenience anybody more than just a few
minutes. Then it went to just phone in and let us know you are
back and have a nice day. Now it is, by the way, you have got
to come down to Miami, which is not a very pleasant thing to
have to do, particularly if you work, and check yourself in.
It seems to be that the system is providing a nuisance
without really providing also a solution to terrorism. So, we
either have the threat, and if we do, you ought to be there at
the port. If we don't, we ought to change the law.
Mr. BONNER. So, there may be a staffing issue with respect
to ports. I can certainly take a look at this----
Mr. SHAW. This could be a big deal.
Mr. BONNER. I will take a look at this.
Mr. SHAW. It could be a big deal, and again, that wouldn't
be a perfect solution, but it is something that I would hope
that you could vet through the agency and within a reasonable
time--we have been talking about this for a long time--within a
reasonable time, come up with a solution. Either there is a
problem or there is not a problem. If there is a problem, we
ought to be right there where those boats come in.
Mr. BONNER. As I say, we are looking at the overall issue,
but I will take a look at the specific issue with respect to
the Bahamas.
Mr. SHAW. You have been cooperative, but we haven't come up
with a solution. Thank you.
Chairman CRANE. Thank you. Mr. Jefferson?
Mr. JEFFERSON. Thank you, Mr. Chairman. I want to ask a
question about what is called the narrow interpretation of the
existing laws and certain preference programs, particularly the
African Growth and Opportunity Act (AGOA) and the Caribbean
Basin Initiative (CBI) (Trade and Development Act of 2000, P.L.
106-200) program. We heard a lot of testimony at the hearing on
AGOA III that apparel that is made wholly in Africa using
appropriate fabric is in--if you might say, added to that would
be some adornment, some small rope belt or some press-on label,
and the products would come to the United States and be turned
back because they weren't made completely of the appropriate
material.
We have passed in this AGOA legislation a sense of the
Congress urging a broad interpretation. It says that provisions
relating to preferential treatment of textile and apparel
articles be interpreted broadly in order to expand trade by
maximizing opportunity imports. Are you aware of this problem,
and how do you plan to interpret this provision that the
Congress has just passed?
Mr. BONNER. First of all, no, I wasn't aware that this was
a problem. I am certainly generally familiar with AGOA and the
Caribbean Basin Trade Partnership Act (P.L. 106-200) of a
couple of years ago. So, I am not aware of the problem, so I
will have to look into it in terms of whether or not there is
an appropriate interpretation of it.
The interpretation, though, of AGOA and related trade acts
is done through our Office of Rulings and Regulations. It is
important and I believe that there is every effort made to do a
principled interpretation to determine--you know, of the
language of the statute and, of course, if the ordinary rules
of statutory construction apply in terms of interpreting
statutes. So, we look to the language. If the language is
unclear, obviously the next thing you do look to is legislative
intent.
So, the attempt here is, with respect to any kind of an
issue, including this kind of an issue, is to have our Office
of Rulings and Regulations make a principled interpretation of
these statutes and apply it as issues arise before it, but I
don't know the specific issue. Obviously, there is a well-
understood--you have to look at the statute and there is some--
there is a general body of trade law in terms of----
Mr. JEFFERSON. I don't want to bog you down with that.
There are a number of complaints that were registered with the
Committee and we tried to address it with this new language. I
just wanted to bring it to your attention and urge you to
please--the normal rules, this is an attempt to move beyond
what might be the more rigid ways of looking at this, because
in the preference program, the notion is to bring products in
from Africa and there is a short timeline to do this.
There is a huge set of competitors over there, mostly
Chinese competitors that are very, very aggressive in the
marketplace and they are making it very difficult for this
program to work appropriately. So, I just bring it to your
attention and urge you--let me talk about another couple of
things because I know the time is short.
Back home at our port, the Trade Partnership Against
Terrorism, we have about 400 importers that can be involved in
the C-TPAT and only about 7,200 of them are involved in this
program and they usually involve large importers, not the
smaller periodic importers. This is the reality, it seems. So,
the question is, is it feasible that the C-TPAT would be able
to provide a sufficient container security coverage given that
you are going to have this low volume of inspections, and then
largely of the big importers when the smaller ones make up the
bulk of the trade?
Mr. BONNER. Well, first of all, there is no restriction on
smaller importers joining C-TPAT. They would have to develop
the security plan, which would be submitted to us. We would
review it to make sure that the supply chain security best
practices are being met and that sort of thing. So, they are
not excluded, as you know, from C-TPAT. That said----
Mr. JEFFERSON. It just is a manpower issue?
Mr. BONNER. Yes, it could be, and I understand that. That
is--even C-TPAT has potentially some benefits for all
importers, and the reason is that as we can get--and this is
the objective, to get more and more U.S. importers into C-TPAT,
including some of the middle-size and even smaller importers to
get more and more into it so that we have increased supply
chain security. The more we have done that and the more we have
verified that supply chain security is increased, the more we
are able to devote our inspectional resources to those
shipments that pose a potential threat because of our targeting
system or that are unknown.
The reality is, this is a system that ultimately benefits
or has the potential to benefit and facilitate trade into the
United States for everybody, including even small importers,
even if they are not in C-TPAT, because we have--the more you
can rule out because you are satisfied that shipments don't
pose a security threat, particularly for the terrorism issue,
the more quickly we can devote our resources to those shipments
that are not C-TPAT shipments, if you will.
So, we welcome everybody into this. I realize there
sometimes--you know, an importer that doesn't import
frequently, probably there is an investment of some funds here
and the use of some leverage in the supply chain to make the
security improvements. I realize that there are going to be
some companies that, for a variety of reasons, don't want to
make that investment, particularly perhaps their size just
doesn't justify it. There still, as I say, there are benefits
to everybody that imports into the United States to have C-
TPAT, at least in my judgment.
Mr. JEFFERSON. Mr. Chairman, may I ask one last thing? I
want to ask one last question.
Chairman CRANE. All right.
Mr. JEFFERSON. The folks in my port, the freight
forwarders, have a few complaints. Customs established a point
system that was supposed to promise fewer enforcing exams as
carriers, importers, and brokers became C-TPAT certified.
However, the anecdotes they bring to us indicates that the
number of enforcement exams haven't really been reduced and
that the bureaucracy is still there. Is this kind of a plan in
the works and down the line they can see more relief, or is
it----
Mr. BONNER. No--well, I don't known whether the freight
forwarders are or representing C-TPAT importers, but I can tell
you, no, it is not--we give--essentially in the terrorist risk
scoring, there are three purposes for which exams or
inspections might be conducted. One is anti-terrorism, and that
is one that all of us are, I think, rightly concerned about.
Second is enforcement exams, and this could be for illegal
drugs or other kind of contraband, including, for example,
knock-off products and the like. The third category is freight
compliance exams.
Let me just say that if you are enrolled in C-TPAT and you
have taken the steps to improve the security of the supply
chain--this goes back to the vendors that are shipping goods to
you from overseas--you will get increased--essentially, it will
result in a decreased risk score for the purposes of an anti-
terrorism security inspection exam and there are fewer exams. I
am not saying none, but there are fewer exams if you are in C-
TPAT for security purposes and there are fewer enforcement and
trade compliance examinations if you are in C-TPAT. That is a
fact. So, there are benefits right now for companies that
enroll and join in and take those steps to become C-TPAT
partners.
Chairman CRANE. Thank you. Commissioner, I agree with Mr.
Jefferson about the problem he has raised about interpreting
AGOA and I agree that the provision the House passed Monday
indicates eligibility should be interpreted broadly and I
encourage you to do so. Now, Mr. English?
Mr. ENGLISH. Thank you, Mr. Chairman. Commissioner Bonner,
following up on Mr. Levin's questioning on the issue of
uncollected duties, largely from Chinese imports, one
particular issue you raised was with regard to new shippers. I
believe you cite in a letter to Senator Byrd on May 28 that
particular attention needs to be paid to new shippers and
single-entry bonds. Also in that letter, you stated that CBP
would not oppose legislation to assist you in remedying this
problem. Has that position changed?
Mr. BONNER. No, it hasn't. We would not oppose legislation
that would assist us in this issue. We do think, as I indicated
to Mr. Levin, there are some steps that can be taken and that
we are taking in conjunction with Commerce to address the issue
of essentially the evasion of anti-dumping duties. However, our
position has not changed. We certainly do not oppose
legislation that would help us take some action that would give
us a higher rate of collection of anti-dumping duties.
Mr. ENGLISH. Thank you. Also, as we are both aware, Customs
has received funds for training agents on specific steel
products in recent years. Many of these products are similar
and only minute technical differences separate them from other
steel products. Do you feel this type of interaction with
industry officials and Customs agents for the purpose of
training helps agents correctly identify products at the
borders, and also, do you feel this type of training will also
assist in determining certain circumvention techniques, for
example, certain pipe or tube products currently not
manufactured in Canada but attempting to enter the United
States under North American Free Trade Agreement (P.L. 103-182)
treatment?
Mr. BONNER. I think it can, I think it does, and I think it
is important to have the kind of advice and expertise that
allows us to better identify the kinds of products that, for
example, are subject to anti-dumping duties, and there are, as
you know, some very technical issues in terms of trying to
appropriately categorize and characterize types of products.
They may be, by the way, misidentified in the entry data and so
forth. So, this has been and would continue to be something
that we welcome and value.
Mr. ENGLISH. I also understand that a project is underway
at Customs South Florida Strategic Trade Center to improve
communication between Customs and Commerce, the goal of this
project being, as I understand it, to enhance anti-dumping
communication between the agencies to better enforce orders.
I strongly encourage you to move fully ahead with this
project and other initiatives to improve enforcement. We
obviously are here in Congress trying to set policy, to provide
a better level playingfield for American companies and American
workers for products. However, without Customs being on the
cutting edge of this, and I know that is certainly your
objective, it becomes very difficult for us to address some of
the occasions of unfair trade that we are seeing popping up
around our border. I guess beyond that, is there anything else
you can provide us with as an update with what the
Administration sees as the top priority opportunities for
circumvention that you are addressing?
Mr. BONNER. I need to give a little bit of thought to that.
I would say, though, your point that through the Strategic
Trade Center and otherwise, my sense is we are doing a better
job across the board of engaging with Commerce because of the
interrelationship of collectability and the actions taken by
Commerce with respect to anti-dumping and countervailing
duties. I would have to give a little thought, if I could, and
maybe get back to you on trying to prioritize the most
important issues, let us say, with respect to products or
countries.
Mr. ENGLISH. That would be extremely helpful for us to
have, and Commissioner, without adding to your workload, if you
could provide us something at your convenience in writing on
that point, I think it would be most helpful to the
Subcommittee.
Mr. BONNER. I would be happy to do that.
[The information was not received at the time of printing.]
Mr. ENGLISH. Thank you, Commissioner, and thank you, Mr.
Chairman.
Chairman CRANE. Thank you. I want to thank you both for
your participation this morning and we look forward to
continuing to work with you. With that, I would like to call
our second panel, then, and that is Michael Laden, President,
Target Customs Brokers, Inc., on behalf of the Retail Industry
Leaders Association (RILA); Kevin Smith, Chairman, Joint
Industry Group, and the Director of Customs, General Motors
(GM) Corporation; Peter Powell, Senior, Chief Executive
Officer, C.H. Powell Company; Colleen Kelley, National
President, National Treasury Employees Union (NTEU); Phyllis
Saathoff, President, National Association of Foreign-Trade
Zones (NAFTZ) and Managing Director of Port Freeport, Freeport,
Texas; and Sandra Scott, Vice Chair, Border Trade Alliance
(BTA), and Director of International Affairs for Yellow-Roadway
Corporation.
If you folks will please take seats at the panel, we will
start. Try and keep your eyes on the little lights there on the
panel, and when that light turns red, try and wrap up as
quickly as possible. All printed statements will be made a part
of the permanent record, however. So, anything above and beyond
your presentations will be made part of the record. With that,
we will start off with Michael Laden.
STATEMENT OF MICHAEL D. LADEN, PRESIDENT, TARGET CUSTOMS
BROKERS, INC., MINNEAPOLIS, MINNESOTA, ON BEHALF OF THE RETAIL
INDUSTRY LEADERS ASSOCIATION
Mr. LADEN. Chairman Crane, Ranking Member Levin, and
Members of the Committee, thank you for allowing me to testify
today. My name is Michael Laden and I am currently the
President of Target Customs Brokers, Inc., a division of Target
Corporation. I am here today on behalf of Target Corporation
and the RILA to discuss important issues surrounding the
reauthorization of CBP. A longer statement has been submitted
for the record.
Target Corporation, along with RILA, has been actively
working with Customs on issues surrounding commercial
operations and security. I currently serve on DHS Advisory
Committee on Commercial Operations of the U.S. Customs Service
(COAC). I also, along with RILA, played a key role in the
development of the C-TPAT program, and Target was one of seven
C-TPAT charter Members. Target is also participating in
programs such as Operation Safe Commerce and the Customs Smart
Box program, which are testing end-to-end supply chain
security.
In the post-9/11 world, Customs, the trade community, and
the United States as a whole have faced a new and difficult
reality. How do you maintain a balance between homeland
security and the free-flowing movement of legitimate
international commerce? This is a monumental task that cannot
be rushed into without serious consideration of the potential
impact that regulations could have on the international supply
chain. There are currently a number of ongoing government and
private sector initiatives looking into this.
With that being said, Congress and the trade community must
make sure that Customs does not lose its focus on issues
surrounding commercial operations and focus solely on homeland
security. There are still a number of major issues surrounding
commercial operations that Customs needs to address. I plan on
discussing three such issues today, the end of global quotas
and the impact to the trade, the broad interpretation of
preference programs and trade agreements, and the
regionalization of DHS.
Let me start with the end of global quotas this year. On
December 31, 2004, global quotas on textiles and apparel
products will be removed for Members of the World Trade
Organization under the agreement on textiles and clothing.
Retailers have long been looking forward to this date since
Congress passed the Uruguay Round Agreements Act (P.L. 103-465)
back in 1994. While Target is extremely excited about the
possibilities in a quota-free world, there are many questions
that we have as to what the process will be on January 1, 2005.
We, along with many other RILA Members, are in the process
of placing orders for the first quarter of 2005 and beyond.
There are a number of outstanding issues that Customs, along
with the Committee for the Implementation of Textile Agreements
(CITA) need to address so that retailers will have the
appropriate measures in place beginning on January 1, 2005.
There are some necessary programming changes needed for the
Automated Broker Interface program to be able to handle quota-
free entries. We need to know from Customs when the changes for
the current requirements will be made. This is critically
important for those importers who pre-file their entries, as
many of us do. There are also issues surrounding the future use
of textile visas. Will Customs still require visas for
shipments arriving after January 1, 2005?
We are pleased that Customs has created a website to
address these issues. However, at this point, there is no
current information or guidance to the trade on what is to be
expected. It is critical that Customs populate this web page
with relevant information and alert the trade community of its
existence. This will not only help the trade ensure they are
compliant, but will help Customs in the end, as well.
Let me move on to the broad interpretation of preference
programs. Representing a company that has run into numerous
problems with the narrow interpretation by Customs of certain
preference programs, I am glad to the sense of Congress
language in the bill that would require Customs to broadly
interpret AGOA, the Andean Trade Preference Act (P.L. 102-182),
and CBI preference programs. We, along with many other RILA
Members, have run into too many situations where Customs has
taken a narrow interpretation of the existing laws and have
disqualified products from receiving the benefits as intended
by Congress.
As a result, a great deal of business has been lost from
those countries, especially from the nations of the Sub-Saharan
Africa. We strongly encourage Members of this Committee to
ensure Customs use as broad an interpretation as possible with
regards to these future preference programs. Finally, let me
discuss the concept of regionalization. As part of the
President's fiscal year 2004 budget for DHS, there was a
provision that called for DHS to create a powerful and logical
regional structure. While we do not oppose the creation of a
regional structure, we do have some concerns about the
potential impact on day-to-day Customs operations. We need to
make sure that uniformity and consistency in the application of
Customs laws, policies, and procedures are maintained.
We have communicated this concern to Secretary Ridge and
Under Secretary Asa Hutchinson on numerous occasions. At the
COAC meeting in February, the Under Secretary described the
department's view of a regional structure. According to the
Under Secretary, there will be between 7 and 10 regions and the
Regional Director will have 3 areas of responsibility; act as a
liaison between the Secretary and local officials; act as the
on-site commander for incident management, coordinating
multiple agencies; and handle day-to-day coordination. The
Under Secretary stated that the Regional Director would not be
responsible for day-to-day Customs operations and that all
normal Customs operations--entries, rulings, and other
administrative and operational matters--would, in fact, be
handled by Customs headquarters.
While we appreciated this briefing, we have not heard
anything since. At the meeting, the Under Secretary stated that
the trade, especially COAC, would have an opportunity to review
and comment on this plan. Our biggest concern has been that the
regionalization plan has been crafted in complete secrecy. The
critical stakeholders have had no input or opportunity to vet
the proposed structure.
In the post-9/11 world, Customs faces many challenges, as
witnessed by the name change to CBP. Customs has always had a
difficult mission of facilitating legitimate trade while
enforcing very complex and arcane sets of rules. This is now
further complicated by a new focus on security. Target
Corporation, RILA, and its Members stand ready to work with
Customs, Members of this Committee, and the rest of Congress
and the Administration to help ensure the security and safety
of cargo arriving at U.S. ports. Thank you for allowing me to
testify today.
[The prepared statement of Mr. Laden follows:]
Statement of Michael Laden, President, Target Customs Brokers, Inc.,
Minneapolis, Minnesota, on behalf of the Retail Industry Leaders
Association
Chairman Crane, Ranking Member Levin and members of the Committee,
thank you for allowing me to testify today. My name is Michael Laden
and I am currently the President of Target Customs Brokers, Inc. a
division of Target Corporation. I am here today on behalf of Target
Corporation and the Retail Industry Leaders Association (RILA) to
discuss the important issues surrounding the reauthorization of U.S.
Customs and Border Protection.
With annual sales of approximately $50 billion Target Corporation
is the third largest U.S. retailer and the second largest importer of
containerized cargo. Target Corporation operates approximately 1,500
retail stores in 47 states and employs about 285,000 team members. As
an importer, Target files more than 110,000 entries annually with
Customs and Border Protection for a variety of retail merchandise that
touches almost every chapter of the harmonized tariff.
By way of background, the Retail Industry Leaders Association
(RILA) is an alliance of the world's most successful and innovative
retailer and supplier companies--the leaders of the retail industry.
RILA members represent more than $1 trillion in sales annually and
operate more than 100,000 stores, manufacturing facilities and
distribution centers nationwide. Its member retailers and suppliers
have facilities in all 50 states, as well as internationally, and
employ millions of workers domestically and worldwide. Through RILA,
leaders in the critical disciplines of the retail industry work
together to improve their businesses and the industry as a whole.
Target Corporation, along with RILA, has been actively working with
Customs on issues surrounding commercial operations as well as
security. I am currently serving on the DHS Advisory Committee on
Commercial Operations of the U.S. Customs Service (COAC). I also, along
with RILA, played a key role in the development of the Customs-Trade
Partnership Against Terrorism (C-TPAT) program; Target was one of seven
C-TPAT charter members. Target is also participating in programs such
as Operation Safe Commerce (OSC) and the Customs Smart Box, which are
testing end-to-end supply chain security efforts. I will discuss these
issues later in my testimony. I am also the Chairman Emeritus of the
American Association of Importers and Exporters (AAEI), and was a
founding and charter member of the Business Alliance for Customs
Modernization (BACM).
In the post 9/11 world Customs, the trade community and the United
States as a whole have faced a new and difficult reality. How do you
maintain the balance between homeland security and the free flowing
movement of legitimate international commerce? While a difficult task,
we believe that Customs and the other agencies have done a good job
thus far. This is a monumental task that cannot be rushed into without
serious consideration of the potential impact that regulations could
have on the international supply chain. There are currently a number
ongoing government and private sector initiatives looking into this. I
will discuss security issues later in this testimony.
With that being said, Congress and the trade community must make
sure that Customs does not lose its focus on issues surrounding
commercial operations and focus solely on homeland security. There are
still a number of major issues surrounding commercial operations that
Customs needs to address. I will discuss one such issue this morning
dealing with the expiration of global textile and apparel quotas at the
end of the year. This is an issue that Customs, as well as other
agencies, need to address right now so that retailers, such as Target,
are prepared for the beginning of 2005.
Commercial Operations
Removal of Global Quotas
On December 31, 2004, global quotas on textile and apparel products
will be removed for members of the World Trade Organization (WTO) under
the Agreement on Textiles and Clothing. Retailers have long been
looking forward to this date since Congress passed the Uruguay Round
Agreements Act back in 1994.
While Target is extremely excited about the possibilities in a
quota free world, there are many questions that we have as to what the
process will be on January 1, 2005. We, along with many other RILA
member retailers, are in the process of placing orders for the first
quarter of 2005. There are a number of outstanding issues that Customs,
along with the Committee for the Implementation of Textile Agreements
(CITA), need to address now so that retailers will have the appropriate
measures in place beginning on January 1, 2005.
It is fully expected that merchandise entered on January 1, 2005
will no longer be subject to quota at the time of entry. But there are
a number of questions that we have about the filing process.
There are some necessary programming changes needed for the
Automated Broker Interface (ABI) to be able to handle quota-free
entries on January 1, 2005. We need to know from Customs as to when the
changes for the current requirements will be made. This is critically
important for those importers who pre-file their entries, as many do.
Will the ABI system be able to recognize that a pre-filed entry on
December 29, 2004 for merchandise arriving in the US on January 2, 2005
will not be subject to quota requirements? It is critically important
that the ABI system be able to recognize this difference and recognize
the new quota-free environment.
There are also a number of issues surrounding the future use of
textile visas. Will Customs still require a visa for shipments arriving
after January 1, 2005? Customs requires visa control numbers for their
textile quota shipments to match the year of export from the last port
in the shipment's country of origin. The U.S. Code of Federal
Regulations, Title 19, Part 12.130 (i): defines the date of exportation
for quota, visa or export license requirements, and statistical
purposes, as ``. . . the date the vessel or carrier leaves the last
port in the country of origin, as defined by this section. Contingency
of diversion in another foreign territory or country shall not change
the date of exportation for quota, visa or export license requirements
or for statistical purposes.'' (See also Administrative Message 94-
0366, dated April 12, 1994). Will Customs still require this for
exports after January 1, 2005? If so, will this be for exports from all
nations or just those countries subject to trade restraints?
In addition, we also have some concerns about what is being
communicated to Customs officers at U.S. ports. When will Customs issue
a directive to the ports regarding full integration of all quota
categories for WTO member countries? This is actually a situation where
Customs is waiting for guidance from CITA. We also encourage Customs to
ensure that the types of required documents for entry for textile and
apparel goods remains consistent at every port. As an example, the Port
of Los Angeles requires that goods imported from Russia have a
Certificate of Origin even though this is not a standard required
document for entry.
Because of the quota regime, importers of textile and apparel
products have not been able to take advantage of many of the modern
entry procedures available to importers of other types of merchandise.
This creates additional work for importers and it certainly creates
additional work for Customs, which has been required to operate
parallel entry systems, one for textiles and apparel and another for
most other merchandise. We are more than happy to work with Customs and
CITA on all of these issues.
We are pleased that Customs has created a website to address these
issues. However, at this point, there is no current information or
guidance to the trade on what is to be expected. It is critical that
Customs populate this webpage with relevant information and alert the
trade community of its existence. This will not only help the trade
ensure they are compliant, but will help Customs in the end as well.
We urge at this point in time that Customs and CITA get together to
work with each other, as well as the trade, to resolve all of the
outstanding issues. These decisions are going to affect sourcing
decisions that U.S. retailers are making right now.
Anti-Transshipment Efforts
Another area that continues to concern us is Customs' enforcement
of illegal transshipments. We want to work with Customs to help fight
illegal transshipments, but we continuously feel as if Customs thinks
that importers of textiles and apparel routinely look for and conspire
with foreign manufacturers to circumvent the quota system. This could
not be further from the truth. Target, as well as others in the trade
would like to work with Customs in partnership, as we have done on
security measures, to address issues of illegal transshipments. We
encourage Customs to work with the importing community on these efforts
and refrain from treating every import as being an illegal
transshipment.
Broad Interpretation of Preference Programs
Representing a company which has run into numerous problems with a
narrow interpretation by Customs of certain preference programs, I am
glad to the Sense of the Congress in Section 125 of H.R. 4418 that
would require Customs to ``interpret, implement, and enforce the
provisions of section 112 of the African Growth and Opportunity Act (19
U.S.C. 3721), section 204 of the Andean Trade Preference Act (19 U.S.C.
3203), and section 213 of the Caribbean Basin Economic Recovery Act (19
U.S.C. 2703), relating to preferential treatment of textile and apparel
articles, broadly in order to expand trade by maximizing opportunities
for imports of such articles from eligible beneficiary countries.'' We,
along with many other RILA members, have run into too many situations
where Customs has taken a narrow interpretation of the existing laws
and disqualified products from receiving benefits that Congress had
intended to receive. As a result, a great deal of business has been
lost from those countries, especially from the nations of sub-Saharan
Africa. We strongly encourage members of this committee to ensure that
Customs use as broad an interpretation as possible with regards to
these and future preference programs.
This is critical not only for enforcement of preference programs,
but as it relates to enforcement of free trade agreements as well. Over
the past several years, the United States has significantly increased
the number of free trade agreements that have been negotiated or are in
the process of being negotiated. The problem is that each comes with a
different set of rules of origin that are extremely complex, not only
for the trade, but for Customs as well.
User Fees
I would also like to state our support for the language in Section
103 of the bill that would require a study on the current user fees
collected by Customs. As a major contributor to the user fees, Target
strongly supports directly tying the funds collected through the
Merchandise Processing Fee (MPF) directly to Customs commercial
operations. As it stands now, the money goes into the general revenue
and we are unable to conclude whether or not the funds go directly to
Customs. We strongly support the language that was included in the FSC/
ETI bill that tied the money directly to Customs commercial operations.
Security Efforts
Target, RILA and its members remain committed to working with
Customs, the Department of Homeland Security and the other agencies
involved in supply chain security. Target has worked very close with a
number of the agencies and is involved in several private sector
projects, as well as government projects, looking at ways to address
supply chain security from the factory to the store floor. Target not
only helped to write the Customs-Trade Partnership Against Terrorism
(C-TPAT), but also was one of the original seven charter members. As
well, we are also participating in several trade lanes under Operation
Safe Commerce, which is testing supply chain security from the factory
all the way through the supply chain, as well as the Customs Smart Box
program. Target is also very active on the international level as well.
We are working with both the World Customs Organization and
International Maritime Organization on their efforts on supply chain
security.
Members of Congress should recognize that there is a great deal of
work being done on supply chain security. Major regulations, including
the Maritime Transportation Security Act, the Bioterrorism Act and the
Trade Act of 2002 have all addressed aspects of supply chain security.
In addition, enforcement of the International Maritime Organization's
International Ship and Port Facility Security (ISPS) Code will begin on
July 1. While this will be enforced by the U.S. Coast Guard, members of
this committee need to recognize that this could have an impact on the
free flow of legitimate commerce.
I urge this committee to continue to maintain oversight and
jurisdiction over any future legislation that could impact global
commerce. As well, we strongly urge that all of the agencies involved
in homeland security continue to work with each other, as well as the
business community, to ensure the effectiveness of any new regulations.
There are some specific issues that I would like to address
specifically dealing with Customs and security.
Communications to the Trade
The Customs-Trade Partnership Against Terrorism (C-TPAT) is a great
example of a true government-private sector program that addresses
supply chain security. While the program is voluntary, over 6,000
companies have signed up for the program. As a charter member, we
strongly believe in the program. However, we do have some concerns.
One of the biggest problems that we see is a lack of education
among Customs agents in the field about C-TPAT and its benefits. As a
trusted and verified C-TPAT partner, we are supposed to qualify for
``green lane'' benefits, expedited clearance. Unfortunately, we have
not seen this occur. In addition, when Customs agents find an anomaly
with a container belonging to Target, we believe that they should
contact us to find out whether or not the anomaly is one that can be
explained or not. We have information about the container and the
vendor, starting from the purchase order, that Customs might not have
access to from either the vessel manifest or the Customs entry. We can
offer insight on the chain of custody of the container that Customs
might not be aware of. As well, we have critical information about both
the products and the vendors that Customs might not be able to identify
from the vessel manifest.
In the true sense of public-private partnership, this type of
communication is critical. This not only helps Customs to identify
suspicious cargo, but helps keep legitimate cargo moving through the
supply chain.
VACIS Inspections
As Customs seeks to increase the number of non-intrusive
inspections by using the Vehicle and Cargo Inspection System (VACIS),
we continue to experience long delays at a number of ports. In some
ports, a VACIS examination can take upwards of seven days. Such long
delays can cause havoc for a retailer's supply chain. Customs has
identified this as a problem and is currently studying the situation.
We urge them to correct the situation as soon as possible. Customs
needs to make sure that the appropriate resources are available to
correct the situation. Long delays not only impact a retailer's supply
chain, but also lead to increased congestion problems at U.S. ports.
In addition, as Customs installs radiation portal monitors at the
major U.S. ports, they need to ensure that the use of the monitors do
not lead to increased congestion. While Customs says that it will only
take a couple of minutes for a container to go through the portal, this
could cause major delays. Congress, as well as Customs, needs to make
sure that this does not cause further strain on already congested
ports.
Shipper Definition
When Customs issued final regulations under the Advanced Electronic
Cargo Manifest Requirements under the Trade Act of 2002, Customs had
originally defined the term ``shipper'' on the manifest as the vendor/
manufacturer as opposed to traditional definition of the party who
makes the contract of carriage. While we understand the need for
Customs to have information about what happens early in the supply
chain, redefining the term ``shipper'' on the manifest would not help
to solve the problem. Using the new definition would have caused major
problems for the maritime industry as well as others.
We are pleased that Customs has agreed to return to the traditional
definition of ``shipper'' on the manifest and remain committed to
working with Customs to identify other ways to collect additional trade
data. We urge Customs to continue to work with the trade on these
issues as future regulations are developed.
Regionalization
As part of the president's fiscal year 2004 budget for the
Department of Homeland, there was a provision that called for the
Department to ``create a powerful and logical regional structure.''
While the trade does not oppose the creation of a regional structure
for the Department, we do have some concerns about the impact a
regional structure would have on day-to-day Customs operations. We need
to make sure that uniformity and consistency in the application of
Customs laws, policies and procedures are maintained. We have
communicated this concern to Secretary Tom Ridge, Under Secretary Asa
Hutchinson and Customs Commissioner Robert Bonner on numerous
occasions.
Under Secretary Hutchinson addressed the COAC meeting earlier this
year to describe the Department's view of the regional structure.
According to Under Secretary Hutchinson there will be between seven and
ten regions. The regional director will have three areas of
responsibility: 1) act as a liaison between the Secretary and local
officials; 2) act as the onsite commander for incident management
coordinating the multiple agencies involved; and 3) handle day-to-day
coordination. The regional director will not be responsible for day-to-
day Customs operations. All normal Customs operations (entry, rulings,
etc.) will be handled by Customs headquarters. National level policies
on trade will be determined on the national level.
While we appreciated the briefing, we have not heard anything
since. At the meeting the Under Secretary stated that the trade, and
especially the COAC, would have an opportunity to review and comment on
the regionalization plan. Our biggest concern has been that the
regionalization plan was crafted in complete secrecy. While we
understand the need for some things to be done this way, this effort
should not have been. The critical stakeholders had no input or
opportunity to vet the proposed structure.
To this date, we have not seen any additional information besides
what was provided verbally at the COAC meeting in February. This is a
critical issue that the trade, as well as this committee, needs to be
involved in.
Automated Commercial Environment
The retail industry played a critical role in helping secure
funding for Customs' Automated Commercial Environment (ACE). We still
believe that this system will help Customs in their future endeavors,
not only with commercial entries but also as another tool for homeland
security. With that being said, we are not sure of where the ACE system
is at this point in development. While the funding and architecture
were developed before September 11th, we are not aware as to whether or
not the new security requirements (advanced manifest, etc.) are being
considered as the system is being built. While these issues are
hopefully being discussed in the Trade Support Network (TSN), we fully
believe that Customs needs to communicate to the entire trade community
on the status of the program. This system was promised under the
Customs Modernization Act, which passed Congress in 1994. Almost 10
years later and we do not have a modern system. The current system, the
Automated Commercial System (ACS), is over 20-years old and is need of
replacement.
Operation Safe Commerce/Customs Smart Box
As I stated earlier, Target is participating in both Operation Safe
Commerce and the Customs Smart Box program. While we believe it is
critical to participate in these efforts, we are concerned about the
number of agencies who are running different programs looking at the
same thing--supply chain security. It is important that both agencies
share their learnings from these programs with the trade. This will
only help to shape future regulations as well as best practices.
Disaster Recovery Program
While a great deal of work has been done to prevent weapons of mass
destruction from entering the United States, we are concerned about
what happens if something does occur at a port. If something does
occur, will all of the U.S. ports shut down as the airline industry did
on September 11th? If not, what are the procedures? Are the Captains of
the Port ultimately in charge?
As an example, if something were to happen in the Port of Los
Angeles, what would the impact on the Port of Seattle be? Would the
port remain open and ships be allowed to enter? Have there been
discussions about how to divert ships to alternate ports? Using the
above example, if something happens how much extra cargo would the Port
of Seattle be able to handle? What about Tacoma and some of the other
ports?
We know that the individual ports have their Area Maritime Security
Committees and are working on the ``what if'' situations for their
individual ports, but what is the impact on the ports in other areas?
We are not aware that this has been discussed. One only needs to
look at the situation caused by the lockout on the West Coast in 2002
to see the potential impact of a port closing. In the span of 10 days,
there were hundreds of ships lined up outside of the ports and it took
months for the system to recover at the cost of several billion
dollars. We would be very interested in participating with the
Department and any other agencies involved in disaster recovery
planning.
Conclusion
In the post September 11th world, Customs faces many new
challenges, witnessed by the name change to Customs and Border
Protection. Customs has always had a difficult mission of facilitating
legitimate trade while enforcing a very complex and arcane set of
rules. This is now further complicated by a new focus on security.
We are encouraged by the progress that Customs has made and the
increased partnership with the trade community on new efforts on
security, but we would like to see more on some of the traditional
Customs enforcement programs. We are also pleased to see Customs
working with other agencies, such as the Food and Drug Administration,
on ensuring that the trade does not have a duplication of security
efforts. We strongly urge Customs not to lose sight of its commercial
operations responsibilities. There must be a continued balance of
legitimate trade and security by the Department of Homeland Security.
Target Corporation, RILA and its members stand ready to work with
Customs, members of this Committee and the rest of Congress and the
Administration to help ensure the security and safety of our cargo
arriving at U.S. ports.
Thank you for the opportunity to testify today. I'd be happy to
take any questions that you might have.
Chairman CRANE. Thank you, Mr. Laden. Mr. Smith?
STATEMENT OF KEVIN M. SMITH, DIRECTOR, CUSTOMS ADMINISTRATION,
GENERAL MOTORS CORPORATION, DETROIT, MICHIGAN, ON BEHALF OF THE
JOINT INDUSTRY GROUP
Mr. SMITH. Mr. Chairman, Members of the Committee, my name
is Kevin Smith. I am the Director of Customs Administration for
General Motors Corporation. It is a privilege to appear before
you today at this hearing on authorization legislation for CBP.
The Committee on Ways and Means has consistently been
responsive to the trade community in seeking to balance the
sometimes competing interest of commercial facilitation and
homeland security. Achieving a balance between these roles is
critical to our ability to conduct international business. Due
to its importance, the Joint Industry Group and its Members
have a strong interest in the development of new Customs
automation tools and Customs operations on the Northern border.
My remarks today will focus on these areas, although clearly,
we have many other interests related to trade and CBP.
The international movement of goods through U.S. ports of
entry is a critical issue for companies such as GM because of
the high degree of integration required in our North American
operations. Motor vehicle production is a highly capital-
intensive business that is also highly competitive on a global
scale. It means we must make every effort to use lean and
flexible production methods, such as order to delivery, part
sequencing, and just-in-time inventory methods. These practices
go to the very heart of our cost reduction programs and require
a high degree of coordination with our suppliers in North
America.
As the Committee is keenly aware, ACE will replace ACS, the
present system for processing Customs transactions. The ACE, as
envisioned by the Committee and the private sector in 1993 when
Congress--ACE was envisioned by the Committee and the private
sector in 1993 when Congress passed the Customs Modernization
Act (P.L. 103-182). The act provided for a national Customs
automation program that was intended to modernize many of
Customs' processes and bring them into harmony with the manner
in which the private sector conducts its business.
As you know from your continuous oversight activities, much
of what the New Car Assessment Program promised has not been
implemented, pending the development of the ACE system. Now, 11
years later, construction of ACE is underway. However, the
promises of processes compatible with our business still appear
to be years away.
In its fiscal year 2005 budget submission, the
Administration requested funding comparable to last year and
didn't ask for additional funds necessary to complete the
project as originally planned. Instead, ACE is now projected
for completion beyond 2010.
It is important to note at this point that ACE has attained
considerable more importance since 9/11, reflecting the
security considerations that have transformed CBP and its
mission. While it remains principally a means of processing
commercial transactions, ACE has acquired security dimensions
of critical importance to the bureau. Building transaction data
into cargo selectivity enhances the ability of CBP to assess
risk for specific shipments.
While the implementation of Advanced Information Reporting
as required by the Trade Act of 2002, CBP is now requiring
commercial data hours in advance of arrival. The obvious is
becoming increasingly clear. The need to improve the processing
of commercial data and the need for security-oriented
information are not mutually exclusive and it becomes incumbent
on Congress to see that the funding is available, bringing the
conclusion of ACE closer rather than permitting it to drift
further into the future. Thus, we ask the Committee on Ways and
Means to ensure that its authorization reflects both its own
vision from 1993 and the demands of homeland security.
On the Northern border of the United States, we are also
witnessing the transformation of programs to a risk-based
approach. We are strong supporters of these initiatives and
cite the Free and Secure Trade Program and the Pre-Arrival
Approval System, as examples of how security need not impede
the movement of trade. In fact, by working with businesses
attaining highly secure and compliant internal processes that
can provide required information in advance of arrival, time at
the border can be reduced while security improved.
Programs such as these are a long ways from full
implementation and need the support of the Committee. We
believe that CBP should stay the course on these programs and
ask for your support of them, also. In conclusion, I would like
to thank the Committee for the opportunity of appearing here
today and I would be happy to answer any questions.
[The prepared statement of Mr. Smith follows:]
Statement of Kevin Smith, Chairman, Joint Industry Group, and Director
of Customs, General Motors Corporation, Detroit, Michigan
Mr. Chairman, Members of the Committee: My name is Kevin Smith and
I am the Director of Customs Administration for General Motors
Corporation (GM).
It is a privilege to appear before you today at this hearing on
FY2005-FY2006 authorization legislation for the Bureau of Customs and
Border Protection (CBP). The House Ways and Means Committee has
consistently been responsive to the trade community in seeking to
balance the sometimes competing interests of commercial facilitation
and homeland security. Achieving a balance between these roles is
critical to our ability to conduct international business. We recognize
that this hearing affords us yet another opportunity to provide input,
as you exercise your jurisdiction over customs revenue and trade policy
functions.
Due to its importance, the Joint Industry Group and its members
have a strong interest in the development of new customs automation
tools and in the operation of commercial trade along the northern U.S.
border. My remarks today will focus on these areas, although clearly we
have a great many other interests related to trade and CBP.
The international movement of goods through U.S. ports of entry is
a critical issue for companies such as GM because of the high degree of
integration required in our North American operations. Motor vehicle
production is a highly capital intensive business that is also highly
competitive on a global scale. Economies of scale are very important in
our business, which creates incentives to limit the total number of
production locations while at the same time increasing the level of
shipping between countries to expand product availability. It also
means we must make every effort to use lean and flexible production
methods, such as order-to-delivery, parts sequencing and just-in-time
inventory control methods. These practices go to the very heart of our
cost reduction programs and require a high degree of coordination with
our suppliers in North America. As an example our Detroit-Hamtramck
assembly plant relies on seats from a supplier in Windsor, Ontario.
These seats are built and sequenced in Windsor to specific color and
function specifications while the vehicle is being built in the
assembly plant. In the cost competitive environment that we operate,
the assembly plant has only 4 hours of inventory in the plant. As a
result, a border delay of only a few hours can stop production.
As the committee is keenly aware, the Automated Commercial
Environment (ACE) will replace the Automated Commercial System (ACS),
the present system for processing customs transactions. ACE was
envisioned by the Committee and the private sector in 1993 when
Congress passed the Customs Modernization Act. The Act provided for the
National Customs Automation Program (NCAP) that was intended to
modernize many of Custom's processes and bring them more into harmony
with the manner with which the private sector conducts its business. As
you know from your continuous oversight activities, much of what NCAP
promised has not been implemented, pending the development of the ACE
system. Now, eleven years later, construction of ACE is underway;
however, the promise of processes compatible with our business still
appears to be years away. In its FY2005 budget submission, the
Administration requested funding comparable to last year and did not
ask for the additional funds necessary to complete the project in the
seven years originally planned. Instead, ACE is now projected for
completion beyond 2010. Recently, the House Appropriations Subcommittee
on Homeland Security reported funding at $305 million, thereby
maintaining the previous year's funding level.
It is important to note at this point that ACE has attained
considerably more importance since 9/11, reflecting the security
considerations that have transformed CBP and its mission. While it
remains principally a means of processing commercial transactions, ACE
has acquired security dimensions of critical importance to the Bureau.
Building transaction data into cargo selectivity and targeting enhances
the ability of CBP to assess security risk and identify anomalies for
specific shipments. With the implementation of advance information
reporting as required by the Trade Act of 2002, CBP is now requiring
commercial data up to 24 hours in advance of arrival. The obvious is
becoming increasingly clear: the need to improve and facilitate the
processing of commercial data and the need for security-oriented
information are not mutually exclusive. And, it becomes incumbent on
the Congress to see that funding is available, bringing the conclusion
of ACE development closer rather than permitting it to drift further
into the future. Thus, we ask the Ways and Means Committee to ensure
that its authorization reflects both its own vision from 1993 and the
more recent demands of homeland security. Further, we ask your strong
advocacy within the Congress and before the Administration to ensure
that funding momentum is regained.
We also take this opportunity to commend CBP and the Department of
Homeland Security for its attentiveness to the trade community's
concerns as ACE is implemented. Through the format of the Trade Support
Network (TSN), the private sector and federal regulators together are
collaborating on a system that will achieve the objectives of both. The
TSN has proven to be a highly effective forum where listening to each
other's perspective promises to pay enormous dividends, through the
creation of an effective automated system that serves us both.
On the northern border of the United States, we are also witnessing
the transformation of programs to more security and risk-based
processes. We are strong supporters of these initiatives and cite FAST
(Fast and Secure Trade) and PAPS (Pre-Arrival Process System) as
examples of how homeland security need not impede movement of trade. In
fact, by working with business attaining highly secure and compliant
internal processes, that can provide required information in advance of
arrival, time at the border can be reduced while security is improved.
Programs such as these are a long way from full implementation and need
the support of the Committee. We believe that CBP should stay the
course in the development of programs such as these and ask for your
support of them also.
Mr. Chairman, the House Ways and Means Committee has been a
powerful ally in preserving the appropriate balance between commercial
operations and homeland security. We look forward to our continued work
with the committee and stand ready to assist wherever possible.
Again, I would like to thank the committee for the opportunity of
appearing here today and I would be happy to answer any questions.
Chairman CRANE. Thank you, Mr. Smith. Mr. Powell?
STATEMENT OF PETER H. POWELL, SR., CHIEF EXECUTIVE OFFICER,
C.H. POWELL COMPANY, WESTWOOD, MASSACHUSETTS, AND CHAIRMAN OF
THE BOARD, NATIONAL CUSTOMS BROKERS AND FORWARDERS ASSOCIATION
OF AMERICA
Mr. POWELL. Mr. Chairman and distinguished Members of this
Subcommittee, I am Peter Powell of the C.H. Powell Company in
Westwood, Massachusetts. I am also Chairman of the Board of
Directors of the National Customs Brokers and Forwarders
Association of America. It is a privilege to testify before
your Committee today on the Customs Authorization Act.
First, let me thank the Committee for its years of fine
service to the international trade community. We especially
commend you for your insistence that CBP maintain a balance
between its duties to protect the revenue, facilitate
commercial operations, and its new mandate to safeguard our
Nation's homeland security.
Let me first observe that every change in commercial
operations has its consequences, often at a very basic and
technical level. It is incumbent on CBP to understand those
nuances and then make balanced decisions. I can state
categorically that Customs has gone to extraordinary lengths to
understand our business processes. In the months after 9/11,
CBP has met continuously with the private sector and bent over
backward to solve difficult problems and logistics. Yet having
the right intentions and giving the trade community an
opportunity for effective input are only part of the equation.
The CBP is suffering from a crisis in resources. First, at
the very top of the agency, it is dramatically losing its best
management. Customs officials who fully understand the complex
world of international trade and transportation logistics, who
walk the docks and know the interlocking role that a multitude
of functions play in the successful clearance of merchandise,
are vanishing and this institutional wisdom is not being
replaced. Furthermore, CBP's allocation of manpower at the
ports now is focused preferentially on security, not commercial
operations. This loss of commercial orientation is symptomatic
of a shift that is proving very harmful to the smooth flow of
trade.
At this point, let me address CBP's program on security.
The agency has been very aggressive at instituting programs for
the private sector. The C-TPAT program is illustrative. Customs
saw that blending an amalgam of patriotism, good will, self-
interest, and influence into a partnership would more rapidly
achieve its security goals than any government mandate.
By creating best standards for supply chain security for
itself, the private sector set the bar so that it was
simultaneously demanding, yet realistic. It has been used
deftly by CBP as a carrot that cannot be ignored and must be
embraced, and it has avoided the appearance of being the stick
that would undermine the good faith features of its
participants' compliance. The program must remain voluntary.
It must also be recognized that only 7,200 trade entities
out of approximately 400,000 are involved with C-TPAT. Small,
periodic importers cannot be realistically included. Therefore,
this requires the involvement of intermediaries such as
ourselves in order that they are not disadvantaged merely
because of their size and limited transactions. Security will
depend on more programs in C-TPAT.
A relationship that has proven to be particularly
problematic falls beyond DHS's reach. It is the joint
implementation of the Public Health Security and Bioterrorism
Preparedness and Response Act of 2002 (P.L. 107-188) by CBP and
the U.S. Food and Drug Administration (FDA). For its part, CBP
have gone above and beyond. They have gone beyond the necessary
to ensure that BTA implementation would succeed. At the same
time, the act mandated a new role for the FDA which required
mission identification and implementation in perhaps an
unrealistic timeframe. The FDA has not, however, combined its
lack of experience with the appropriate willingness to work
with the trade to ensure the effective movement of
international commerce.
Yet the most forbidding challenge for reaching a balance
between the achievable and the necessary in homeland security
is the Congress itself. In the clamor for immediate results and
in the throes of a partisan election year, there is an
inclination in the Congress to establish requirements without
consultation, to demand action without concern for its effects
on trade, and to expect that somehow a silver bullet can be
found.
I believe that often achieving the right answers requires a
good faith discourse between the government and the private
sector and an evolution toward alternatives. Overly directive
congressional language mandating particular steps in the
commercial and regulatory process can be counterproductive. We
ask that your Committee, Mr. Chairman, take a lead advocacy
role in tempering the instinct of the others to legislate. Mr.
Chairman, this concludes my remarks. I would be more than happy
to answer any questions.
[The prepared statement of Mr. Powell follows:]
Statement of Peter H. Powell, Sr., Chief Executive Officer, C.H. Powell
Company, Westwood, Massachusetts
Mr. Chairman. I am Peter H. Powell, Sr. of the C.H. Powell Company
of Westwood, Massachusetts. I am also Chairman of the Board of
Directors of the National Customs Brokers and Forwarders Association of
America (NCBFAA). It is a privilege to testify before your committee
today on the subject of the FY2005-2006 Bureau of Customs and Border
Protection (CBP) Authorization Act.
First, let me thank the committee for its years of fine service to
the international trade community. We are pleased that you are holding
this hearing because it indicates your continuing and immediate role in
customs operations at CBP. We believe that, with the creation of the
Department of Homeland Security and the realignment of committee
jurisdictions in the Congress, there has been confusion and
apprehension within the private sector that the Ways and Means
Committee would have a reduced role in overseeing the agency. NCBFAA
strongly supports your continued and aggressive oversight. We commend
you for your insistence that CBP maintain a balance between its duties
to protect the revenue and facilitate commercial operations and its new
mandate to safeguard our nation's homeland security.
The Balance Between Security and Trade Facilitation
In fact, it is this balance that is the focus of my testimony
today. Together with my colleagues in the customs brokerage, freight
forwarding and NVOCC industries, I witness on a daily basis how well
the balance is drawn. Let me say from the start that we are fully
committed to doing everything that is necessary to protect the
homeland. Brokers, forwarders and NVOs signed up on Day One, for
example, to formulate the concept of C-TPAT (Customs-Trade Partnership
Against Terrorism) to enable the advance notification of inbound and
outbound shipments, and to provide our expertise as transportation
experts to government security efforts.
C.H. Powell Company is a full-fledged participant in Operation Safe
Commerce (OSC), a program which provides the foundation for testing
supply chain security, ``smart box'' containers, and uncovering the
gaps that undercut our commitment to defeat terrorism. As Chairman of
the Board of NCBFAA, I have served on two working subcommittees of the
government's Commercial Operations Advisory Committee (COAC), refining
the implementation of the 24-hour rule for maritime transportation and
developing standards for cargo container security.
Our industry has committed its time and resources to protecting
America from terrorism. At the same time, the cost of these measures
need not be to sacrifice time of movement and to create cost burdens on
shippers and consumers that they cannot afford. Every change in
commercial operations has its consequences, often at a very basic and
technical level. It is incumbent on CBP to understand those nuances and
then make balanced decisions.
A Crisis in Resources at CBP
I can state categorically that Customs has gone to extraordinary
lengths to understand our business processes. From the days immediately
following 9/11, this committee and others were instrumental in
legislating a balanced approach: protect the homeland but establish
clear principles for private sector input and consideration of the
demands of trade. The Trade Act of 2001 was an extraordinary
achievement in recognizing the tension that exists between security and
maintaining the engine of an economy that has made America the most
powerful economic force in the world. In the months after 9/11, CBP has
met with the private sector and bent over backward to solve difficult
problems in logistics. Recently, a group of four associations--the
World Shipping Council, the National Industrial Transportation League,
the Retail Industry Leaders Association, and the National Customs
Brokers and Forwarders Association--petitioned CBP to reverse its
position on the ``definition of a shipper'' and the information
required in advance of the arrival of maritime shipments. Our rationale
was compelling; CBP's answer was immediate and responsive.
Yet, having the right intentions and giving the trade community the
opportunity for effective input are only part of the equation. The
Bureau of Customs and Border Protection is suffering from a crisis in
resourcing. First, at the very top of the agency, it is dramatically
losing its best management. Years of experience in management at the
agency are retiring from CBP in droves, leaving temporary, transitional
and inexperienced executives in charge. Customs officials who fully
understand the complex world of international trade and transportation
logistics -- who walked the docks and know the interlocking role that a
multitude of functions play in the successful clearance of merchandise
-- are vanishing and this institutional wisdom is not being replaced.
Customs must again be the place that its employees treat as a career,
not as the first few items on a resume. Customs must rebuild its top-
level infrastructure.
Furthermore, the technical means to accomplish the tasks of
security and facilitation are not in place at the nation's ports. The
tools on the dock (such as the ``VACIS'' machines used for non-
intrusive inspections) are not available. One authority has said that a
container designated for inspection may wait in place for as long as
seven days before that inspection is conducted.
And, CBP's allocation of manpower at the ports now is focused
preferentially on security, not commercial operations. Personnel are
simply not available as commodity specialists for reviewing the
classification of merchandise. The term ``inspection'' now refers to
reviewing security, not ensuring the validity of entry data for the
collection of revenue. Inadequate resources and a lack of adequately
knowledgeable manpower have led to extremely poor communications in the
field. When anomalies are discovered, CBP staff cannot, or will not,
call the shipper or his broker to obtain the additional detail or more
complex data to effectively resolve the matter so that the cargo can be
cleared. This loss of commercial orientation is symptomatic of a shift
that is proving very harmful to the smooth flow of trade.
CBP's Security Programs
Let me also address CBP's programs on security. The agency has been
very aggressive at initiating positive programs for the private sector.
The Customs-Trade Partnership Against Terrorism (C-TPAT) is
illustrative. Approximately sixty days after 9/11, Customs convened a
gathering of approximately 100 leaders from the private sector to
evolve a voluntary program to reinforce the security of the supply
chain. Premised on the recognition that U.S. federal law had
limitations in reaching a supply chain that is substantially located
overseas, Customs saw that blending an amalgam of patriotism, goodwill,
self-interest and influence into a partnership would more rapidly
achieve its security goals than any government mandate. By creating
``best standards'' for supply chain security for itself, the private
sector set the bar so that it was simultaneously demanding yet
realistic.
The trade community signed on to C-TPAT in overwhelming numbers and
it has become the ``gold standard'' for international trade. Simply
put, if CBP targeting systems positively recognize C-TPAT membership,
everyone in the supply chain values doing business with those similarly
recognized. But, let there be no mistake. C-TPAT cannot become the
judas goat for a government regulatory program. It has succeeded
because it is a voluntary, self-imposed discipline on the supply chain.
It has both commercial and security advantages. It has been used deftly
by CBP as a ``carrot'' that cannot be ignored and must be embraced.
And, with CBP assessment program, it has avoided the appearance of
being the ``stick'' that would undermine the good faith features of its
participants' compliance.
At the same time, it must be recognized that only 7,200 importers
out of approximately 400,000 can be involved in C-TPAT. Small, periodic
importers cannot be realistically included; therefore coverage of these
entities requires the involvement of intermediaries such as those
within NCBFAA in order that they are not disadvantaged merely because
of their size and limited transactions. Yet, it is the single, sporadic
container that poses a greater threat than that of a high-volume C-TPAT
member. Security will depend on more programs than C-TPAT, programs
that complement each other as they reduce risk and increase the
government's ability to intercept the one container that could
devastate our country.
Accompanying programs like C-TPAT are also other Department of
Homeland Security agency programs that often prove duplicative,
overreaching or at cross-purposes. Container security initiatives, for
example, have emerged from multiple DHS agencies, often with CBP
leading the way to the consternation of its fellow agencies. Presently,
CBP is fielding its ``smart box'' initiative, a full year after its on-
again, off-again disinterest and then involvement with DOT/TSA's
Container Security Group. The private sector has quite appropriately
asked itself if all of these separate initiatives would ever be
reconciled. Of late however, DHS has responded to its role as
integrator of cargo security programs and done an extremely effective
job. Recently, in creating its MTSA (Maritime Transportation Security
Act) subcommittee of the COAC, in bringing together resources at the
departmental and agency levels, and in convening broad representation
from the commercial community, DHS has proven itself to be on-track for
resolving our misgivings.
CBP and the FDA: Implementing the Bioterrorism Act
A relationship that has proven to be particularly problematic falls
beyond DHS' reach: it is the joint implementation of the Bioterrorism
Act by CBP and the Food and Drug Administration (FDA). For its part,
the Bureau of Customs and Border Protection have gone ``above and
beyond'' the necessary to ensure that BTA implementation would succeed.
At the same time, BTA mandated a new mission for FDA which required
mission identification and implementation in perhaps an unrealistic
timeframe. It has not however combined this lack of experience with the
appropriate willingness to work to ensure the effective movement of
international commerce.
An example of late has been a crisis at the Northern Border.
Customs antiquated Automated Commercial System (ACS) went ``down'' for
several days, which in turn meant that the BTA's prior notice
requirements were not processed, even though they had been filed by
shippers. FDA's answer was not to take extraordinary steps to solve the
problem created by 5-mile border backups involving often perishable
merchandise, but instead to take a doctrinaire enforcement approach
that required a second, duplicate filing of prior notices, at
substantial cost in time and resources to an already beleaguered
industry.
The relationship between CBP, the agency more experienced in the
details of border processing, and the FDA appears to be at best
``tentative'' to trade community observers.
Congress and Homeland Security
Yet, the most forbidding challenge for reaching a balance between
the achievable and the necessary in homeland security is the Congress
itself. In the clamor for immediate results and in the throes of a
partisan election year, there is an inclination in the Congress to
establish requirements without consultation, to demand action without
concern for its effects on trade, and to expect that somehow a ``silver
bullet'' can be found.
A recent report issued by the Los Alamos National Laboratory
illustrates the folly of this approach. For every measure there is a
countermeasure that can defeat a security technology. As the security
agencies jump through hoops to meet demands for a fool-proof security
device--no matter what the cost to the shipping public, the Los Alamos
reports shows how the most sophisticated measures can be defeated by a
well-financed, technologically-educated terrorist organization.
It is my view that a successful approach to homeland security will
be years in development and that we have to be prepared to move
incrementally towards solutions. To some extent, this will of necessity
be trial-and-error. It will depend on a highly focused, problem-solving
approach by government and the private sector, acting in partnership.
It will depend on each relying on the good faith of the other in order
to solve problems and reach objectives.
Examples of late to Congressional demands for immediate solutions
are port security legislative provisions introduced in both Houses of
the Congress. One such provision would create a $5000 fine for a
shipper's failure to move uncleared merchandise from the dock after 5
days (presently the requirement is 15 days). The provision further
provides that this merchandise must be inspected and entered into
general order warehousing if it remains on the dock after that time.
The provision ignores such facts as: goods ordered inspected by CBP
cannot be moved; inspections often take 7 days to occur; a work
stoppage can exceed this timeframe; movement to GO by truck can take
another 7 days to occur; and there already exist enormous financial
disincentives (e.g., demurrage) to leaving merchandise in place. It is
merely a simplistic approach to reducing congestion and learning about
the contents of a container. It would come at the expense of a party
not in a position to provide a solution. Legislation such as this must
be resisted at all costs by those most familiar with the operation of
trade and its value to the nation.
An example of the opposite phenomenon has been CBP's evolution in
understanding the data that is necessary for effective security risk
assessment. When this committee passed the Trade Act of 2001, Congress
met the demands of CBP for using manifest data in order to conduct its
targeting. While the trade community has always believed that effective
targeting required more extensive information than could be provided by
the manifest and that this document (a long-standing commercial
document) should not be expanded exclusively for this purpose, Customs
deemed the manifest a convenient. means to acquire data that was
available immediately. Since then the private sector has continued to
press this point and Customs now agrees that alternate means need to be
developed to provide more extensive security data. NCBFAA is pleased
with CBP's latest proposal. Entry data would now be submitted 24-hours
prior to arrival of the merchandise in exchange for acknowledgement of
this cooperation through the Automated Targeting System (ATS). Customs
will also explore the means to acquire commercial data even earlier.
For its part, NCBFAA has proposed a ``chain of security'' data flow
that would provide data at the point of container stuffing overseas. We
have suggested the submission of purchase order data evolving to a
``custody data set.''
I believe that, often, achieving the right answers requires this
discourse and an evolution towards alternatives. Overly directive
Congressional language mandating particular steps in the commercial and
regulatory process can be counterproductive. We ask that your
committee, Mr. Chairman, take a lead advocacy role in tempering the
instinct of others to legislate.
* * *
Mr. Chairman, this concludes my remarks. As I said at the onset, we
are grateful for this opportunity to share our views.
Chairman CRANE. Thank you, Mr. Powell. Ms. Kelley?
STATEMENT OF COLLEEN M. KELLEY, NATIONAL PRESIDENT, NATIONAL
TREASURY EMPLOYEES UNION
Ms. KELLEY. Thank you, Chairman Crane, Mr. Jefferson, and
Mr. Becerra. On behalf of the more than 150,000 Federal
employees represented by NTEU, more than 15,000 of whom work in
CBP, I thank you very much for the opportunity to share our
views with you on H.R. 4418, the Customs and Border Security
Act.
This act authorizes appropriations for 2005 and 2006 for
CBP at the level requested in the President's budget proposal,
$6.2 billion for 2005 and $6.4 billion for 2006. While these
figures are more than the CBP budget for 2004, these funding
levels include the bare minimum for long-term CBP commitments
such as ACE, C-TPAT, CSI, and the U.S. VISIT program, as well
as for additional hiring.
For the current fiscal year, three important issues
affecting CBP personnel have come to the forefront. They are
the reduction in the overtime cap for legacy Customs personnel,
and for new CBP officers, the current hiring freeze announced
by DHS and the lack of pay for employees who are working a
sixth day when they are training at Federal Law Enforcement
Training Center (FLETC).
For the past several years, the annual appropriations bills
have specifically amended the Customs Officer Pay Reform Act
(COPRA) (1911, 36 Stat, 901) to provide for a $30,000 overtime
cap for legacy Customs employees. Unfortunately, the fiscal
year 2004 appropriation, while stating that all CBP officers
will have a $30,000 overtime cap, does not contain the specific
amendment to COPRA and, therefore, it has had the unintended
effect of reinstituting a $25,000 cap for only those employees
who are currently covered by COPRA, who are legacy Customs
employees and the new CBP officers. The NTEU hopes that
Commissioner Bonner, working closely with NTEU and the Members
of this Subcommittee, can fix this situation before the end of
fiscal year 2004.
A second issue of concern for CBP personnel is DHS's
announcement of a hiring freeze for the remainder of fiscal
year 2004 because the agency says they are fully staffed. While
NTEU acknowledges the recent increase in hiring at CBP, we are
also aware of the unfulfilled promises of the USA PATRIOT Act
(P.L. 107-56) that called for a tripling of staffing on the
Northern border. As of October 2003, there were 1,589 legacy
Customs inspectors on the Northern border, only half of the
3,177 required by the PATRIOT Act.
The third personnel issue is the lack of pay for FLETC
training. On January 1, 2002, at the request of FLETC, the
legacy U.S. Customs Service implemented a 6-day-a-week training
program for all Customs officers. Unfortunately, the legacy
U.S. Customs Service and now CBP have refused to compensate
legacy Customs officers for the sixth day of the week that they
are in training at FLETC, while employees from INS, the Border
Patrol, and other bureaus receive overtime pay for that sixth
day. Legacy Customs officers and the new CBP officers receive
no pay, neither straight time nor overtime, for their work on
the sixth day of the training week. I ask the Committee to work
with DHS and with CBP to immediately correct this.
With respect to the Committee's ongoing questions about
whether trade functions are being given sufficient priority
within CBP, NTEU shares the Committee's concerns. The Homeland
Security Act of 2002 (P.L. 107-296) included provisions to
ensure that the trade functions of the legacy Customs Service
remain a priority within DHS.
Unfortunately, the number of import specialists around the
country who enforce the statutory, regulatory, and treaty
requirements of CBP and other Federal and State agencies by
determining admissibility of merchandise and other goods into
the United States continues to decrease, from approximately
1,086 full-time positions in 1999 to only 892 positions as of
September of 2003, and that is according to a U.S. government
Accountability Office report.
Because of the rapidly growing volume of trade coming into
the United States and the limited resources for trade
facilitation and enforcement, CBP has been relying more on
targeting processes than actual physical inspections by
inspectors or import specialists to detect trade violations for
shipments, thereby increasing the chance for potential trade
violations on imported products.
The ``One Face at the Border'' initiative that was recently
announced by Secretary Tom Ridge is of great concern to
employees, also. The NTEU believes that combining the border
protection responsibilities that were previously held by three
highly skilled specialists into one super-inspector position
raises serious concerns. Each of the job responsibilities from
the three legacy inspector agencies is highly specialized and
distinct, including trade facilitation and enforcement.
Prior to the creation of the CBP officer position, legacy
Customs inspectors received between 9 and 12 weeks of training
just on the Customs Service rules and regulations. Now, the new
CBP officer will receive about 14 weeks of training on all port
and border agency regulations, and they will be responsible for
knowing the specialized work of Customs, INS, and the U.S.
Department of Agriculture.
Currently, Customs and INS inspectors are cross-trained to
the most basic, primary inspection work for entry into the
United States. However, today, if a U.S. Customs legacy
inspector is faced with a complicated INS visa at a primary
inspection station, they have the ability to send the passenger
to a more intensive secondary inspection where an experienced
legacy INS inspector can make a determination as to the
validity of a visa.
It is unclear whether experts in INS issues or Customs
issues will continue to be readily available for these
secondary inspection once the ``One Face at the Border'' and
the super-inspector position, or the CBP officer position, as
it is called, is fully put in place, and that will take about a
year to a year and a half to happen. The NTEU feels strongly
that if the border initiatives such as U.S. VISIT are to be
successful, specific expertise must be maintained among the CBP
officers' ranks as it relates to Customs and INS regulations.
The more than 15,000 Customs employees represented by NTEU
are committed to the varied missions of DHS and CBP, from
protecting our country's ports and borders to drug
interdiction, to trade facilitation in and out of the United
States, and on their behalf, I thank you very much for the
opportunity to appear before you today.
[The prepared statement of Ms. Kelley follows:]
Statement of Colleen Kelley, National President, National Treasury
Employees Union
Chairman Crane, Ranking Member Levin and Members of the
Subcommittee, my name is Colleen M. Kelley, and I am the National
President of the National Treasury Employees Union (NTEU). On behalf of
more than 150,000 federal employees represented by NTEU, almost 13,000
of whom work for Bureau of Customs and Border Protection (CBP)
stationed at 317 ports of entry across the United States, I would like
to thank you for this opportunity to present our Union's views on H.R.
4418, ``The Customs and Border Security Act of 2004''. This legislation
would authorize appropriations for CBP for FY 2005 and FY 2006 at the
level's requested by the President's budget. NTEU is particularly
interested in provisions of the legislation which would affect legacy
customs inspectors, canine enforcement officers and import specialists,
who are responsible for ensuring compliance with import laws and
regulations for over 40 federal agencies, as well as stemming the flow
of illegal contraband such as child pornography, illegal arms, weapons
of mass destruction and laundered money.
In 2003, legacy CBP employees seized over 2.2 million pounds of
cocaine, heroin, marijuana and other illegal narcotics. Customs and
Border Protection Officers also processed over 412 million travelers
last year, including over 1 million cars and trucks. These numbers
continue to grow annually. Over the last decade trade has increased by
137%. Legacy U.S. Customs Service personnel facilitate more trade, and
interdict more drugs than any other agency within the Customs and
Border Protection Bureau. The legacy Customs Service collects over $23
billion in revenue on over 26 million entries involving over $1.2
trillion in international trade every year. The CBP also provides the
federal government with its second largest source of revenue. Last
year, the CBP deposited over $24.7 billion into the U.S. Treasury.
FY 2005 Customs and Border Protection (CBP) Budget:
The Administration has requested a funding level for the CBP of
$6.2 billion for fiscal year 2005. While this figure is $171 million
more than the budget for Fiscal Year 2004 it only includes the bare
minimum for long-term CBP commitments such as the Automated Commercial
Environment, new and more aggressive trade and border security
enforcement efforts and additional hiring.
While NTEU fully supports increased authorization of funds for the
Customs Service, no increase in funds will actually be available to
Customs without increased appropriations. The discretionary spending
caps in the House Budget Resolution will make increased appropriations
extremely difficult, if not impossible, to achieve as was made clear
during the recent House Appropriations Committee mark up the FY 2005
Homeland Security Appropriations bill. The mark included $6.6 billion
for CBP in FY2005, a $422 million increase over the President's
request, again this is a good first step for FY 2005, unfortunately,
the President's request for the CBP represents a token increase from
last year's appropriations for all of the agencies transferred into the
CBP. NTEU believes that this recommendation is simply inadequate to
meet the needs of Customs and other border security personnel,
especially in light of their additional homeland security missions such
as the Customs Trade Partnership Against Terrorism (C-TPAT), the
Container Security Initiative (CSI), U.S. VISIT and the 24-Hour Rule
that requires advanced transmission of accurate cargo manifest
information to the CBP.
Three important issues for DHS personnel in FY 2004 are the current
``hiring freeze'' being instituted by DHS, the reduction in the
overtime cap for legacy Customs personnel and new CBP officers and the
non payment for working a sixth day of training at FLETC.
Overtime Cap:
With the consolidation of legacy Customs, INS and APHIS inspectors
into a single front-line border security position, an issue that needs
to be addressed immediately by this subcommittee is the correction of
the overtime cap language for all CBP employees. When legacy Customs
employees joined together last March to form the Bureau of Customs and
Border Protection, the Department and Congress realized the differences
in overtime systems between the various border agencies. Unfortunately,
the FY 2004 DHS Appropriations bill included a provision that, while
intending to provide greater consistency in overtime earnings among the
front line CBP workforce, has instead created additional problems for
the CBP workforce, more specifically, legacy Customs personnel and the
new CBP officers.
Specifically, the FY 2004 DHS Appropriations bill states that all
CBP employees are subject to a $30,000 annual overtime cap However, for
the past several years, the annual appropriations bills specifically
amended COPRA to provide for an increase to $30,000 as an overtime cap.
Unfortunately, this year's (FY 2004) appropriation does not contain
this amendment and has had the unintended effect of re-instituting a
$25,000 cap for only those employees currently covered by COPRA (legacy
Customs personnel and the new CBP officers).
Commissioner Bonner is well aware of this problem, as he indicated
in a November 2003 Commissioner's message to all CBP employees stating
that, ``we believe that this disparity was not intentional and we have
begun to take all necessary steps to correct it through the proper
channels. At my direction, the CBP Office of Congressional Affairs is
now working with the Department to address this inconsistency through a
legislative correction.'' NTEU hopes that the Commissioner, working
closely with NTEU and the members of this subcommittee, can fix this
situation for legacy Customs employees and new CBP officers before the
end of FY 2004.
This situation has become even more acute due to the fact that CBP
has proposed regulations to make COPRA the sole overtime and premium
pay system for all CBP officers and Agriculture Specialists. It is
anticipated that the entire CBP inspectional workforce will be
transferred under COPRA by July 25, 2004, thereby putting the entire
CBP inspectional workforce under the $25,000 cap mandated by the FY
2004 Homeland Security Appropriations bill.
Hiring Freeze:
An additional issue that has come to the forefront this year is the
fact that in March 2004, DHS put a hold on hiring any additional CBP
personnel because an accounting review showed that CBP and ICE might
possibly exceed their FY 2004 budgets by more than $1 billion.
Fortunately, the funding deficit was a result of combining the various
border security budgets and no huge funding deficits will materialize.
However, DHS has announced that despite the budget clarification,
it will not be hiring any additional CBP personnel for the remainder of
FY 2004 because the agencies involved with border security are ``fully
staffed.'' While NTEU acknowledges the recent increase in hiring at
CBP, NTEU also is aware of the unfulfilled provisions of the Patriot
Act that called for a tripling of staffing on the Northern Border.
Figures provided by DHS show that as of October 2003 there were 1,589
legacy Customs inspectors on the Northern Border, only half of the
required 3,177 required by the Patriot Act. NTEU would strongly
encourage the committee to provide full authorization to hire the
additional 1,588 Northern Border security personnel required by the
Patriot Act and currently missing from the Northern Border.
Pay for FLETC Training:
On January 1, 2002, at the request of the Federal Law Enforcement
Training Center (FLETC), the legacy U.S. Customs Service implemented a
six-day a week training schedule for all basic training courses for
Customs officers in order to accommodate the higher volume of employees
being sent to FLETC as a result of the events of September 11.
Unfortunately, as a result of the six-day a week basic training
schedule, the legacy U.S Customs Service, and now the Bureau of Customs
and Border Protection (CBP) have refused to compensate legacy customs
officers and the new CBP officers for their sixth day of basic training
at FLETC. Legacy Customs officers and the new CBP officers receive no
pay, either ``straight time'' or overtime pay for their work on the
sixth day of basic training. While there may be disagreement as to what
overtime system may be appropriate, it is outrageous that these
employees are required to work one day a week for no pay at all.
This inequity has become even more egregious for legacy Customs
inspectors due to a recent decision of the Bureau of Immigration and
Customs Enforcement (BICE), that authorized the retroactive payment of
FLSA overtime to legacy immigration inspectors who, like legacy Customs
officers had been assigned to a six-day workweek while attending their
basic training at FLETC since January 1, 2002. Again, by forcing
hundreds of newly trained legacy Customs inspectors and new CBP
officers to work a sixth day without any compensation while their
legacy INS counterparts receive FLSA overtime is certain to hinder the
esprit-de-corps and development of the Department of Homeland
Security's ``One Face at the Border Initiative'' which has merged the
legacy Customs and INS inspectional workforces into one border security
position within DHS. The committee needs to work closely with DHS and
the CBP bureau to immediately correct this training pay inequity for
legacy Customs employees and the new CBP officers.
CBP Trade Personnel:
The Homeland Security Act (HSA) of 2002 included provisions to
ensure that the trade functions of the legacy Customs Service remain a
priority within DHS whose primary mission has now become homeland
security. Section 412 of the HSA clearly states that, ``the Secretary
of Homeland Security may not consolidate, discontinue, or diminish,
reduce the staffing level, or reduce the resources attributable,'' to
customs revenue (trade) functions performed by employees such import
specialists, entry specialists, drawback specialists to name a few.
Unfortunately, the number of import specialists around the country
continues to decrease from approximately 1086 full time positions in
1999 to approximately 892 positions as of September 2003 according to a
GAO report (GAO-04-345). The decrease in the number of import
specialists has had an adverse impact on a number of legacy Customs
trade compliance areas such as textile transshipments. Illegal textile
transshipment is one form of illegal import activity that occurs when
false ``country-of-origin'' information is provided for imported goods
in order to evade U.S. textile quotas and customs duties.
As CBP has shifted its resources and mission priorities to the
anti-terrorism and drug interdiction, import specialists' ability to
properly enforce the trade regulations for goods, such as textile
imports, has markedly decreased. Because of the rapidly growing volume
of trade coming into the United States and the limited resources for
enforcement and additional staffing, CBP has been relying more on
targeting processes than actual physical inspections by inspectors or
import specialists to detect trade violations for shipments such as
textiles, thereby increasing the chance for potential trade violations
on products such as textiles.
Another issue involving CBP trade personnel, such as import
specialists, is the fact the journeyman grade of import specialists has
remained at a GS-11. This, despite the fact that most import
specialists across the country regularly do higher graded work in the
course of their daily duties as their position has evolved from one
that was more transaction-based to one that is account-based which
requires more specialized knowledge and experience of particular
industries such as agriculture, automotive, communications, textile and
steel to properly enforce the complex trade rules accompanying each
industry.
It is unfortunate that CBP continues to refuse to properly
compensate import specialists for their invaluable work on behalf of
the Department and the trade community. NTEU strongly urges the
committee to increase the journeyman grade for CBP import specialists
to GS-12. The upgrade has been long overdue and would show the trade
personnel within CBP that Congress recognizes the high level of
expertise that all import specialists possess.
One Face at the Border:
As the subcommittee is aware, on September 2, 2003, Secretary Tom
Ridge announced the creation of a new CBP officer position and the
``One Face at the Border'' initiative. Under this plan, a new position,
the Customs and Border Protection Officer (CBPO) would combine the
duties of legacy inspectors from Customs, INS and APHIS into a single
front-line border security position at the 317 official ports-of-entry
across the United States.
NTEU believes that combining the border protection responsibilities
that were held by three highly-skilled specialists into a ``super
inspector'' raises some serious concerns. Each of the job
responsibilities from the three legacy inspection agencies is highly
specialized and distinct. By utilizing one employee to perform all
three primary and secondary inspection functions, will the agency lose
the expertise that has made the United States border inspection
personnel second to none?
NTEU believes that the CBP officer position was created with the
assumption that the basic skill sets for legacy Customs and INS
inspectors are similar and NTEU would have to agree with this statement
as far as primary inspection is concerned. However, it is in secondary
inspections where expertise is needed. It is in secondary inspections
where legacy Customs and INS experts ``drill down'' to seek the facts
they have been trained to find.
CBP Officer Training under the One Face at the Border initiative:
Prior to the creation of the CBP officer position, legacy Customs
inspectors received 9 to 12 weeks of intensive basic training on
Customs Service rules and regulations alone. Now, the new CBP officer
will receive only 14 weeks of training for all Customs, INS, and APHIS
rules and regulations. Under the new CBP officer training guidelines,
legacy inspectors currently on the border will be transitioning into
the new position in the summer of this year by way of classroom
training, CD-ROM computer teaching and on-the-job training. While the
new training will lead to a broader knowledge of the INS, Customs and
APHIS rules and regulations of entry for passengers and goods entering
the United States, there is a concern as to whether it will provide the
specialized expertise necessary to ensure the successful accomplishment
of the critical missions of the Department of Homeland Security.
Another aspect of the ``One Face at the Border'' initiative that
needs more thorough scrutiny is the lack of details with regard to the
secondary inspection process at ports of entry. Currently, legacy
Customs and INS inspectors are ``cross-trained'' as to the most basic
Customs and INS procedures for entry into the U.S. for passengers and
goods. However, if a legacy Customs inspector is faced with a
complicated visa entry situation at an airport or land border primary
inspection station they have the ability to send the passenger to a
more intensive secondary inspection where an experienced legacy INS
inspector can make a determination as to the validity of a particular
visa. It is unclear whether experts in visa issues or other specific
Customs and INS border protection matters will continue to be readily
available for secondary inspection. This issue is even more urgent in
light of the fact that on January 5, 2004, DHS rolled out its new
entry/exit visa processing system known as U.S. VISIT. Operating at 115
airports and 14 seaports across the country, and eventually expanding
to the 50 largest land border ports of entry by the end of 2004, U.S.
VISIT is currently being manned by only legacy INS inspectors because
legacy Customs inspectors do not have the on the job experience to
thoroughly determine the validity of a particular visa or passport.
NTEU feels strongly that if border initiatives such as U.S. VISIT are
to be successful, specific expertise must be maintained among the CBP
officer ranks as it relates to Customs and INS regulations.
COBRA:
As this committee is well aware, in addition to annual
appropriations, the legacy Customs Service also receives funds from a
user fee account known as the COBRA account. This user fee account
funds all inspectors' and canine enforcement officers' overtime pay as
well as approximately 1300 legacy Customs positions across the country.
The COBRA account is funded with user fees collected from air and sea
passengers entering the United States (except from the Caribbean and
Mexico), commercial vehicles, commercial vessels/barges and rail cars.
The COBRA account's reauthorization was included as part of HR 2896,
marked up by this committee in 2003, and most recently as part of HR
4520, that would extend the COBRA user fees until September 30, 2014.
The COBRA fund must continue to be reauthorized or Congress must
appropriate additional funds to make up for the loss of the user fees
in the future. NTEU strongly urges the committee's reauthorization of
COBRA to ensure that COBRA fees used to pay for legacy Customs
inspectors and inspectors overtime remain available to CBP.
Law Enforcement Officer Status:
Legislative action that would help to ensure the retention of
legacy Customs and other CBP personnel would include granting law
enforcement status for legacy Customs Inspectors, Canine Enforcement
Officers and other border security personnel in the CBP. For example,
legacy Customs Service Inspectors and Canine Enforcement Officers
continue to be the nation's first line of defense against terrorism and
the smuggling of illegal drugs and contraband at our borders and in our
ports. Legacy Customs Service Inspectors have the authority to
apprehend and detain those engaged in terrorism, drug smuggling and
violations of other civil and criminal laws. Canine Enforcement
Officers and Inspectors carry weapons, and at least three times a year
they must qualify and maintain proficiency on a firearm range. Yet,
they do not have law enforcement officer status. They are being denied
the benefits given to other federal employees who they have been
working beside to keep our country safe. Legacy Customs employees face
real dangers on a daily basis, granting them law enforcement officer
status would be an appropriate and long overdue step in recognizing and
retaining the Customs personnel who continue to protect our borders
from terrorism and drugs. There currently is a bill before the House,
HR 2442, which would grant law enforcement status to CBP personnel.
Representative Filner introduced this bill and it currently has 156
cosponsors. I would ask the members of this subcommittee to cosponsor
this very important legislation.
Conclusion:
Each year, with trade and travel increasing at astounding rates,
CBP personnel have been asked to do more work with fewer personnel and
resources. The more than 13,000 Customs employees represented by the
NTEU are capable and committed to the varied missions of DHS from
border control to the facilitation of trade into and out of the United
States. They are proud of their part in keeping our country free from
terrorism, our neighborhoods safe from drugs and our economy safe from
illegal trade. These men and women are deserving of more resources and
technology to perform their jobs better and more efficiently.
I applaud this Subcommittee for recognizing the twenty-first
century needs of the Bureau of Customs and Border Protection and I urge
each of you to visit the CBP ports in your home districts. Talk to the
inspectors, canine officers, and import specialists there to fully
comprehend the jobs they do and what their work lives are like. Thank
you for the opportunity to be here today on behalf of the Customs and
Border Protection employees to discuss these very important issues.
Chairman CRANE. Thank you, Ms. Kelley. Ms. Saathoff?
STATEMENT OF PHYLLIS SAATHOFF, PRESIDENT, NATIONAL ASSOCIATION
OF FOREIGN-TRADE ZONES, AND MANAGING DIRECTOR, PORT FREEPORT,
FREEPORT, TEXAS
Ms. SAATHOFF. Thank you, Chairman Crane and Members of the
Committee, for holding this important hearing and for inviting
me to testify before the Subcommittee on Trade. My name is
Phyllis Saathoff. I am Managing Director for Port Freeport in
Freeport, Texas, and President of NAFTZ.
I appreciate the opportunity to discuss budget
authorizations for Customs for fiscal years 2005 and 2006 and
related trade issues and how these issues affect the Members of
NAFTZ and the U.S. Foreign-Trade Zones program. The NAFTZ is a
nonprofit association representing more than 800 Members,
comprised of State and local government agencies, public
entities, individuals, and corporations involved in the
Foreign-Trade Zones program. The Foreign-Trade Zones program
encourages domestic warehousing, manufacturing, and processing
activity.
Today, there are 260 approved general purpose zones and 534
sub-zones located in all 50 States and Puerto Rico. The total
value of merchandise received at Foreign-Trade Zones annually
exceeds $200 billion. Over 2,200 firms utilize the Foreign-
Trade Zones program, employing more than 300,000 people.
The Foreign-Trade Zone program creates an interdependent
relationship or partnership between CBP in zones. The Foreign-
Trade Zones program facilitates the use of Customs services and
simplifies the process, while at the same time providing the
opportunity for Customs to exercise a higher degree of
oversight than occurs with normal imports.
There are several clear examples of the partnership. In
1980, the Customs headquarters and NAFTZ published the first
detailed explanatory manual on Customs matters for Foreign-
Trade Zones, which has since been updated through periodic
mutual consultations. This successful collaboration on the
Customs manual led to joint NAFTZ-Customs training programs for
Customs officers. Unfortunately, these joint training sessions
are currently suspended because of limited resources within
CBP. We urge funding be restored for this important training.
In fact, in the next few years, we see the need for an expanded
program, since many senior Customs officials are eligible for
retirement and new individuals will be hired.
The NAFTZ believes that the budget authorizations for
Customs for fiscal year 2005 and 2006 need to be approved at
the level requested in the President's budget proposal.
Adequate funding is critical to maintaining the balance between
the trade and security functions of CBP. We are concerned about
possible budget shortfalls this year, as we have been disturbed
by the recent cutback in nonessential costs and the freeze in
hiring. It is most important that the more than 300 Customs
ports of entry have necessary staffing to support the rapidly
increasing levels of imports.
The security of our borders and ports, their local
communities, the personnel employed there, and the immense
volume of trade and economic activity that flows through them
is of critical interest to NAFTZ. The NAFTZ believes that
existing Foreign-Trade Zones security requirements complement
the requirements of C-TPAT and supports the continued
development and expanded access of the C-TPAT program for
Foreign-Trade Zones, which already require strict security
standards enforced by Customs.
While the program attracted a large number of applicants,
we realize that the validation process has been slow and that
the promised security as well as trade benefits of C-TPAT have
been retarded by the budget freeze. The $15.2 million requested
in the CBP budget for additional supply chain security officers
should bring C-TPAT participants closer to receiving the full
benefits of the program. The NAFTZ has worked closely with
Customs efforts on the ACE design and implementation process.
The success of ACE is a high priority for NAFTZ. The automation
of the Foreign-Trade Zone interface with Customs has been a
longstanding shared goal for both of us, but it has never
materialized.
From a security standpoint, our Member companies typically
have long-established and documented relationships with Customs
and their record of behavior is well known and predictable and
carry a lower risk profile than lesser-known importers and
exporters. The reduced documentation and automation burden
provides Customs the ability to shift time and energy from
Foreign-Trade Zone activity to other standard import and export
firms. We have been told that the ACE implementation schedule
Release 6 will include necessary functionality for Foreign-
Trade Zones. The NAFTZ actively supports this timely
development.
The NAFTZ has worked closely with Customs headquarters on a
wide variety of outstanding Customs zone management issues. We
are currently working with Customs headquarters on certain
limited updates and clarifications to the operating procedures
and regulations concerning origin declarations on estimated
entries, filing of multiple weekly entries, as well as issues
related to weekly entry zone-to-zone transfers and exports
authorized by the Trade and Development Act of 2000.
Significant progress has been made in working through these
regulatory issues.
In summary, NAFTZ is deeply concerned about the possibility
of long-term hiring freezes and staff shortages and delay in
important Customs programs, such as the scheduled
implementation of ACE and C-TPAT, if adequate budgets are not
provided. We urge that the budget authorizations for CBP meet
or exceed the President's budget for fiscal year 2005. We must
have safe and secure borders and we must have efficient, cost
effective, predictable movement of commerce in and out of the
United States. Thank you for the opportunity to testify.
[The prepared statement of Ms. Saathoff follows:]
Statement of Phyllis Saathoff, President, National Association of
Foreign-Trade Zones, and Managing Director of Port Freeport, Freeport,
Texas
Thank you, Chairman Crane, and Members of the Committee for holding
this important hearing and for inviting me to testify before the
Subcommittee on Trade. My name is Phyllis Saathoff. I am the Managing
Director of Port Freeport (Foreign Trade Zone No. 149) in Freeport,
Texas and President of the National Association of Foreign-Trade Zones
(NAFTZ). I welcome the opportunity to discuss budget authorizations for
Customs for FY 2005 and FY 2006 and related trade issues, and how these
issues affect NAFTZ members and the U.S. Foreign Trade Zones program.
The NAFTZ is a non-profit trade association representing over 800
members comprised of State and local government agencies, public
entities, individuals and corporations involved in the Foreign-Trade
Zones program. The NAFTZ plays an important role in facilitating
international trade and US competitiveness through the promotion and
support of the Foreign Trade Zones program
The Foreign-Trade Zones program was created by an act of Congress
in 1934. Its purpose is to encourage domestic warehousing,
manufacturing and processing activity. States and local governments use
foreign-trade zones as part of their overall economic development
strategy and to improve the international business sector in their
communities. In this way, FTZs contribute to the enhancement of the
U.S. investment climate for commerce and industry. The FTZ program
encourages capital investment in the U.S. rather than abroad and
secures American jobs. The benefit occurs only if the activity takes
place in the U.S. It substitutes U.S. produced merchandise and labor
for foreign imports. Today there are 260 approved general-purpose zones
and 534 subzones located in all 50 states and Puerto Rico. According to
the latest available annual report of the Foreign-Trade Zones Board,
the total value of merchandise received at foreign-trade zones annually
exceeds $200 billion. Over 2,200 firms in the U.S. utilize foreign-
trade zones and employment at these facilities exceeds 300,000.
It is not generally understood that the FTZ program creates an
interdependent relationship, or partnership, between CBP and zones. The
Foreign-Trade Zone program facilitates the use of Customs services and
simplifies the process, while at the same time providing the
opportunity for Customs to exercise a higher degree of oversight than
normal imports. This partnership has grown naturally, and connects
zones with not only Customs Headquarters, but with the former Regions
and Districts, as well as the Ports nationwide.
There are several clear examples of the partnership. In 1980,
Customs Headquarters and the NAFTZ published the first detailed
explanatory Manual on Customs matters on any topic for foreign-trade
zones. The Manual has been updated through periodic mutual
consultations since then, and is now available in an on-line version.
It is a very good example of the public and private cooperation, of
Customs and the NAFTZ developing an important reference work that can
be used both by the import and export community and by Customs.
This successful collaboration on the Customs Manual led to a joint
NAFTZ-Customs effort to develop a joint training program for Customs
officers. Initially, training occurred at NAFTZ Seminars and
Conventions. Eventually, the training moved to the Customs Training
Center in Glynco, Georgia. Literally thousands of Customs employees
have been trained jointly by Customs and the NAFTZ in the intricacies
of the Foreign-Trade Zone program. Unfortunately, these joint training
sessions are currently suspended because of limited resources within
CBP. It is hoped that we will be able to restore funding for this
important training. In the next few years, in fact, we see the need for
an expanded program since many senior Customs officials are eligible
for retirement and new individuals hired by Customs to replace them are
likely to have little knowledge of the intricacies of the Foreign-Trade
Zone program.
There is also a long history of regulatory cooperation between FTZs
and Customs, which I will briefly discuss later in the testimony
Customs Budget Authorization
The NAFTZ believes that the budget authorizations for Customs for
FY 2005 and FY 2006 need to be approved at the level requested in the
President's budget proposal. Adequate funding is critical to
maintaining the balance between the trade and security functions of
CBP. We are concerned about possible budget shortfalls this year, as we
have been disturbed by the recent cutback in nonessential costs and the
freeze in hiring. It is most important that the more than 300 Customs
Ports have necessary staffing to support the rapidly increasing levels
of imports.
Our members are also beginning to focus on proposals for FY 2006. A
recent article in the Washington Post, (2006 Cuts In Domestic Spending
On Table, The Washington Post, May 27, 2004) highlighted budget
guidance issued by the Office of Management and Budget detailing cuts
in several domestic programs, including the Department of Homeland
Security. Of course, any cuts to Homeland Security potentially impact
Customs and Border Protection. Consequently, the NAFTZ is deeply
concerned about the possibility of long term hiring freezes and staff
shortages and delay in important Customs' programs such as the
scheduled implementation of Automated Commercial Environment (ACE) if
adequate budgets are not provided.
The NAFTZ supports the enhancement of Customs resources for
training, automation, and commercial operations. It is most important
that Customs be funded at a level that will provide the necessary
controls and structure to implement a safe and secure import and export
process.
Reorganization in Department of Homeland Security
The NAFTZ has followed the reorganization in the Department of
Homeland Security and worked closely with Customs, the Department of
Homeland Security, and the Department of Treasury, on the delegation of
authority from Treasury to Customs. The NAFTZ has insisted in this
delegation that there be no diminution of the trade functions in their
transfer from Treasury and that Customs ensures these functions receive
sufficient priority. We know this has been a priority of this Committee
and our members appreciate your strong support.
For FTZs, the delegation problem had to clearly establish the exact
interface among the Foreign-Trade Zones Board, the Department of the
Treasury, the Department of Commerce, Customs Headquarters, and
Homeland Security. After considerable effort, an arrangement was worked
out that retained the legal structure of the Foreign-Trade Zones Board
with the two members being the Secretary of the Treasury and Secretary
of Commerce, while accommodating the interests of Customs and Homeland
Security. Just as it is with every group whose central concern is the
unobstructed flow of trade, we remain alert to any changes in this new
equation. However, the new arrangement seems to be functioning
effectively. Customs continues to work with zones in facilitating trade
and we see no slack in the necessary support, activity or oversight.
Customs-Trade Partnership Against Terrorism (C-TPAT)
The security of our borders and ports, their local communities, the
personnel employed there, and the immense volume of trade and economic
activity that flows through them is a critical interest to the NAFTZ.
The NAFTZ believes that existing FTZ security requirements complement
the requirements of Customs-Trade Partnership against Terrorism (C-TAT)
and supports the continued development and expanded access of the C-
TPAT program for foreign trade zones.
Foreign-trade zones require strict security standards enforced by
Customs. All foreign-trade zones have undergone a physical security
review, background investigations of key employees of foreign-trade
zone operating firms, and their activities are subject to unannounced
``spot checks'' at any time, as well as audits.. In addition, foreign-
trade zone operations are required to be under a special Foreign-Trade
Zone Operators Bond that can be accessed by Customs to financially
enforce the security responsibilities. The background investigation and
physical review of facilities exceeds current C-TPAT requirements. The
NAFTZ has been working with Customs Headquarters for several years to
secure the involvement of foreign-trade zone operations in C-TPAT
general-purpose zones. A large percentage of all foreign-trade subzone
users are already under the C-TPAT program, because subzone operators
qualify as importers under the current membership criteria.
While the program attracted a large number of applicants, we
realize that the validation process has been slow and that the promised
security as well as trade benefits of C-TPAT have been retarded by the
budget freeze and a consequent shortage of personnel. The $15.2 million
requested in the CBP budget for additional supply chain security
officers should bring C-TPAT participants closer to receiving the full
benefits of the program.
Customs Modernization
The NAFTZ has worked closely with Customs' efforts on the ACE
design and implementation process, committed significant time and
resources, so success of ACE is a high priority for the NAFTZ.
At the request of Customs, the NAFTZ developed, and funded, a task
force to work on the ACE program as it applies to FTZs. Representatives
of a broad industry cross section from our membership have spent
literally hundreds of hours working on the development of the totally
automated FTZ methodology. This is an especially important process to
the NAFTZ, since it will be key in supporting our country's security
and trade goals. Also, the automation of the foreign-trade zone
interface with Customs, as the committee knows, has been a longstanding
shared goal for both of us, but it has never materialized. Even after
the Miscellaneous Trade and Technical Corrections Act of 1999 (Public
Law 106-36) that was passed in 1999 by Congress mandating the
automation of the FTZ admission process, no automation has occurred.
However, our ACE task force under ACE has worked diligently. It has
been a very great success. In Customs' own words, ``the NAFTZ ACE FTZ
Task Force requirements document ENT-043 detail and format is a model
for all other ACE requirements industry submissions It is our view that
foreign-trade zones generally provide the ability for Customs to view
our members on an account basis with full automation of individual
transactional reporting and authorizations, which is a long-term goal
of ACE. From a security standpoint, our member companies typically have
long-established and documented relationships with Customs, and their
record of behavior is well-known and predictable, and carry a lower
risk profile than lesser known importers and exporters. By reducing the
amount of documentation and paperwork for receipts at zones and Customs
entries for shipment imports, zone-to-zone transfers, and exports, both
Customs and trade benefit. The reduced documentation and automation
burden provides Customs the ability to shift time and energy from
foreign-trade zone activity to other standard import and export firms.
Other Customs Issues
The NAFTZ is also very interested in the smooth administration of
Weekly Entry procedures and automation of the zone admission process.
The NAFTZ has worked closely with Customs Headquarters on a wide
variety of outstanding Customs zone management issues. Over the years,
we have worked cooperatively with Customs in the updating of the
Customs FTZ Regulations. In 1986, a significant revision to the
Regulations was produced. We are currently working with Customs
Headquarters on certain limited updates and clarifications to the
operating procedures and Regulations concerning origin declarations on
estimated entries, use of total zone value, misunderstandings on FDA
weekly entries, and filing of multiple weekly entries.. Very
significant progress has been made in working through these regulatory
issues and we hope to be able to report total satisfactory resolution
of expressed concerns back to the Committee in the near future.
Weekly Entry In 2000, Congress passed the Trade and Development Act
of 2000 (Public Law 106-200) that extended weekly entry to all types of
FTZ operations, because the Committee fully understood that this action
would greatly facilitate the movement of trade and reduce paperwork
Subsequently, Customs Headquarters has raised certain concerns with
respect to zone-to-zone transfers and exports that are currently being
addressed by Customs and the NAFTZ. We continue to believe that the
statute as written is legally sound. If technical corrections to the
statute are necessary, we will be in contact with the Committee.
Automation of Zone Admission Process. In 1999, the Miscellaneous
Trade and Technical Corrections Act (Public Law 106-36)directed the
Commissioner of Customs to automate the FTZ admission process by 2000.
While no action has specifically been taken by Customs Headquarters in
this regard, we have been told that the ACE implementation schedule,
Release 6, will include necessary functionality. The NAFTZ has been
actively supporting this development.
SUMMARY
In sum, NAFTZ works with CBP in a mutually beneficial partnership,
but this relationship could erode without sufficient federal funding
and human resources. We urge that the budget authorizations for the CBP
meet or exceed the President's budget for fiscal year 2005, in order to
adequately fund important programs such as C-TPAT and ACE as well as
Customs training, personnel and commercial operations. The NAFTZ looks
forward to working with Customs to improve Weekly Entry and automation
of critical zone management tools, such as the automation of the zone
admission process.
We appreciate the opportunity to testify today and look forward to
working with Customs and the Committee in the enhancement of FTZ
processes and the further development of the Foreign-Trade Zones
program.
Chairman CRANE. Thank you, Ms. Saathoff. Now, Ms. Scott.
STATEMENT OF SANDRA SCOTT, DIRECTOR OF INTERNATIONAL RELATIONS,
YELLOW-ROADWAY CORPORATION, OVERLAND PARK, KANSAS, AND VICE
CHAIR, BORDER TRADE ALLIANCE, PHOENIX, ARIZONA
Ms. SCOTT. Good morning, Chairman Crane, Members. My name
is Sandra Scott and I am the Director of International
Relations for Yellow-Roadway Corporation. It is the largest
North American truckload carrier and we employ more than 50,000
men and women.
However, what brings me here today is my position as Vice
Chair of the Border Trade Alliance. The Border Trade Alliance,
founded in 1986, has been a consistent advocate on behalf of
the cross-border trade community for border and trade agency
funding levels that will allow the United States to remain
competitive in an increasingly global economy.
The BTA has also been a vocal advocate for innovative
programs that expedite the flow of legitimate trade and travel
while increasing our Nation's security. In particular, we were
strong supporters of the Customs Modernization Act that played
a significant role in the subjects we will discuss here today.
Thank you for holding this hearing today and taking the
opportunity to hear from those of us on the frontlines of
international trade. On behalf of the BTA, I am submitting
written testimony that touches on the host of issues that this
Committee is reviewing at today's hearing. In my limited time
here, however, I would like to stick to the issues of Customs
modernization, specifically the importance of the ACE and the
International Trade Data System (ITDS).
The BTA has taken great interest in this issue of late,
going so far as to play a leadership role in establishing a
coalition of key trade community stakeholders, calling
attention to the importance of ACE/ITDS. In the past several
weeks, I have enjoyed meeting with many of you and your staffs
to discuss the importance of this issue.
Why are ACE and ITDS so important? The ITDS offers a single
window for commercial data to be provided by the private sector
for processing by the ACE and distribution to Federal agencies
with enforcement, security, statistical, and revenue collection
responsibilities for commercial cargo crossing America's
borders. Originally an information technology initiative of the
National Performance Review in 1994, its goal was to provide a
government-wide system for the electronic, paperless,
collection, use, and dissemination of international trade data.
Now being designed as a fundamental part of the ACE
development, ITDS encourages inter-agency information sharing,
thus providing much greater efficiencies in data collection and
intelligence gathering. This will result in more effective
enforcement, security targeting processes, and risk analysis of
trade flows. For the trade and for the legitimate cargo, the
streamlined sharing of information will accelerate border
clearance times, reduce costs, and cut down on inefficient
paper-based systems.
The recent legislative action of the Congress in passage of
the Bioterrorism Act would have been more easily implemented
had the early 1990 start on an ITDS system been provided more
structure and attention within the Administration. Currently,
participation in ACE/ITDS is voluntary for government agencies.
Right now, only 8 agencies are participating in ACE/ITDS, with
an additional 10 showing interest in 2004. These are among 79
agencies identified as candidates. For the full benefits to
accrue, all these agencies need to join in.
Non-participation in ACE/ITDS by a Federal agency deprives
the government's homeland security and cargo facilitation
efforts of valuable information. Furthermore, it isolates that
agency from data helpful to its own mission. The ITDS, fully
supported, would provide a seamless automated approach to our
Federal regulatory presence at all borders. The record of non-
participation by Federal agencies, whether by design or through
oversight, is very disappointing as ITDS is now being developed
and implemented as an integral piece of ACE that is managed by
CBP and DHS. They cannot require agencies from other
departments to participate.
The needed interagency cooperation and collaboration is
something that requires the attention and involvement of the
highest levels of the Federal Government. That leadership and
direction must come from the White House, where there is
sufficient span of authority to bring 79 distinct Federal
agencies together. Thus, an Executive Order can provide the
government-wide operational guidance necessary to place
essential agencies under the umbrella of ITDS, ensuring budget
and policy decisions needed for the continued growth and
success of ITDS.
The BTA suggests that the Customs Border Security and Trade
Agencies Authorization Act of 2004 (H.R. 4418) we are
discussing here today, may provide a good platform to express a
sense of the Congress that full interagency participation in
ITDS should be ensured via Presidential Executive Order.
[The prepared statement of Ms. Scott follows:]
Statement of Sandra Scott, Vice-Chair, Border Trade Alliance, Phoenix,
Arizona, and Director of International Affairs for Yellow-Roadway
Corporation, Overland Park, Kansas
The Border Trade Alliance (BTA) appreciates this opportunity to
submit testimony on the subject of Customs budget authorizations and
other Customs issues. Since 1986, our organization has consistently
advocated on behalf of the cross-border trade community for agency
funding levels that will allow the United States to remain competitive
in an increasingly global economy. The BTA has also been a vocal
advocate for innovative programs that expedite the flow of legitimate
trade and travel while increasing our nation's security.
H.R. 4418, Customs budget authorization bill
Regarding H.R. 4418, the Bureau of Customs and Border Protection
(CBP) budget authorization bill, the BTA agrees with Subtitle C, Sec.
122, calling for the establishment of ``Integrated Border Inspection
Areas at the United States-Canada border.''
In today's unique environment of increasing trade levels as well as
increasing threats, the governments of the U.S. and Canada should be
seeking innovative ways to partner to maintain each country's security,
as well as their competitive edge in the global marketplace. The
establishment of Integrated Border Inspection Areas (IBIAs) between CBP
and the Canadian Customs and Revenue Agency (CCRA) would go far in
increasing security while reducing redundancies.
Waiting to inspect a cargo load until it arrives into the U.S. from
Canada is too late. When a fully loaded truck leaves the Canadian
mainland and enters on to one of the bridges connecting our two
countries, such as the Ambassador Bridge in Detroit, MI and Windsor,
ON, or the Peace Bridge in Buffalo, NY and Ft. Erie, ON, our countries'
critical infrastructure is put at unnecessary risk. Without knowing
what that truck is carrying, we run the risk each day of allowing
passage of someone or something with the potential to do us harm. IBIAs
allow each country's respective inspection services to carry out any
necessary security applications long before a cargo load arrives at its
intended country of destination.
Security is not the only consideration to be made when studying the
issue of IBIAs. Too often, drivers cross into the U.S. without proper
documentation ready to enter their loads into the flow of U.S.
commerce, thus creating unnecessary delays as the various paperwork
requirements are worked through with CBP officials. Canada and the U.S.
should work together to prevent these bureaucratic inefficiencies
before the improperly documented loads arrive at their country of
destination.
The BTA is especially hopeful that successful IBIAs will establish
a best practice for the establishment of similar facilities on the
U.S.-Mexico border, which like our border to the north, processes an
ever-growing amount of trade.
In going forward with the IBIA concept, the committee should bear
in mind the need to properly staff these facilities during peak
periods, as well as the need to develop some expedited processing
option for carriers so as to keep the IBIAs from turning into nothing
more than parking lots.
The BTA is aware of past wrangling between the U.S. and Canada over
the general issue of sovereignty and, more specifically, the question
as to whether CBP personnel should be permitted to wear their side arms
while on Canadian soil. While not passing judgment on that issue in
this space, we are confident that this issue can be effectively
resolved between the two governments. There is too much at stake to
allow this issue to be the barrier to a better trading environment
between our two countries.
Customs modernization: ACE/ITDS
The BTA was pleased to see that the committee has raised questions
on the Automated Commercial Environment (ACE) and its relation to the
International Trade Data System (ITDS). Our organization has taken
great interest in this issue of late, going so far as to play a
leadership role in establishing a coalition of key trade community
stakeholders calling attention to the importance of ACE/ITDS.
ITDS offers a single window for commercial data to be provided by
the private sector for processing by the ACE and distribution to
Federal agencies with enforcement, security, statistical and duty
collection responsibilities for commercial cargo crossing America's
borders. Originally an information technology initiative of the
National Performance Review in 1994, its goal was to provide a
government-wide system for the electronic (paperless) collection, use
and dissemination of international trade data.
Now being designed as a fundamental part of ACE development, ITDS
encourages interagency information sharing, thus providing much greater
efficiencies in data collection and intelligence gathering. This will
result in more effective enforcement, security targeting processes, and
risk analysis of trade flows. For the trade and for legitimate cargo,
this streamlined sharing of information will accelerate border
clearance times, reduce costs, and cut down on inefficient paper-based
systems.
Non-participation in ACE/ITDS by a federal agency deprives the
government's homeland security and cargo facilitation efforts of
valuable information; furthermore, it isolates that agency from data
helpful to its own mission. ITDS, fully supported, would provide a
seamless automated approach to our federal regulatory presence at all
borders.
The record of non-participation by Federal agencies, whether by
design or through oversight, is disappointing. As ITDS' operators, CBP
and the Department of Homeland Security (DHS) cannot require agencies
from other departments to participate. That leadership and direction
must come from the White House where there is sufficient span of
authority to bring 79 distinct Federal agencies together. Thus, an
Executive Order can provide the government-wide mandate necessary to
place essential agencies under the umbrella of ITDS.
The BTA suggests that H.R. 4418, the Customs budget authorization
bill, may provide a good platform to express a sense of the Congress
that full-interagency participation in ITDS should be ensured via
presidential Executive Order.
Also, it would be of great benefit to designate an ``owner'' of
ITDS. As we cited above, while CBP and, by extension, DHS operate ITDS,
their power is limited in directing other agencies to buy into and
participate in ITDS. We recommend designating a department or agency
with ultimate say in the direction ITDS takes.
DHS organization
It is worth noting here that the BTA was and is supportive of the
creation of DHS. While the transition to this new department has not
been without its hiccups, we are convinced that DHS and its ``One Face
at the Border'' strategy has and will continue to result in more
effective border management than the legacy structure of numerous
agencies with overlapping jurisdictions competing over the same turf.
Coordination between DHS and those agencies outside DHS can always
be improved, and Congress has a role to play in ensuring that cross-
agency communication is improved. Case in point, the Trade Act of 2002
and the Public Health Security and Bioterrorism Preparedness and
Response Act of 2002, otherwise known as the Bioterrorism Act,
illustrate the potential disruption that results from competing legal
mandates.
Both of those laws called for the submittal of advance cargo
manifest information to the proper U.S. enforcement authorities,
depending on whether the load contained foodstuffs, prior to that
load's arrival at the U.S. border. The timeframes for submittal of this
manifest information outlined in these two laws, however, were
different and contradictory.
A common lament in the trade community is the lack of uniformity in
processing cargo depending on port of entry and commodity. Congress
could do much to promote uniformity by crafting legislation cognizant
of the unique structure of DHS and the fact that some of the agencies
that play a role in international trade are not part of the DHS
structure.
C-TPAT
The BTA is supportive of the Customs Trade Partnership Against
Terrorism (C-TPAT). Like others in the trade community committed to C-
TPAT, however, we believe that there must be an assurance from CBP of
tangible benefits to participants in the program. One such benefit is
access for carriers to border FAST lanes, or Free And Secure Trade
lanes.
While it is our understanding that CBP has undertaken a significant
hiring effort in order to assemble a staff trained to validate C-TPAT
companies and facilities, we still have some concern about CBP's
ability to ensure C-TPAT compliance, especially with so many companies
seeking FAST access. The committee is well advised to monitor this
evolving issue.
We are also concerned with the paltry number of small and medium
sized businesses who have gotten C-TPAT certification. We recommended a
concerted marketing campaign by CBP to ensure that the small and medium
sized carriers and importers that make up the bulk of international
traders are aware of C-TPAT and ultimately take the steps necessary for
certification. Certification ensures they receive the benefits possible
under the program while CBP ensures an increasingly secure
international supply chain. We must guard against creating a system of
the ``haves'' and ``have nots'' of international trade, characterized
by large trusted shippers whose shipments receive expedited service,
and small to medium sized shippers whose security apparatus remains in
question and whose shipments do not reach their destination in a timely
fashion.
The failure to bring small and medium sized companies into the C-
TPAT fold also has a direct effect on less-than-truckload (LTL)
carriers--the bulk of whose customers are small and medium sized--and
their C-TPAT-certified customers. According to C-TPAT criteria,
carriers cannot access the FAST lanes at land border ports of entry
with loads that are not C-TPAT certified. Thus, a carrier with loads
from both C-TPAT and non-C-TPAT customers cannot access the FAST lane,
which results in a penalty to the C-TPAT-certified business.
We are also concerned with the C-TPAT Status Verification
Interface, or SVI. SVI is touted by CBP as a mechanism for C-TPAT
members to query a CBP system electronically with a secure
identification number which other companies are also part of C-TPAT.
However, in its current design SVI is flawed in that the user must have
access to another company's identification number in order to verify C-
TPAT participation. We recommend altering SVI to permit querying by
company name.
Finally, the BTA and others in the trade community would like to
see statistics from CBP indicating whether FAST lane access is indeed
faster than using a regular cargo lane. There is anecdotal evidence
suggesting that FAST does not offer carriers the speedy access
advertised by CBP. If CBP's statistics indicate that FAST is not
resulting in faster crossing times, then we in the trade are happy to
work with CBP to fix the problems with FAST. We also recommend posting
FAST lane crossing times on CBP's Web site along with the data for non-
FAST lane crossing times. This would result in an easy one-stop source
for border crossing data.
Once again, the BTA appreciates the opportunity to submit testimony
to the committee on these issues of great importance to the cross-
border trade community. We offer our organization's years of collective
knowledge on border trade issues as the committee continues to consider
these important topics.
Chairman CRANE. Ms. Scott, excuse me for interrupting, but
we are down to just 5 minutes on the recorded vote on the
floor. Let me reassure all of you, any printed statements you
have will be made a part of the permanent record and we thank
you for your participation, and we look forward to working with
you on a continuing basis. With that, the hearing stands
adjourned.
[Whereupon, at 11:56 a.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of American Association of Exporters and Importers
The American Association of Exporters and Importers (``AAEI'')
appreciates the opportunity to offer its comments on budget
authorizations for U.S. Customs and Border Protection (``CBP'') and the
Bureau of Immigration and Customs Enforcement (``ICE'') for fiscal year
(``FY'') 2005 and FY 2006, as well as both current and prospective CBP
trade security and trade facilitation measures.
As the Subcommittee knows, AAEI is a trade association comprised of
U.S. and multinational manufacturers, distributors, retailers, and
service providers engaged in the import and export of merchandise to
and from the United States. It has represented the scope of America's
trade community in regulatory, legislative, and public policy arenas
since 1921. AAEI's primary focus is the promotion of fair and open
trade policies and practices through education and advocacy. It has
long been a strong supporter of supply chain integrity and security as
well as the full-range of trade community issues affecting customs and
international commerce.
AAEI commends Chairman Crane and members of the Subcommittee on
Trade of the Committee on Ways and Means in their effort to guide and
support the critical trade functions of CBP through the introduction of
H.R. 4418 and conduct of these hearings, in which connection we are
privileged to submit this testimony. It has long been this
Subcommittee's role, under the auspices of Ways and Means jurisdiction,
to provide leadership in shaping federal government programs essential
to America's commercial operations. We appreciate and applaud your
continued vigilance. The Subcommittee's understanding of the supply
chain, commercial valuation, and a myriad of related issues impacting
the trade community has proven invaluable over the years. Indeed, the
Subcommittee's role has been integral to ensuring major substantive
advances over the years, including development and consideration of the
Customs Modernization Act (``Mod Act'') more than ten years ago. AAEI
appreciates these efforts and thanks both the Subcommittee and the full
Committee for their efforts.
1. Balancing Vital National Priorities
We would also like to thank the Subcommittee for the opportunity to
present our views on CBP's efforts to maintain a balance between trade
security and trade facilitation. AAEI supports CBP's national security
mission as part of the U.S. Department of Homeland Security (``DHS'' or
the ``Department''), and recognizes that, in creating DHS, Congress was
mindful not to impede legitimate trade. AAEI believes that Congress
should monitor the trade-related activities of CBP to ensure that DHS
maintains a balance between national security and global trade.
As CBP Commissioner Bonner has recognized, CBP is striving ``to
increase security while simultaneously preserving and, when possible,
even improving the more efficient movement of legitimate trade and
travel.'' While AAEI has consistently supported CBP's efforts to strike
a balance between increasing America's security while improving trade,
we are increasingly concerned that trade facilitation, and in some
instances the trade community itself, are not viewed by some within our
national security leadership as an equal partner. We share the
Subcommittee's concern that priorities be balanced. We, for instance,
are particularly concerned that interested parties including much of
the trade community and even Congressional committees have, on more
than one occasion, been unable to initiate constructive dialogue with
CBP and DHS on vital facilitation issues. In examining this state of
affairs, we suggest that a significant part of the problem results from
the security community's perception of its role. We frequently hear a
mantra of guns, gates, and guards when the focus needs to be equally
attuned to overall national interest, risk management, and operations
facilitation.
A second significant factor is the lack of resources, both dollars
and manpower, devoted to the facilitation and operations aspects of
CPB's functions. Here we acknowledge the huge brain drain that is
occurring across federal government agencies as senior government
employees retire in record numbers, but the situation the trade
community confronts goes well beyond that. The experienced customs
professionals at all levels who long have made the system work are
leaving or have left or, as we so often hear, are so discouraged that
they are resigned to frustration. The solution to these and related
problems will require long-term dedication on the part of DHS and clear
oversight by the Subcommittee.
2. CBP Regionalization
AAEI has strongly supported Administration efforts to create and
administer DHS and commends the extraordinary work necessary to do so
over the last three years. It is clear that DHS continues to evolve to
meet the challenges before it. Based on information derived from the
FY'04 budget plan as well as meetings with government officials, AAEI
understands that the Department has proposed a plan to regionalize core
Department functions. As conveyed to the trade community, the concept
of ``regionalization'' entails the designation of a single DHS official
as responsible for a specific geographic area of the nation. That
individual would be charged with coordinating government resources in
response to a terrorist ``incident.'' Although DHS has not issued a
formal notice seeking comments on any specific proposal, Department
officials have indicated to members of government advisory committees
that such a reorganization plan is currently under review at the White
House.
Importantly, unlike other recent CBP trade security initiatives
such as the Customs-Trade Partnership Against Terrorism (``C-TPAT''),
the regionalization plan has, to date, been created without the benefit
of substantive trade community input. We are, therefore, concerned that
ongoing plans to regionalize CBP, without coordinated and cooperative
substantive input from the trade, could amount to a step backward for
trade facilitation. As AAEI has expressed to the Administration on
previous occasions, we have several specific concerns regarding the
regionalization of CBP including: (1) CBP's failure to utilize
available private sector expertise and liaison, leading potentially to
inefficient or impractical regulatory outcomes and a potentially
negative impact on trade; (2) the strong likelihood that disorder and
confusion may again detrimentally impact commercial decisions regarding
product import and export; and (3) implementation of regionalization
and the potentially enormous drain on available DHS resources may
directly impact CBP's ability fully to implement badly needed
modernization, personnel, and training upgrades.\1\
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\1\ See, April 14, 2004 letter from AAEI President Hallock
Northcott to the Honorable Josh B. Bolton, Director, Office of
Management and Budget.
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The trade community recognizes strong DHS efforts to ensure vital
uniformity in policies and programs among the nation's ports but
reminds the Subcommittee that even today, we are still too far from
meeting this goal. We, in all facets of the industry, see this lack of
uniformity by commodity, by port, and even by time of the month. We
also see a lack of uniformity of purpose and procedures mushrooming as
seemingly uncoordinated agency action is initiated by those
traditionally interested in product integrity or enforcement issues
rather than trade facilitation.
In order to address these concerns, AAEI submits four points
concerning the regionalization concept. First, AAEI supports the
government's efforts to provide critical first responder and crisis
management structure to DHS. In particular, AAEI supports the
government's initiative to vary the color-coded threat level advisory
system according to local conditions so as to cordon a region of the
country based on specific intelligence.
Second, AAEI reminds the Subcommittee about the inefficiencies that
resulted from the U.S. Customs Service's regional structure prior to
passage of the Mod Act in 1993. The inconsistent treatment of identical
or similar merchandise and the lack of uniformity in trade compliance
procedures at various ports of entry created ``port shopping'' by
frustrated importers. The concepts of ``informed compliance'' and
``reasonable care,'' as well as the headquarters and port structure
embodied in the Mod Act, were designed to provide greater
predictability and uniformity in the administration of customs laws and
to facilitate trade. Many multinational companies have integrated these
trade compliance principles into their global operations and are
seeking uniformity in the treatment of their goods on a worldwide
basis. AAEI believes that CBP's functionality has, with significant
trade community cooperation and guidance from this Subcommittee,
progressed substantially over the past 11 years. The trade community
is, therefore, reluctant to support any efforts that may nullify the
efficiencies gained over the past several years.
Third, AAEI is concerned that, without continued vigilance, certain
``onerous'' aspects of any regional structure activated in response to
a national security incident will become a permanent layer of DHS
organization beyond the immediate aftermath of such an incident. Over
time, the regional structure could diminish the important role that CBP
Headquarters plays in the uniform administration of the customs laws
and in overseeing trade facilitation. As noted below concerning section
102 of H.R. 4418, AAEI believes that maintaining adequate funding for
CBP's commercial activities is crucial to striking a balance between
national security and facilitating trade.
Fourth, because no proposal has been shared with the trade
community, AAEI is unsure what type of event or activity would be
considered an ``incident'' for the purpose of activating the regional
structure contemplated by DHS. Therefore, on behalf of the trade
community, AAEI is seeking further information and, perhaps more
importantly, the opportunity for meaningful input on the DHS proposal.
That input must incorporate those diverse aspects of the community that
would potentially be dramatically impacted by the proposal and should
be both coordinated and truly cooperative. In the absence of such
coordination and cooperation, it would be unreasonable to expect the
trade to lend its full support to CBP Regionalization.
3. Customs-Trade Partnership Against Terrorism (``C-TPAT'')
Turning to C-TPAT, we observe that this program was initially
launched by CBP as a voluntary program designed to be flexible and
adaptable to the needs of each importer while meeting the government's
objective of securing corporate supply chains quickly. To date, C-TPAT
has indeed endeavored to serve as a government-private sector
partnership program that addresses supply chain security. The trade
community was involved in the design and creation of the program, and
continues to advise CBP on its implementation. We note, however, that
in the experience of a significant number of AAEI members, C-TPAT has
failed to yield measurable trade facilitation benefits even as the
program has increased compliance costs.
Accordingly, AAEI recommends that Congress require CBP or the
General Accounting Office to conduct a study in order to calculate the
costs incurred by the trade community in implementing C-TPAT as well as
other current programs. This study should also have as its objective
the measurement of the benefits to border security resulting from the
trade community's adoption of C-TPAT's security recommendations. AAEI
notes that the Mod Act shifted responsibility for trade compliance
(i.e., the proper classification, valuation, and marking of imported
merchandise) to importers utilizing the principles of ``informed
compliance'' and ``reasonable care,'' and envisioned that CBP would
expand the number of agency personnel responsible for trade
facilitation and compliance. However, many of those resources have been
shifted to trade security. AAEI is also concerned that CBP's inspectors
and operations personnel do not have uniform standard operating
procedures for contacting C-TPAT certified importers to resolve
security issues arising during the clearance of shipments. Currently,
security related anomalies or incidents may result in a differing
response from CBP officials depending upon port of entry. AAEI
recommends that CBP implement uniform procedures establishing how
security issues involving C-TPAT certified importers will be resolved.
This should be followed by training on such procedures for operational
personnel at all ports. As with all of AAEI's recommendations, the
Subcommittee should bring its expertise to bear in determining the
funding levels CBP would need to support such efforts.
One other area of concern relates to the maintenance of
confidential business information. AAEI members who have joined C-TPAT
would like reassurance that their confidential information is not being
shared with other government agencies, both domestic and foreign,
without their consent. Such prohibitions would include lawful
disclosure requests made under the Freedom of Information Act. See, 5
U.S.C. 552 and 19 C.F.R. 103.5.
We understand that CBP has seriously debated altering the
fundamental nature of C-TPAT from a voluntary program to a mandatory
trade security requirement. We are concerned that if this occurs,
compliance costs would continue to grow in the absence of improvements
in trade facilitation. We note also that it would be important to
understand the overall impact upon the flow of goods and services of a
mandatory C-TPAT program. AAEI does not support making C-TPAT a
mandatory program. Rather, AAEI recommends that CBP implement uniform
procedures for handling security issues involving C-TPAT certified
importers and conduct further training of its personnel on C-TPAT. The
trade would not support any trade security program that dictates
inflexible standards and, in addition, does not provide a sufficient
return on its investment in supply chain security measures without
commensurate trade facilitation by CBP.
In the Subcommittee's efforts to explore the larger issues, it is
worth noting that AAEI strongly encourages the Subcommittee to continue
its oversight of related World Customs Organization and International
Maritime efforts. We believe that integration and, where appropriate,
coordination can provide significant benefits for U.S. commercial
operations interests.
4. Automated Commercial Environment and the International Trade Data
System
We next address the state of the Automated Commercial Environment
(``ACE'') and integration of the International Trade Data System
(``ITDS''). First and foremost, AAEI considers ACE to be a crucial part
of customs modernization and necessary for the government to keep up
with the volume of transactions and merchandise. It is an essential
component of our nation's trade environment. As such, it is essential
that significant effort be devoted to ACE. In this regard, AAEI is
prepared to contribute to the Subcommittee's continued inquiries.
Since the formal launch of ACE and its Trade Support Network
(``TSN''), AAEI believes that important issues have been well explored,
many sectors of the industry have significantly contributed, and
overall, significant progress has been made. Many of our members are
extremely pleased with progress to date. ACE's ongoing implementation
and solid growth are very encouraging to those of us whose
organizations have waited many years for progress on this front. We
congratulate both the responsible government officials and the private
sector TSN representatives for their efforts to bring this project to
fruition.
Industry recognizes that ACE will be central to the way in which
the trade interfaces with the government. It is going to be at the
heart of CBP's entry, revenue collection, security, and compliance risk
management functions, among others. Its future is being resolutely
shaped in daily meetings and conferences both here in Washington and
elsewhere. But while ACE implementation has always seemed far off into
the future, this is no longer the case. ACE is happening now. We are on
the cusp of critical decision-making, programming, and implementation
that will significantly affect the trade for years to come. Anticipated
ACE releases will:
Open ACE account status with web portal access to over
1,000 new participants;
Enable monthly payment of duties;
Integrate partner government agency requirements (e.g.,
APHIS, FDA); and
Implement entry and entry summary processing.
It may also be useful for the Committee to recognize that this is a
critical juncture for the programming into ACE of key Mod Act
functionalities, including monthly summary filing (IASS) and
Reconciliation.
Frankly, though we are highly supportive of ACE efforts and the ACE
Trade Support Network process, we have a number of serious concerns.
For instance, in reviewing member involvement we are keenly aware that
a number of company/firm members of the TSN already feel overwhelmed
with ACE information, sometimes making it difficult to distinguish and
absorb the most important developments. As development and
implementation move forward, the situation promises to become even more
challenging. Imagine, if you will, the many affected organizations
across the country that are perhaps only dimly aware of progress to
date.
But beyond these significant concerns with communication and
education, we fear that ACE, already behind schedule, will be
significantly delayed by resource shortages and changing priorities. We
are concerned that, over the next three years, the next phases of ACE
will focus predominately on law enforcement and security rather than on
trade facilitation. We are also concerned that the original intention
of many provisions under working group review may have been
significantly modified over time and have not been fully vetted by the
larger trade community. Finally, we are very concerned that it is a 10-
year-old system, replacing another 20 plus year-old system, which,
optimistically, won't be in place for another five to seven years.
Thus, we encourage the Subcommittee's interest in ACE's progress and
will be happy to assist wherever possible.
As the Subcommittee has emphasized over many years, information and
data sharing are vital to the modern customs system. ACE will enable
importers to meet not only ``reasonable care'' requirements for CBP,
but also mandates imposed by other government agencies by allowing
access to one set of trade data in ``real time.'' Integration of ITDS
as a single window for the maintenance of trade data collected by the
federal government furthers the Congressional intent of the Mod Act and
these other goals (i.e., compliance with multiple agency requirements)
of the trade community. See, H.R. Rep. No. 103-361(I), at 128 (1993),
reprinted in 1993 U.S.C.A.N.N. 2678.
The trade community has a long-standing interest in working with
the government to build a single data standard for federal agencies
involved in regulating trade. While the trade community recognizes the
government's need for trade data in order to secure the nation,
importers are now subject to different and sometimes conflicting
information and transmission requirements by various federal agencies.
For example, Congress has mandated that both CBP and the Food and Drug
Administration (``FDA'') collect advance cargo manifest information
prior to the shipment of imported products. See, Trade Act of 2002,
P.L. 102-210, 116 Stat. 933, as amended by section 108 of the Maritime
Transportation Security Act of 2002, P.L. 107-295, 116 Stat. 2064;
Public Health Security and Bioterrorism Preparedness and Response Act
of 2002, P.L. 107-188. Unfortunately, because these agencies issued
their ``prior notice'' regulations pursuant to two different statutes,
the agencies promulgated regulations with different requirements (i.e.,
different time periods for submitting the same data, utilizing
different online systems). Such inconsistencies significantly increase
the administrative burden of compliance on the part of importers.
Based on a recent report by CBP concerning the status of ITDS and
ACE, several government agencies will begin integrating their
operations into the ACE/ITDS design. See, ITDS On Track to Help Create
``One Screen at the Border,'' 3 Modernization Monitor at 3 (Spring
2004), at http://www.cbp.gov/xp/toolbox/about/modernization/. Many of
these agencies (i.e., Federal Communications Commission, Animal and
Plant Health Inspection Service, Food and Drug Administration, U.S.
International Trade Commission, and Census Bureau) are involved in
regulating trade or transportation. In particular, Census collects and
maintains data utilized in U.S. trade statistics. The report indicates
that another 15 federal agencies will begin working in ITDS in 2004.
Since over 100 agencies are involved in international trade and a
significant number have trade security responsibilities, the ITDS
initiative remains vital. In implementing this effort, the Association
strongly encourages the Subcommittee to maintain vigilance over
proprietary data protection and to install strong ``firewalls''
prohibiting inappropriate data distribution within and among U.S.
Government agencies, international organization, foreign government
entities, and private sector organizations.
AAEI believes that by strongly encouraging all federal agencies to
utilize ACE for trade data transmission requirements, Congress will
give these agencies a stake in the successful development and
implementation of ACE. Moreover, using ACE as the primary portal
through which trade data is submitted to the federal government,
Congress will be saving both the government and the private sector time
and money in focusing limited resources toward a single, universal
system. Frankly, however, unless the Congress and senior Administration
officials provide serious incentives we suspect that this system may
simply limp along without meeting its true potential. Failure to fully
employ this system would be a shame.
Modernization of CBP's trade compliance tools and procedures is key
to ensuring that CBP is able to achieve its dual role as a national
security and trade enforcement agency. However, trade facilitation
should not be separate from trade security and enforcement. The
movement towards an account-based compliance system can only occur if
Congress makes ACE the centerpiece of such a system. This, in turn,
requires Congress to enact the necessary statutory changes to arcane
U.S. customs laws. Therefore, AAEI supports the Subcommittee's efforts
to make certain statutory revisions designed to provide CBP with the
necessary tools to complete the legal framework for development of ACE
(i.e., allowing the filing of reconfigured entries, expansion of the
protest period, and changing the official liquidation notice) as
described more fully below in Section VI of this Statement.
5. Additional Trade Facilitation Concerns
In its essential role within DHS, CBP has continued to serve as the
nation's lead agency in trade enforcement. Nevertheless, AAEI believes
that, with its post 9/11 focus on security and law enforcement
concerns, Customs, and now CBP, have not been able to provide the trade
with the necessary guidance for compliance in certain areas. There are
many examples ─ one which involves a subject long of direct
interest to the Subcommittee is the elimination of quotas on textile
and apparel products as a result of the Uruguay Round Agreement on
Textiles and Clothing.
Although CBP has posted information on its website concerning the
integration of textiles and apparel made in WTO member countries, CBP
has not issued rules for the transition to a quota-free environment.
Many importers are currently ordering merchandise for importation at
the end of 2004. However, CBP has not indicated how it will treat
textile and apparel items which may be shut out of the 2004 quota
limits.
In previous years, importers had the option of delivering the
merchandise to a bonded warehouse until the quota category reopened.
Importers are purchasing visas for merchandise that is not guaranteed
entry in 2004 and may be worthless because the quotas will be
eliminated in 2005. This scenario imposes a significant economic cost
to the trade, but it is not the only hazard facing importers in this
area. Other potential issues relating to merchandise subject to quota
are:
What is the timeline and status of the programming
changes that will be needed to remove current requirements in the
Automated Broker Interface (``ABI'') for those categories that will be
fully integrated on December 31, 2004?
Can importers/brokers pre-file entries prior to December
31, 2004?
Will ``live'' entries be eliminated for those products
(and countries) that are fully integrated at the end of 2004?
Will visas still be required for shipments arriving after
January 1, 2005?
AAEI will continue to work with CBP and other government agencies
to ensure the smooth transition to a quota-free environment, but the
trade needs more guidance from the government concerning how this
transition will proceed.
6. Specific Provisions of H.R. 4418
As stated above, we are supportive of H.R. 4418 and, in particular,
those provisions that promote trade facilitation. Nonetheless, for the
benefit of the Subcommittee, we provide the following selected comments
regarding provisions not addressed above.
A. Establishment of Cost Accounting System
Section 102 of H.R. 4418 requires CBP to establish and implement a
cost accounting system in order to track expenses incurred for both
commercial and noncommercial operations.
AAEI supports this provision because it will provide both Congress
and the trade community with metrics by which they can gauge whether
CBP's trade operations and functions have sufficient priority and
budget resources. Moreover, AAEI supports Congress requiring all
federal agencies with trade-related functions to implement a cost
accounting system in order to aid in Congressional oversight and
budgeting for trade operations. An example of the usefulness of a cost
accounting system would be to measure the administrative cost of the
antidumping program, including the annual distributions made under the
Continued Dumping and Subsidy Offset Act of 2000 (``CDSOA'' or the
``Byrd Amendment''). Since the government currently does not have a
cost accounting system for CBP, the International Trade Administration
of the U.S. Department of Commerce, or the U.S. International Trade
Commission, the domestic industry receives all the antidumping and
countervailing duties collected by the government. A cost accounting
system for such agencies would provide the Congress and the trade with
the administrative costs for all trade programs so that user fees can
be quantified and tailored to specific services provided by the
government.
B. Study and Report Relating to Customs User Fees
The proposed bill also includes a requirement that the Controller
General conduct a study analyzing whether each user fee levied by CBP
approximates the cost of the services that CBP provides to the trade.
Since the new trade security environment requires new revenue
sources in order to secure the nation's ports and global supply chain,
AAEI supports the study of user fees. Previous user fees levied on the
trade community have been highly problematic due in part to the nature
of the assessment (i.e., Harbor Maintenance Fee assessed on the value
of the merchandise) and certain constitutional infirmities (i.e., the
U.S. Supreme Court invalidated the Harbor Maintenance Fee as an
unconstitutional tax on exports). As the Subcommittee is aware, AAEI
has devoted considerable time and energy to policy reform affecting
both problem areas. Also, we have repeatedly noted that user fees have
provided huge surpluses to the government's general revenue fund
instead of being dedicated to funding the fees' legislative purpose.
Regrettably, general revenue allocation has not provided equitable
return to the trade community or the national interest.
AAEI notes that several bills introduced in Congress have provided
for a fee assessed on carriers or imports in order to fund port
security plans. Such a user fee has been stripped from the final
legislation previously passed by or currently pending in Congress
(e.g., amended version of ``Maritime Transportation Security Act of
2004'' (S. 2279) reported in the U.S. Senate on May 20, 2004).
Moreover, other bills have included user fees which are not dedicated
to CBP's commercial operations or divert funds from existing user fees
to support other (i.e., non-trade-related) government programs. AAEI
requests that Congress carefully calibrate any user fees to the actual
cost of services provided by the government so that no segment of the
trade community is unduly burdened with the costs of government
operations that benefit the nation as a whole. We suggest that
consideration be given to tying this directly to the merchandise
purchasing fee or other appropriate vehicle.
C. Entry of Merchandise
The legislation pending before this Subcommittee amends the customs
statute to permit the filing of reconfigured entries and extends the
period to reconcile such entries to 21 months. See, section 111 of H.R.
4418. AAEI supports this provision as a step towards realizing
Congress' stated policy of an account-based system for import
transactions. It is one step in accomplishing the Association's overall
effort of which the Subcommittee is well aware. See, H.R. Rep. No. 103-
361(I), at 127, 136 (1993), reprinted in 1993 U.S.C.A.N.N. 2677, 2686.
D. Limitation on Liquidations
In addition to changes relating to reconfigured entries filed under
an import activity summary statement, Section 112 would amend Section
504 of the Tariff Act of 1930 (19 U.S.C. 1504) to replace the phrase
``amount of duty asserted at the time of entry by the importer'' with
the phrase ``amount of duty asserted by the importer.'' AAEI does not
oppose this change in the statute.
E. Protests
Section 113 of H.R. 4418 permits a protest to be filed within 180
days instead of the current 90-day deadline. Section 113 also expands
the list of items that may be protested to include those items
previously covered by 19 U.S.C. Sec. 1520(c), which would be repealed
by Section 115. AAEI supports this provision to foster the fair
administration of the customs laws and to complement the movement to an
account-based system to reconcile import transactions by providing more
time to contest the tariff classification, valuation, or origin of
merchandise.
However, neither the current 90-day period nor the proposed 180-day
period for protests is sufficient to permit importers and their
representatives enough time to fully research certain issues (e.g.,
issues not the subject of a Request for Information or Notice of
Action, issues discovered as part of an internal review, as well as
clerical errors or mistakes of fact, which are generally less apparent
after liquidation of an entry), and to present to CBP legal arguments
supported by sufficient underlying facts and circumstances. On a number
of occasions, importers and their representatives have had their
protests denied because they filed their protests in a timely fashion,
but were unable to submit what CBP believed were sufficient reasons for
allowing the protests within the current 90-day window. In some
instances, the U.S. Court of International Trade has upheld CBP's
denial of protests on jurisdictional grounds because sufficient
underlying reasons for allowing a protest were not submitted within the
90-day protest period. See, e.g., XL Specialty Ins. Co. v. United
States, Slip Op. 04-61 (CIT June 8, 2004). Therefore, while AAEI
supports an extended protest period, it also recommends maintaining 19
U.S.C. 1520(c) in its current state, primarily because without
it, importers would be left with no remedy in correcting clerical
errors or mistakes of fact outside the protest period.
Finally, AAEI notes that there are many questions and issue areas
where simple ``updating'' can make a substantial difference in the
conduct of daily business. In particular, we would like to call to the
Subcommittee's attention an arcane area of customs law that should be
addressed as part of trade modernization and facilitation review.
Currently, Bulletin Notices of Liquidation, which consist of thousands
of entries listed in computer generated printouts and available for
review only at customhouses throughout the United States, are
considered the official notification of liquidation. See, 19 C.F.R.
Sec. 159.9. As it is impractical to expect importers to travel to a
local customhouse to check liquidation status, they should be permitted
to rely on the ``Courtesy Notice of Liquidation,'' which is typically
mailed by CBP to an importer, as the official liquidation notice.
Ultimately, however, once ACE is fully operational, mailed ``Courtesy
Notices of Liquidation'' should be replaced by electronic notification.
Returning to current practice, on many occasions the Courtesy
Notices of Liquidation and the Bulletin Notices of Liquidation reflect
different liquidation dates for various reasons (e.g., CBP ``red-
lines'' or cancels liquidations on the Bulletin Notice without
importers being aware of such action, CBP mistakenly liquidates entries
which are the subject of litigation and the liquidation of which is
legally suspended by operation of law). Because these differences
between Courtesy Notices and Bulletin Notices of Liquidation occur far
too often and are directly related to the changes sought to be made by
Sections 113 through 115 of H.R. 4418, AAEI recommends that Congress
change the statute to provide that the Courtesy Notice of Liquidation
serves as the official Notice of Liquidation and that CBP be required
to maintain permanent records of the date that such notices are mailed
to importers. Finally, AAEI notes that CBP considered, but did not
adopt, interpreting 19 U.S.C. Sec. 1514 in a way that would preclude
importers from protesting ``no change'' liquidations (i.e., where CBP
liquidates an entry based on the classification and declared value
contained in the entry). AAEI requests that the Subcommittee note in
its Report accompanying H.R. 4418 that CBP should not interpret
Sec. 1514 to preclude protests on ``no change'' liquidations and
entries deemed liquidated by operation of law.
F. Review of Protests
Section 114 amends Section 515(b) of the Tariff Act of 1930 (19
U.S.C. 1515(b)) to provide that importers may request accelerated
disposition of a protest at the time the protest is filed, rather than
having to wait 90 days as is currently required. AAEI has been involved
in this effort and supports the provision, as it will allow importers
flexibility in obtaining a decision quickly from CBP in order to appeal
a decision to CBP Headquarters or file a summons with the Court of
International Trade, particularly when a large number of entries are
involved in a single legal issue.
G. Establishment of Integrated Border Inspection Areas at U.S.-Canadian
Border
Section 122 of the legislation authorizes the establishment of an
integrated border area at the U.S.-Canada border, and would foster a
high degree of cooperation between the customs agencies of the two
countries in order to inspect vehicles before accessing bridges and
tunnels traversing the nation's northern border. Because the United
States and Canada currently cooperate closely in both trade
facilitation (i.e., Free And Secure Trade or ``FAST'') and trade
security (i.e., Partnership in Protection or ``PIP''), AAEI supports
legislative efforts to authorize customs officials to operate in each
country in order to maintain a seamless, but secure border. Indeed, our
members have been active in forging private sector cooperation and
coordination. AAEI would, however, very much welcome the opportunity to
work with Congress and CBP to ensure that appropriate limitations are
placed on the legal authority exercised by such Canadian officials
while stationed in the United States. AAEI suggests that the agreements
forged between foreign governments and CBP for the Container Security
Initiative may serve as a useful model for this program.
H. Interpretation of Textile and Apparel Provisions
Section 125 of the proposed legislation directs CBP to interpret
preferential treatment of textiles in various trade agreements (i.e.,
the African Growth and Opportunity Act, the Andean Trade Preference
Act, and the Caribbean Basin Economic Recovery Act) broadly in order to
maximize the benefits to eligible beneficial countries. AAEI supports
Congressional efforts to ensure that the potential of these agreements
is fully realized by their intended beneficiaries.
VII. Summary
AAEI greatly appreciates the Subcommittee's efforts to ensure that
trade facilitation is recognized as an equal partner to trade security,
a goal that is evident in many of the provisions of H.R. 4418, and we
are generally supportive of the proposed legislation. We also
appreciate the opportunity to comment on important issues beyond the
specific provisions of H.R. 4418, such as whether CBP's programs and
policies similarly recognize the importance of a relationship of
equals. We believe that the Subcommittee's continued oversight and
active promotion of conjoined security and facilitation priority
programs can make an enormous difference.
While CBP has put forth an extraordinary effort in improving trade
security, it is quite clear that there is a growing belief among AAEI
members that the agency views trade facilitation as of secondary
importance. We therefore support all efforts by Congress to promote the
twin goals of trade security and trade facilitation, which are
complementary administrative and enforcement functions. Clearly, we
look forward both to supporting this Subcommittee's active involvement
and to continuing our partnership with CBP in pursuit of these goals.
Statement of American Trucking Associations, Inc., Alexandria, Virginia
Introduction
Mr. Chairman and members of the Subcommittee, thank you for
providing this opportunity to comment on the FY 2005 and 2006 budget
authorizations for the Bureau of Customs and Border Protection and the
Bureau of Immigration and Customs Enforcement. Both of these agencies
are important to cross-border trucking security and facilitation.
We would like to take the opportunity to address several issues
relevant to these agencies and their efforts at protecting our borders
and facilitating the movement of goods and people. Specifically, we
will discuss the creation of the Department of Homeland Security's
creation and organization and its effect on the Bureau of Customs and
Border Protection, the Free and Secure Trade/Customs-Trade Partnership
Against Terrorism program, customs modernization issues, US-VISIT, and
several other programs of interest.
American Trucking Associations (ATA), Inc., with offices located at
2200 Mill Road, Alexandria, Virginia22314-4677, is the national trade
association of the trucking industry. Through our affiliated trucking
associations, and their over 30,000 motor carrier members, affiliated
conferences, and other organizations, ATA represents every type and
class of motor carrier.
The trucking industry plays a critical link in the economic
interdependency among the United States, Canada and Mexico, moving
about 74 percent of the value of freight between the United States and
Canada, and about 83 percent of the value of U.S.-Mexico freight.\1\
The increasing trade volumes that have been generated among the three
North American Free Trade Agreement (NAFTA) partners have not only been
good for the economic well being of our countries, but have also
allowed our customers throughout North America to diversify, expand and
improve their asset utilization and access new markets for their
products. According to U.S. government data, in 2002, 6.8 million
trucks entered the U.S. from Canada, while 4.4 million entered from
Mexico, resulting in more than 13 million truck crossings a year on the
northern border, and more than 8 million crossings on the U.S. southern
border.
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\1\ Bureau of Transportation Statistics, U.S. Department of
Transportation
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Creation of DHS-DHS, CBP and Trade Functions
ATA supported the concept of a unified agency within the U.S.
government to deal with national security in the wake of the events of
September 11, 2001. In addition, we strongly support the ``One Face at
the Border'' concept. Of course, a massive government departmental
reorganization, such as that experienced by the Department of Homeland
Security (DHS), which blended 22 agencies, would be expected to produce
some growing pains. This has been true of the creation of DHS, and the
integration of CBP.
Prior to the terrorist attacks in 2001 and prior to its integration
into DHS, CBP, as the U.S. Customs Service, had already begun work to
make the international trade environment more secure and compliant with
a new automated import-export system, the Automated Commercial
Environment. In addition, after the terrorist attacks in 2001, the
agency worked with the trade community and the Commercial Operational
Advisory Committee (COAC) to create the Customs-Trade Partnership
Against Terrorism (C-TPAT), a voluntary security program for, among
others, all international transportation providers. The trade community
felt confident in working with CBP and that programs like C-TPAT and
the Automated Commercial Environment (ACE), discussed below, would
fairly balance the agency's two primary missions--security and trade
facilitation.
ATA supports coordination of CBP policies under the DHS's Bureau of
Transportation Security, which has provided strong and consistent
guidance. The confusion over policy direction and authority that marred
the first months of the creation of DHS has, fortunately, abated under
the direction of BTS. However, the CBP dual missions of trade
facilitation coupled with national security considerations must be
constantly and zealously balanced. For that reason, ATA also strongly
supports CBP's province over operations, regulations, and issues
pertaining to international trade at our borders and ports. This is
important to continuing the kind of consistency, expertise and
institutional knowledge that will benefit both trade and national
security. ATA also supports CBP's continuing efforts to communicate in
an open forum with the trade community through its Trade Support
Network and other venues, and its willingness to consider the
operational realities of international trade when promulgating new
security or trade regulations.
In reality, since the terrorist attacks in 2001, the DHS agencies
have struggled with balancing national security with trade
facilitation. The US-VISIT program, discussed below, exemplifies a
program that over-emphasizes national security to the expense of trade
facilitation. We encourage both Congress and the agencies to work
closely with the trade community in order to avoid further congestion
at our borders that negatively affects our national economy.
Customs and Border Protection Programs
ATA believes that CBP's success with providing security at the
borders must be examined in the context of several programs that the
agency either created or administers. These programs are discussed
below.
Free and Secure Trade/Customs-Trade Partnership Against Terrorism (C-
TPAT)
ATA supports the FAST/C-TPAT program as an important voluntary
trade-government security program, and has encouraged its cross-border
members to enroll. C-TPAT was originally created and developed within
the COAC, with CBP consulting with trade for feedback prior to
finalizing the program. For the motor carrier industry, the program at
our borders is Free and Security Trade/C-TPAT. The program requires a
certain level of security measures to be taken by motor carriers in
their hiring practices, their operations, and in securing their
facilities. The FAST portion of the program serves two functions: 1) to
certify the drivers, by doing extensive background checks in both the
U.S. and Canada; and 2) to promote electronic transmission of driver,
freight and equipment information to CBP, as required under the Trade
Act.
Unfortunately, for cross-border less-than-truckload motor carriers,
the promise of this excellent program cannot be fully realized. Unless
all the freight on a trailer is from a C-TPAT enrolled importer, the
benefits of the program for LTL carriers are relatively few. This, in
turn, mitigates the effectiveness and intent of the FAST/C-TPAT program
for these carriers, who, according to CBP, haul about 20 percent of
cross-border freight.
ATA strongly supports the concept of FAST lanes, which were
originally promised to carriers at the ports of entry but slowly became
``desired results'' rather than reality, further diminishing the return
on investment for the enrolled carriers. ATA supports more investment
in better border infrastructure that would make FAST lanes a reality,
fulfilling the promise of better security and trade facilitation for
our member carriers. Because truck traffic at the border will only
increase over time, it makes good sense to pay attention to this issue
now, rather than later, in order to avoid threatening the economic
health of the U.S.
As to the effectiveness of the FAST/C-TPAT program, we can safely
say that to date there have been no major terrorist incidents stemming
from cross-border freight entering into the United States. We would
call this a 100 percent effectiveness rate. But because the program is
still in its infancy in many ways, our expectation is that it will grow
and change over time to meet the needs of CBP and of the trade
community. ATA believes CBP is headed in the right direction with this
kind of strong voluntary partnership security program. We support
periodic audits of FAST/C-TPAT motor carriers to ensure the integrity
of the program, provided the audits do not become overly burdensome.
When the ACE automated truck manifest is finally activated, along
with the implementation of the Trade Ade regulations, both discussed
below, we will be more able to fully evaluate the effectiveness of all
of the border programs created to facilitate trade and provide for
national security.
Customs Modernization (Automated Commercial Environment/International
Trade Data System) (ACE/ITDS)
ATA has supported the concept and creation of the ACE system since
it was first proposed. However, building the system has faced a series
of challenges in the areas of funding and design. We continue to
support ACE as a critical program that will facilitate trade and
provide security at our nation's borders.
ACE began its life in the mid-1990's as a trade facilitation tool
for CBP, but quickly added national security to its intended use after
the terrorist attacks in 2001. ATA and some of its members worked for
several years prior to the terrorist attacks on the ACE Multi-Modal
Manifest (MMM), which was intended to serve as a manifest information
collection tool for CBP so the agency could screen freight, people and
equipment entering the U.S. Work on the MMM continued after September
2001, accelerated by an infusion of money from Congress, and continues
to this day. In tandem with this development, CBP has beefed up its
Automated Targeting System in order to more effectively screen freight,
personnel and equipment data for informational anomalies.
Unfortunately, for the motor carrier industry, the truck portion of
the MMM, which would provide an automated truck manifest is not yet a
reality. Originally slated to become fully functional in September of
2002, we are still waiting for our electronic truck manifest, which is
most likely to be up and running in the Spring of 2005. This delay is
the result of a number of small setbacks in the previous foundations
built in the ACE system. We hope to see no further delays.
Judging from CBP's experience with the air, ocean and rail
Automated Manifest Systems, we can safely say that these systems are in
a constant state of flux, with constant changes demanded to refine the
system, and we expect a similar experience with the ACE MMM. We are
aware that the ACE MMM may require adjustments and changes ranging over
a number of years.
The one remaining fly in the ointment for ACE is the ITDS, the
front-end data collection system for a number of government agencies
with an interest in international trade. Despite the fact that the
concept of ITDS has been around since the mid-1990's, progress has been
slow in getting government agencies with an interest in collecting
information or data on international trade committed to built into ACE.
At this point, ATA believes some sort of mandate--either from Congress,
DHS or the President--is necessary to speed this process along. An
infusion of money into the ITDS Board of Directors and the individual
agencies that have an interest in international trade would certainly
help in the effort to promote ITDS participation, which in turn would
enhance national security and trade facilitation.
To ensure the success of ACE/ITDS, ATA supports adequate funding
levels from Congress. ATA belies that both ACE and ITDS are examples of
successful government-industry partnerships. We believe these projects
should serve as a model for other government agencies dealing with
cargo and security issues, both domestically and internationally. This
kind of cooperative effort allows agencies regulating our industry to
know about our businesses, just as we learn about the business of
government.
Trade Act of 2002
The Trade Act ties the FAST/C-TPAT program to a time-definite
prenotification requirement for motor carriers. The Act requires motor
carriers (and other transportation providers in other modes) to send
information on freight, drivers and equipment electronically to CBP
prior to arrival at the border. For motor carriers that are C-TPAT
certified, with FAST-certified drivers, carrying freight from a C-TPAT
importer of record, the prenotification time is one-half hour. For
either non-C-TPAT carriers or freight that is not from a C-TPAT
certified importer of record, the prenotification time is one hour
prior to the truck's arrival at the border. This time gives CBP the
opportunity to run the data on freight, driver and equipment through
its Automated Targeting System in order to spot anomalies and identify
the need for a security or compliance inspection.
When the ACE truck manifest is completed, motor carriers will be
able to use it to transmit the required freight, driver and equipment
information to CBP. Until that system
development is completed, the trucking industry will use either a
FAST/NCAP electronic manifest, which is currently used by only a few
importers at the northern border, or the Pre-Arrival Processing System
(PAPS), a bar-coded system. Both of these systems serve to provide the
required pre-arrival information so that CBP can target shipments for
security and compliance.
Other Programs That Affect CBP
Because CBP is the lead agency at the border, it takes on the
responsibility for a administering regulations for other agencies. Some
of these programs are discussed below.
US-VISIT
ATA has some concerns about the practicality of requiring a
separate entry-exit system for truck drivers at our northern and
southern borders, as would be required by the US-VISIT program. The
trucking industry is concerned about how US-VISIT will impact or
interact with technologies to facilitate enforcement efforts while also
expediting the movement of cargo and people across our borders. If the
implementation of US-VISIT results in increased delays in getting
commercial and regular vehicles through our ports of entry, the
increased congestion and traffic could have a negative environmental
impact in and around border towns and cities impacting border
communities and have a serious effect on the U.S. economy.
The task of enforcing DHS's US-VISIT program at our borders will
fall to CBP. ATA recognizes that the implementation of the US-VISIT
program is mandated by various statutes, including sections of the Data
Management Improvement Act (DMIA), the USA PATRIOT Act, and the
Enhanced Border Security and Visa Entry Reform Act of 2002. We
anticipate implementation of US-VISIT at the 50 busiest land border
ports of entry (POE) by the end of 2004 as stipulated in the DMIA.
These US-VISIT requirements would have a tremendous impact on the U.S.
economy, if we consider that 400 million individual transactions take
place at land border ports of entry on a yearly basis, and more than 20
million total truck crossings take place every year at our northern and
southern borders.
ATA supports government agency sponsored programs that allow
trucking companies to provide secure, efficient, effective and safe
cross-border operations. We believe the end goals of security and
efficiency are not mutually exclusive, but we must be careful to design
systems that do not impede our economic security and growth.
The FAST/C-TPAT program for carriers and drivers has already
established a high level of security for known entities, and this
should satisfy the requirements of the US-VISIT program. ATA believes
that drivers and carriers in this program should qualify to transport
international commercial shipments without having to provide both
biometric identifiers and have a digital picture taken every time upon
entry, and then to provide the biometric identifiers again upon exit.
Food and Drug Administration--Bioterrorism Act of 2002
ATA has worked with both the FDA and CBP to make the provisions of
the Bioterrorism Act practical for our industry while not sacrificing
national security. The task of enforcing the BTA regulations at our
borders will also fall to CBP.
The BTA requires importers of record to submit information on food
shipments carried by truck two hours prior to reaching the border. This
timing does not match the CBP timing under the Trade Act, and we
foresee a great degree of unnecessary confusion if this discrepancy is
not corrected. CBP has been working with FDA to establish an adequate
targeting program so that the FDA's BTA prior notice time requirements
can be coordinated with transportation providers' prenotification time
requirements under the Trade Act.
ATA is concerned about the effect of the BTA on cross-border trade
facilitation. On August 12, 2004, the FDA enter into the full
compliance for its prior notice requirements under the BTA, and trucks
that arrive at the border without prior notice having been filed or
with inadequately filed prior notice will be stopped, held or turned
around. The BTA requirements have added a tremendous burden to an
agency (CBP) that already carries a great deal of responsibility at our
borders. ATA supports additional funding to allow the CBP to carry out
its enhanced mission at our nation's borders and ports.
Hazardous Materials Background Checks
ATA supports the use of the driver's FAST card to meet any needed
security requirements at the border. An additional background check for
drivers carrying hazardous materials has been proposed. If DHS requires
an additional layer of security at the border by adding this background
check requirement for drivers carrying hazardous materials, this
extends the monitoring responsibilities of CBP even further. The
requirement is duplicative, and is a perfect example of the need to
coordinate requirements within the DHS agencies. Cross-border truckers
that enroll in the FAST program do not need this additional security
measure, and the requirement, for them, is not only duplicative but
also costly and unnecessary.
Conclusion
The tasks of ensuring both the security of our country and the
integrity of our economy are daunting. ATA commends DHS and CBP for
their efforts at integrating these two tasks, and hopes the agencies
will continue to work with industry to achieve them. To achieve this,
we offer the following:
ATA supports BTS's efforts to better coordinate and
provide policy consistency for customs' functions and guard against
duplicative requirements.
ATA supports CBP as the lead agency in dealing with
border and port security and trade facilitation.
ATA supports a strong balance between trade facilitation
and national security.
ATA supports CBP's FAST/C-TPAT program as an important
facet of Trade Act compliance and national security.
ATA supports the ACE/ITDS project as supporting the dual
missions of national security and trade facilitation.
ATA supports the continued importance of trade
facilitation and national security with CBP and other agency programs
at our ports and borders.
ATA supports additional funding from Congress in order to
build needed infrastructure at our land border ports of entry.
ATA supports adequate funding from Congress to empower
CBP's efforts at protecting the homeland and ensuring the health of our
economy.
ATA supports the use of the FAST card for border
security.
Thank you for allowing us to comment on these issues of great
importance to cross-border motor carriers. If you have any questions
about any of the information in this statement, please call Martin
Rojas, Executive Director of Safety, Security and Operations at (703)
838-7950 or Margaret Irwin, Director of Customs, Immigration and Cross-
Border Operations at (703) 838-1745.
Customs and International Trade Bar Association
Washington, D.C. 20009
June 25, 2004
Congressman Philip M. Crane, Chairman
Subcommittee on Trade
Committee on Ways and Means
1104 Longworth House Office Building
Washington, DC 20515
Dear Chairman Crane:
The Customs and International Trade Bar Association (``CITBA'')
welcomes the opportunity to submit these comments for the hearing
record in lieu of a personal appearance. CITBA is an association of
attorneys practicing primarily in the area of customs and international
trade law. These comments are in response to the Advisory from the
Committee on Ways and Means, Subcommittee on Trade, of June 7, 2004
(No. TR-5), announcing the above-captioned hearing on budget
authorizations and another Customs issues, such as reorganization of
the Department of Homeland Security (``DHS''), security and trade
facilitation, and customs modernization.
User Fees
CITBA supports the language in Section 103 of the bill that would
require a study and report on the collection and use of Merchandise
Processing Fees imposed under the Consolidated Omnibus Budget
Reconciliation Act of 1985. For too long, it has been impossible to
determine whether the amount of such user fees approximates the cost of
the services provided by the Bureau of Customs and Border Protection
(``CBP'' or ``Customs''). Moreover, the revenues collected have gone
into the general revenue without any method of ascertaining whether
they have gone to funding that agency's commercial operations. CITBA
strongly supports tying the user fee collections directly to Customs
operations. Enacting Section 103 would also help blunt any criticism or
complaint by our trading partners that these user fees may be
inconsistent with U.S. obligations under international trade
agreements.
Technical Amendments on Entry and Protest
Subtitle B of the bill provides for various amendments to the laws
governing entry procedures and administrative review of Customs
decisions. CITBA strongly supports these amendments, which reflect a
consensus among private sector and government experts as to the minimum
level of statutory changes required to implement upcoming developments
in the customs modernization plan. As the Subcommittee is well aware,
initial releases under the Automated Commercial Environment are
underway. The Trade Support Network, a joint government-industry
partnership designed to ensure that ACE fulfills both sectors'
requirements, has identified technical amendments, now embodied in
Subtitle B of H.R. 4418, needed to permit the realization of the new
system's benefits. For example, Subtitle B would authorize line item
liquidation when data is aggregated for periodic reporting, would
improve on the periodic payment procedures, and would simplify the
administrative review process. While all of the amendments may be
``technical'' in nature, they are critically important to providing the
proper framework to capture the benefits of the modernization effort,
and CITBA urges that Subtitle B be enacted in this, or in any other,
appropriate legislative vehicle as soon as practicable.
Homeland Security Regionalization Plans
As the legal representatives of countless importers, exporters and
related service providers, we are keenly interested in ensuring that
the laws, policies, procedures and practices of CBP are uniform and
consistent throughout the United States. While generally that is now
the case, this was not always so. The Subcommittee on Trade was
instrumental in the last decade in encouraging the Administration to
achieve uniformity in the wake of the Customs Modernization Act of
1993. Eventually the Treasury Department did away with the old Customs
regions system, under which some regions occasionally had acted
autonomously and inconsistent with national policies or procedures.
Like our colleagues in other professional or trade organizations,
we recognize the need for the Department of Homeland Security to create
a regional structure to better organize the legacy disparate agencies
and to provide for appropriate incident response management. However,
we do have concerns about the impact a new regional structure might
have on day-to-day CBP operations. We understand that DHS officials
have acknowledged these concerns and have pledged to address them in
the regionalization plan roll-out. To date, however, no details have
emerged and the trade community continues to be apprehensive about the
matter. CITBA urges the Subcommittee to stay involved in development of
the DHS regional structure planning, and to help ensure that we do not
revert inadvertently to the days when traders received inconsistent
treatment in different U.S. ports of entry.
Conclusion
CITBA expresses its appreciation to the Subcommittee for inviting
discussion of these and other important issues concerning Customs
commercial operations and homeland security. We stand ready to continue
to work with the Congress and the Administration in seeking
modernization of customs processes and enhancement of our border
security.
Respectfully submitted,
Melvin S. Schwechter
President
Statement of Grocery Manufacturers of America
The Grocery Manufacturers of America (GMA) appreciates the
opportunity to present our views on Customs budget authorization and
other issues. Of particular concern to our member companies is the
efficient operation of inspection services at the Canadian border. For
the last several months, GMA member companies have reported significant
delays at the border as well as inconsistent enforcement policies on
regulated products coming into the United States. GMA respectfully
requests that there be increased attention and sufficient resources
allocated to ensure the proper balance between border security and
trade efficiency at the Canadian border.
Agricultural Quarantine Inspections and Border Delays
Earlier this year, GMA wrote to Assistant Commissioner of Customs,
Jayson Ahern, regarding our concerns with the reduction of the hours
available for agricultural quarantine inspections at the port of
Buffalo and the equally inefficient hours in Detroit. A twenty-eight
hour weekly reduction had imposed significant costs on some of our
member companies that import regulated commodities through these ports.
As a result of the decrease in hours, companies experienced border
delays, significantly increased inventory costs and increased carrier
costs. A copy of this letter and Mr. Ahern's response is attached.
To address our concerns, the hours available for AQI inspections at
the Port of Buffalo Peace Bridge were improved to seventy-five hours
per week (8:00 AM to 11:00 PM Monday through Friday). We are concerned,
however, that wait times significantly in excess of two hours still
persist at the border and our companies continue to need to pay
considerable border clearance waiting fees to carriers. As recently as
a few weeks ago, one of our companies reported having to wait in excess
of two days for an AQI inspection at the Canadian border. The US driver
of the truck would have been better off to have returned to the United
States empty than to wait for proper clearance with his load.
Incidences like these have lead to increased reluctance of carriers to
transport regulated commodities, which in turn forces companies to turn
to less experienced and potentially less secure providers. In addition,
carrier costs have increased from fifteen to twenty percent for
regulated commodities and additional fees are incurred for each hour a
truck must wait at the border. We believe that Customs must work to
reconcile the clear demand for services with sufficient personnel to
alleviate significant wait times and other impediments to trade at the
border.
Our companies have suggested that the use of intermodal rail
transport for the movement of ``regulated'' products into the United
States could reduce traffic and ease the burden on the northern ports.
Last February, GMA companies, rail carriers and customs brokers met
with an inter-agency team of officials to discuss such a proposal. We
understand that as of yet no decision has been taken on this proposal.
We believe that our detailed and comprehensive plan will ensure
that the movement of regulated products is properly controlled.
Unfortunately, this effort may be undermined by the USDA's insistence
that they will not forgo the right to stop a train at any time even if
an agreed movement of regulated product procedure is implemented. Rail
carriers have indicated that the uncertainty of schedules under the
USDA approach may preclude their carrying regulated products. They
argue that since automotive parts and equipment use the same rail
routes and rely on just in time delivery, they cannot afford to have
trains stopped and inspected on a random basis. Rail carriers are
simply not willing to put auto industry business at risk. We hope that
Customs will work to reconcile these conflicting concerns in order to
proceed with this new approach to ease the burden at our borders.
Inspections and Cargo Security
Another difficulty we have encountered is with the inconsistent
enforcement of policies with respect to the replacement of seals on
vehicles that are broken upon inspection. In some cases, the seals are
replaced and the new seal number recorded on the bills of lading.
However, in other instances, inspectors will record that they will not
replace the seal. In other cases, drivers are told bluntly that the
inspectors simply will not replace the seals. Sometimes product is
removed from the vehicle for purposes of inspection or analysis and not
returned to the vehicle. The removal is not being documented on the
bills of lading.
This presents a major food safety and security issue for companies,
since many retail and foodservice customers will not accept shipments
of product from vehicles with no seals, or broken ones. The lack of
seals and omission of notating when product has been removed from a
vehicle, for purposes of examination or analysis, which are not
properly returned results in undocumented receipt shortages. This is
not conducive to the various security programs importers have
implemented nor is it conducive to government sponsored security
initiatives importers participate in such as the Customs-Trade
Partnership Against Terrorism (C-TPAT).
We believe that inspectors should be directed to replace broken
seals on vehicles following inspections; notate on the bills of lading,
or in some other form, the new seal number, what product and quantity
has been removed from the vehicle (and not returned), where the
shipment has been cleared for entry.
Conclusion
Thank you for the opportunity to present our views today. We are
hopeful that US Customs will work to increase the hours of operation of
agricultural quarantine inspectors, adopt a workable intermodal
transportation system for regulated products and ensure the consistent
enforcement of policies with regard to replacement of broken seals and
documented removal of product. We look forward to working with the
Committee and US Customs to ensure that there is an appropriate balance
between border security and trade efficiency at our northern ports.
Statement of John T. Hyatt, International Freight Forwarders and
Customs Brokers Association of New Orleans, Inc., Metairie, Louisiana
We appreciate the opportunity to address certain issues, which are
the purview of your Subcommittee on Trade, and also of concern to our
membership. Our organization consists of 43 member firms which operate
in the Service Port of New Orleans and process entries (in addition to
New Orleans,) at Baton Rouge, Birmingham, Chattanooga, Gramercy,
Gulfport, Huntsville, Jackson, Knoxville, Lake Charles, Little Rock,
Memphis, Mobile, Morgan City, Nashville, Pascagoula, Shreveport and
Blountville (Tri-Cities.)
In the post 9/11 era we have seen a number of initiatives rolled
out by legacy U.S. Customs designed to secure the supply chain and
thwart terrorist infiltration of cargo transport. We applaud these
efforts, but at the same time feel as if we are working at cross-
purposes. Local Customs officials have been most helpful when we seem
to hit bureaucratic walls. We were advised that a ``point'' system was
established at the ATC (Automated Targeting Center) and promised less
enforcement exams as each element of the supply chain became C-TPAT
certified (carrier, importer, broker.) From anecdotal evidence we don't
really see a diminution of these types of examinations. More troubling,
it appears that in some cases, carriers and terminal operators may be
using the excuse of ``security'' to create new profit centers. There
should be some oversight (perhaps from the FMC,) requiring these
entities to justify such charges based on cost analysis.
We realize that there were some ``growing pains'' with the merger
of legacy agencies into the Bureau of Customs and Border Protection and
it may be too early to judge its success. Only recently has legacy
Customs and USDA/APHIS standardized manning levels and work rules which
should now allow 24/7 coverage for cargo inspection purposes,
permitting more expeditious examinations within carrier free time
periods. In the past, carriers had allowed additional free time due to
government ``holds.'' That no longer obtains. Additionally, container
demurrage charges have increased dramatically from $20/day to between
$75 and $100/day. Thus, manning levels to ensure speedy releases are
crucial to the trade.
It is unfortunate that the U.S. Coast Guard was not also included
in BCBP as its efforts seem to be duplicative and increasing the
overall cost to the trade, i.e., opening sealed containers on vessels
at sea, not resealing with any CG ``seal,'' causing BCP shore side to
assume that container integrity had been compromised.
Within the past generation U.S. international trade has grown from
just 5% of GNP to over 25%. International trade is a vital part of our
economy. Being mindful of this, we must ensure that at the same time we
seek to secure our borders we do not jeopardize our economic well
being.
Statement of National Retail Federation
On behalf of the U.S. retail industry, the National Retail
Federation (NRF) submits these comments to the House Ways and Means
Subcommittee on Trade for its hearing on U.S. Customs authorization and
other customs issues. NRF is the world's largest retail trade
association, with membership that comprises all retail formats and
channels of distribution including department, specialty, discount,
catalog, Internet and independent stores as well as the industry's key
trading partners of retail goods and services. NRF represents an
industry with more than 1.4 million U.S. retail establishments, more
than 20 million employees--about one in five American workers--and 2003
sales of $3.8 trillion. As the industry umbrella group, NRF also
represents more than 100 state, national and international retail
associations.
Most of NRF's members import products into the United States or
rely upon imported products to fill out their merchandise assortments.
Many of our members are also participants in the Customs-Trade
Partnership Against Terrorism (C-TPAT), and a very significant number
are regarded by U.S. Customs as significant importers. For this reason,
NRF has a strong interest in making sure that there are adequate
resources to support the activities of the newly formed Department of
Homeland Security (DHS), and its Bureau of Customs and Border
Protection (CBP).
NRF and the retail industry would like to impress upon this
committee that while homeland security is an important national
priority, there are still key trade compliance functions within CBP
that must be adequately supported and monitored. We continue to be
concerned about the balance between the agency's twin missions of
security and trade facilitation, and urge the Committee to continue
oversight of the agency to ensure that tariff collection and trade
compliance do not become secondary considerations.
We have several issues that we would like to address as part of
these hearings: 1) Transition issues surrounding the removal of textile
and apparel quotas at the end of this year; 2) The plans to regionalize
CBP and its potential impact on trade compliance programs; 3) Issues
relating to non-intrusive cargo exams; 4) Contingency plans in the
event of a security ``event'' at one or more of our blue water
seaports; and 5) Government funding for security.
Transition Issues for Textile and Apparel Imports
Under the terms of the World Trade Organization Agreement on
Textiles and Clothing (ATC), U.S. quotas on imports of textiles and
apparel from most WTO members will be lifted on January 1, 2005, and
trade in these industrial products will revert to the basic rules under
the WTO that apply to all other industrial goods. There are only a
handful of exceptions--China, which has special rules negotiated as
part of it accession agreement to the WTO, and those nations that are
not WTO members.
Under the decades-old quota regime, importers are required to
provide a paper ``textile declaration,'' which provides details on the
origin of the goods and a ``visa,'' which is usually not electronic and
is issued by the exporting country. Without these documents, no textile
or apparel shipment can be entered into the commerce of the United
States. These documents are provided to support the quota system, which
limits imports by country and by textile category (a three-digit
category system that is separate and distinct from the Harmonized
Tariff System used to determine duty rates).
These documentation requirements exist solely for the purpose of
administering quotas, and, therefore, there is no overriding reason to
continue them past January 1, 2005, for freely traded goods. No other
industrial good, subject to the regular NTR rules, requires a visa
provided by the exporting country. No other industrial good, subject to
regular tariffs, requires a detailed origin declaration. NRF believes
these requirements for textile and apparel imports should be dropped by
U.S. Customs as of January 1, 2005.
Eliminating these requirements would clear the way to automate
trade in these product categories. Indeed, integrating these products
into the normal way of conducting import transactions would free up
needed resources to devote to security or other, more pressing, trade
compliance issues. There is no reason to waste precious government
resources on import documentation necessary to support a quota regime
that has expired. Dropping these requirements will not reduce the
statistical information obtained by Customs or Census, nor will it lead
to greater trade fraud.
Nevertheless, U.S. Customs has yet to provide any guidance to the
trade on how documentation requirements will be modified or what
transition mechanisms they plan to put in place leading up to the end
of the quota system on January 1, 2005. Given the fact that we have
known for ten years that these quotas will expire at the end of this
year, it is curious that less than six months before the event, U.S.
Customs has yet to issue any guidance at all.
NRF strongly urges the Committee to exert oversight and direction
over this process to ensure that the import procedures applicable to
textiles and apparel, come January 1, 2005, are the same procedures
that apply to all other normally traded industrial products.
Regionalization of CBP
Many years ago NRF and other import groups worked with Congress to
ensure that certain trade compliance aspects of U.S. Customs--rulings,
regulations, and import specialists in particular--were centralized. At
the time, there were concerns that trade compliance issues were being
unevenly applied at different ports of entry, touching off so-called
``port shopping'' to find the port with the easiest compliance
requirements.
NRF strongly believes that certain aspects of trade compliance--
especially those involved with helping importers classify merchandise
for duty compliance--should remain centralized. More important, the
application of trade compliance laws and regulations should be even-
handed and guided on a national basis.
For these reasons, we have been deeply concerned over reports
coming out of DHS that the department is preparing to implement a major
decentralization plan for CBP. Details of this decentralization are
unknown to us, but we continue to hear from U.S. Customs officials that
the agency believes it must decentralize to meet its new security
objectives. We urge this committee to ensure that such a
decentralization will not apply to trade compliance activities of CBP.
Vehicle & Cargo Inspection Systems (VACIS) Issues
In the wake of the events of September 11, 2001, Customs has
significantly increased the number of cargo inspections it undertakes.
The vast majority of these inspections are non-intrusive and use
Vehicle & Cargo Inspection System (VACIS) technology, which scans
containers through the use of gamma ray imaging.
The use of VACIS exams is preferable to full physical cargo
examination. However, it is clear that many seaports do not have a
sufficient number of these systems. More important, the use of these
systems has raised important health and safety concerns among long
shore workers that call into question their efficacy and long-term
viability as an inspection tool.
It may be possible to move a VACIS system from one place to another
as it is currently being employed. However, the system is designed to
operate as a stationary piece of equipment. The system is set up at a
location and trucks drive through it during which an x-ray is taken of
the international shipping container. When used in this fashion, a
VACIS system can process a container in a very short time, and
significantly improve the ability of the United States to inspect
cargo.
However, most VACIS systems are not being used this way. Longshore
workers have raised concerns about the long-term health effects on
drivers who must drive a truck through this system. Consequently, most
VACIS systems are now being used in a mobile mode where trucks are
lined up and the VACIS machine is moved over the truck. This
significantly slows the rate of inspection, results in many system
failures and breakdowns, and is adding to congestion and air-pollution
at the nation's ports.
Congress should conduct further oversight with respect to the use
of these systems. They must be certified as safe for the workers who
must use them. If they are safe, then the government ought to take
steps either to compel port workers to cooperate with these exams, or
devote enough resources to employ its own truck drivers. Congress
cannot hope to increase the number of non-intrusive exams without
having significant supply-chain impacts if the technology is not well-
accepted by the workers who must use it, or if there are significant
health or safety concerns about its use.
Emergency Seaport Contingency Plans
Most of NRF's members who are large importers have fully embraced
the C-TPAT program. They, more than anyone, understand the need to
secure the supply chain from factory to store in an effort to avoid any
kind of security problem related to international transportation. Our
hope is to avoid any security ``event'' related to international cargo,
because such an event would have catastrophic impact, not only on the
nation's retailers, but also the entire U.S. economy. For this reason,
we believe we need more than just preventive measures, we also need
contingency plans relating to our nation's seaports.
Our members have been told many times by officials at DHS and the
Department of Transportation that a single incident in one of our
seaports could result in every seaport in America being closed to trade
for a period of time.
We have only to look back on the events of 2002, when a labor
dispute resulted in a ten-day closure of every port on the West Coast,
to understand just how costly and devastating such a closure might be.
Within one or two days, trains bearing export cargo stopped rolling.
Grain elevators filled. U.S. freezers reached their capacity by the
third day as fresh products were diverted to frozen. Exporters lost
foreign sales as perishables rotted on the docks. By day five,
manufacturers were shutting down factories and sending workers home.
Even after the ports were reopened, it took months to sort out the
backlog. And during the initial phases of the reopening, cargo was
literally stranded at ports of call and forced to sit there for weeks
on end because of government red tape.
We know what would happen if another terrorist incident were to
occur. But DHS appears to have no national contingency plan for
actually dealing with the commerce of the United States should an event
occur. Nor do we have a clear understanding of the conditions that have
to be in place in order to reopen our ports after an incident. Finally,
we need some attention to emergency rules, such as emergency suspension
of the Jones Act, that will allow the diversion of cargo from one port
of call to another in an instance where a single port is shut for an
indeterminate period of time, but other seaports remain open.
We call on Congress to insist that DHS and DOT collaboratively
develop contingency plans for reopening ports after an incident, and
for handling cargo diversion in emergency situations.
``Paying'' for Cargo Security
From time to time it has been suggested that the trade community
ought to ``pay for'' security in some way, usually through some kind of
tax on import or export containers. The argument is often made that
airport security is funded through passenger taxes. It has even been
suggested by a few people that such a tax be used to support the
funding needs of DHS itself.
NRF strongly opposes any taxes or user fees that are applied to
seaport containers. The trade community already makes a significant
contribution to the U.S. treasury though Customs Merchandise Processing
Fees and import tariffs. In fact, the trade-related revenues generated
by trade activities are in excess of $20 billion each year. NRF
strongly feels that the proceeds of the MPF should be specifically
earmarked for U.S. Customs trade compliance and trade facilitation
programs since those fees are collected directly from the trade
ostensibly for those purposes. We understand that the most recent
reauthorization of the MPF includes such an earmark, and we would urge
the Committee to continue its support for such an earmark.
We do not support specific earmarks for tariff collections;
however, we urge Congress to keep these revenues in mind as we move
forward with budget authorizations, and, more important,
appropriations. Ensuring that DHS and CBP have sufficient resources to
facilitate trade and meet security concerns ought to be a high federal
priority. The fact that significant revenue is generated by
international trade should be an important factor in setting spending
priorities.
In closing, NRF thanks the committee for holding these hearings and
urges it to continue its oversight activities of DHS and CBP trade
compliance activities. If you have questions about NRF or its positions
on these issues, please contact Erik Autor, Vice President and
International Trade Counsel at (202) 626-8104.
U.S. Association of Importers of Textiles and Apparel
Washington, D.C. 20037
June 14, 2004
Honorable Philip Crane, Chairman
Subcommittee on Trade
House Committee on Ways and Means
Washington, D.C. 20515
Dear Mr. Chairman:
The upcoming hearing to consider the Fiscal Year 2005 budget for
the Bureau of Customs and Border Protection (CBP) and H.R. 4418, the
Customs and Border Security Act of 2004 provides an important
opportunity for the Subcommittee to address significant issues related
to the elimination of quota restrictions on January 1, 2005.
One effect of the elimination of quotas under the World Trade
Organization should be to guarantee that textiles and apparel are
treated the same as other manufactured products, which are traded free
of admissibility restrictions and/or additional paperwork requirements.
This development will mean significant changes in the way that textile
and apparel imports are handled at the point of entry into the United
States. If the transition from strict control to a more efficient
system is to work smoothly, a great deal must be accomplished before
the end of the year by both CBP and the inter-agency Committee for the
Implementation of Textile Agreements.
We respectfully urge the Subcommittee to use the hearing next week
to press CBP officials to move forward with promptly addressing the
necessary changes in customs entry procedures.
Because of the quota regime, importers of textiles and apparel have
not been able to take advantage of many of the improved entry
procedures available to importers of other types of merchandise. This
creates additional work for importers and it certainly creates
additional work for CBP, which has been required to operate parallel
entry systems, one for textiles and apparel and another for most other
merchandise. The end of quotas in 2005 will change all of that.
USA-ITA has opened a dialogue with CBP on these issues. These
discussions have centered on the following:
Elimination of the ``live'' entry requirement;
Elimination of the extended conditional release period
Paperless entries made available to all textile and
apparel imports;
Elimination of the quota charge statement; and
Elimination of the textile declaration.
CBP has indicated that it will eliminate the quota charge
statement, but is not able to make additional changes without CITA's
approval. We respectfully urge the Subcommittee to question the extent
to which CBP is compelled to await CITA approval, and to require CBP to
initiate steps to modify its regulations.
1. Live entry
Currently, textile and apparel products are subject to a so-called
``live entry'' requirements, which means that the entry must be
reviewed and duties paid before the goods may be released. While this
may be justifiable where quotas apply, so that a determination of the
availability of quota may be made before entry, it makes no sense once
quotas are eliminated. The Subcommittee should require that CBP make
the necessary changes to implement an elimination of the live entry for
non-quota textile and apparel products as of January 1, 2005.
2. Conditional Release Period
For all goods entering the United States, the initial release by
CBP is conditional, subject to a demand for redelivery to CBP within 30
days should CBP determine that entry requirements were not met.
However, for textile and apparel products, CBP's regulations, at 19 CFR
section 141.113(b), the conditional release period is extended another
180 days--six months--during which CBP may demand redelivery of
merchandise or, in the event of a failure to redeliver, assess
liquidated damages. Clearly, this exceptional treatment of textile and
apparel products can no longer be justified once the quotas no longer
apply. Thus, the Subcommittee should instruct CBP to modify its
regulations to eliminate the extended conditional release period for
textile and apparel products not subject to quota.
3. Availability of Paperless Entry
Today, textile and apparel products must be accompanied by a
variety of piece of paper. These include a quota charge statement and a
textile declaration. With the requirement of a presentation of these
piece of paper, it is impossible for apparel importers to participate
in the paperless entry process available to all other importers of
consumer goods.
It would seem to go without saying that once products are not
subject to quotas, importers of such goods should not have to present a
statement asserting whether they paid for any quota applicable to those
goods. However, in the absence of a definitive statement from
U.S.Government officials, uncertainty dictates that importers continue
to obtain that statement from suppliers and include it with their entry
package. CBP should be required to state with certainty that this
document is not required for products no longer subject to quota.
The various textile declarations are a particular concern. These
are declarations that state that a textile product is a product of a
single country (single country declaration) or of production in
multiple countries (multiple country declaration) or that a textile
product is not subject to quota restrictions at all (a negative
declaration). If these pieces of paper continue to be required for
release, none of the improvements in the clearance of textile
products--or the treatment like all other goods--will be realized. The
regulation requiring textile declarations, 19 CFR section 12.130(f),
was created in the context of the quota regime and was intended to
ensure that quota admissibility requirements were satisfied. These
admissibility requirements will be eliminated on January 1, 2005. The
Congress should therefore direct CBP to eliminate the textile
declaration requirements from its regulations concurrent with the end
of the quota system.
If the textile declarations are not eliminated, CBP will have to
continue to operate a separate entry system for textiles and apparel.
The added expense and loss of efficiency that this caused might have
been justified while quotas were in place; however, the end of the
quota regime cancels any justification.
Sincerely,
Laura Jones
U.S. Business Alliance for Customs Modernization
Washington, D.C. 20005
June 17, 2004
Congressman Philip M. Crane, Chairman
Subcommittee on Trade
Committee on Ways and Means
1104 Longworth House Office Building
Washington, DC 20515
Dear Chairman Crane:
The U.S. Business Alliance for Customs Modernization (BACM)
welcomes the opportunity to provide this statement in lieu of a
personal appearance at the June 17 hearing of the Subcommittee on
Trade, Committee on Ways and Means, concerning budget authorizations
for U.S. Department of Homeland Security (DHS) agencies and other
customs issues. BACM is a coalition of two dozen of the largest U.S.
importers and exporters. Our members file over two million customs
entries valued at over $130 billion per year. BACM is dedicated to
modernization of U.S. Customs laws, regulations and policies and is
committed to the facilitation of trade to the greatest extent possible
consistent with homeland security and trade compliance. A full list of
the BACM member companies appears at the end of this statement.
Balancing Security and Trade Facilitation
BACM fully supports the Bureau of Customs and Border Protection
(CBP or Customs) in its critical new mission of securing our borders.
Our member companies were among the first partners with the agency in
its supply chain security initiatives. In fact, several BACM companies
were among the charter members of the Customs-Trade Partnership Against
Terrorism (C-TPAT), and we have worked closely with CBP on
implementation of the advance notice requirements on inbound and
outbound shipments.
But these programs and measures are not without cost. Every change
in commercial operations has its consequences. It is incumbent upon CBP
to understand these nuances and to make balanced decisions. We commend
the Subcommittee for your insistence that trade facilitation and
protecting the revenue remain at the forefront of CBP's mission, along
with its new mandate to safeguard our homeland security.
With respect to the C-TPAT program, every single BACM company is a
participant. As part of the government's ``layered'' border security
system, it has effectively and dramatically enhanced the security of
the global supply chain. We have no doubt that the success of this
program is due to the fact that it is voluntary, and without a ``one-
size-fits-all'' template. It is critical that C-TPAT remain the
voluntary partnership that it is, with guidelines rather than
unrealistic standards, and that CBP be provided adequate funding for
the program.
Department of Homeland Security Regional Management Structure
As large importers utilizing many ports of entry throughout the
U.S., BACM members are keenly interested in ensuring that the laws,
policies, procedures and practices of CBP are uniform and consistent
throughout the United States. While generally that is now the case,
this was not always so. The Subcommittee on Trade was instrumental in
the last decade in encouraging the Administration to achieve uniformity
in the wake of the Customs Modernization Act of 1993. Eventually the
Treasury Department did away with the old Customs regions system, under
which some regions occasionally had acted autonomously and inconsistent
with national policies or procedures.
As we have clearly stated to the Administration, we recognize the
need for the Department of Homeland Security (DHS) to create a regional
structure to better organize the legacy disparate agencies for incident
response management. However, we do have concerns about the impact a
new regional structure might have on day-to-day CBP operations. We
understand that DHS officials have acknowledged these concerns and have
pledged to address them in the regionalization plan roll-out. To date,
however, our offers to provide input into the planning process have not
been accepted, no details have emerged, and we and the trade community
as a whole continue to be apprehensive about the matter. BACM urges the
Subcommittee to stay involved in the development of the DHS regional
structure planning, and to help ensure that we do not revert
inadvertently to the days when our companies received inconsistent
treatment in different U.S. ports of entry.
Section 103: User Fees`
Section 103 of H.R. 4418 would require a study on the extent to
which the amounts of user fees imposed under the Consolidated Omnibus
Budget Reconciliation Act of 1985 approximate the cost of the services
provided by the Bureau of Customs and Border Protection. BACM supports
this provision, because it is currently impossible to realistically
align the level of the fees with the costs to provide services.
Moreover, the fees collected have gone into the general revenue without
any method to ascertain whether they have gone to funding CBP's
commercial operations. BACM strongly supports tying the user fee
collections directly to Customs operations.
Subtitle B: Technical Amendment
Subtitle B of the bill provides for various amendments to the laws
governing entry procedures and administrative review of Customs
decisions. BACM strongly supports these amendments, which reflect a
consensus among private sector and government experts as to the minimum
level of statutory changes required to implement upcoming developments
in the customs modernization plan. As the Subcommittee is well aware,
initial releases under the Automated Commercial Environment are
underway. The Trade Support Network, a joint government-industry
partnership designed to ensure that ACE fulfills both sectors'
requirements, has identified technical amendments needed to permit the
realization of the new system's benefits. For example, Subtitle B would
authorize line item liquidation when data is aggregated for periodic
reporting, would improve on the periodic payment procedures, and would
simplify the administrative review process. While all of the amendments
may be ``technical'' in nature, they are critically important to
providing the framework to capture the benefits of the modernization
effort, and BACM urges that Subtitle B be enacted in this or any other
vehicle as soon as practicable.
Conclusion
BACM wishes to extend its appreciation to the Subcommittee for
providing this opportunity to address the commercial operations aspect
of CBP's mission. As some of the first private sector participants to
partner with CBP to secure the supply chain after 9/11, our actions
have shown our commitment to the new security paradigm. At the same
time, we must continue with customs modernization and trade
facilitation efforts, and CBP must continue its revenue protection
function. BACM believes that with government-industry partnerships and
the use of ``smart'' technology and programs, our nation can achieve
both security of our borders and efficiency of customs commercial
operations. We are committed to working with you and the Administration
to achieve these goals.
Sincerely,
Timothy Van Oost
Chair