[Senate Hearing 108-158]
[From the U.S. Government Publishing Office]
DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2004
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THURSDAY, MARCH 20, 2003
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10 a.m., in room S-146A, the
Capitol, Hon. Judd Gregg (chairman) presiding.
Present: Senators Gregg, Stevens, Hollings, and Kohl.
DEPARTMENT OF COMMERCE
Office of the Secretary
STATEMENT OF HON. DONALD L. EVANS, SECRETARY OF
COMMERCE
Senator Gregg. Let me formally welcome you, Mr. Secretary.
We appreciate your coming by to tell us what is happening at
the Commerce Department. The floor is yours.
Did you have a statement or anything?
Senator Hollings. No, thank you.
Secretary Evans. Thank you, Mr. Chairman. If you do not
mind, Mr. Chairman, for the record let me go ahead and read a
brief edition of what I would like to submit to the record in
my written remarks.
Mr. Chairman, Mr. Hollings, members of the committee, I am
pleased to be here again to present the President's fiscal year
2004 budget request for the Department of Commerce. With your
permission, I would like to briefly highlight some of the key
components of our budget and submit my written testimony for
the record.
A vibrant private sector is essential to American jobs and
security. One hundred years ago, Congress created the
Department of Commerce to promote American industry and
business and economic opportunity for our citizens. This is the
nexus of our diverse programs in trade, technology,
entrepreneurship, and environmental stewardship.
In developing the budget request, I have carefully followed
the President's directive to focus on four priorities. As you
know, making a budget entails difficult decisions and resources
are limited. Choices have to be made. Clearly, these troubled
times of war and attacks on our way of life demand responsible,
targeted spending. The President's total budget request for the
Department of Commerce is $5.4 billion. This budget provides
for the continued funding of key Commerce programs, while
focusing resources on four critical priorities: fostering
economic growth, contributing to homeland security, advancing
science and technology, and upgrading facilities.
To generate jobs and economic growth, government and
business decisionmakers need the best possible economic
information. An additional $5.4 million is requested for the
Bureau of Economic Analysis. These funds are required to
improve the quality and timeliness of GDP and economic accounts
data. As you know, two-thirds of the revisions in the last
three GDP annual releases were due to lack of information.
For the Census Bureau, which monitors the Nation's social
and economic development, we are asking $9.3 million in
increased spending. The money is for improved data collection
and methods for measurement of the important services sector
and continued planning for the 2010 census.
The President and I are very concerned about the economic
security of America's workers. A proposed increase of $13.8
million for economic development administration will assist
communities severely impacted by plant closures and layoffs.
To meet homeland security needs, the President is
requesting an additional $2.3 million for the Bureau of
Industry and Security. The funds will be used to strengthen
export controls on the dual use of goods and technologies that
would strengthen the military capabilities of our adversaries.
The NOAA budget request includes $5.5 million to expand
NOAA weather radio to a truly national all-hazards warning
network. The funding will allow first responders and emergency
managers direct access to the network to transmit all hazard
messages, and to further strengthen homeland security, we are
requesting $10.3 million for NIST. As you know, NIST is
investigating the collapse of the World Trade Center buildings.
Using lessons learned, we want to help develop new standards
for cost-effective safety and security of buildings.
Additionally, the funds will be used to test performance
standards for biometric systems used to identify visitors to
our country and to test radiation standards.
To support technology innovation and provide for
intellectual property protection, the Department is working to
eliminate the practice of using USPTO revenues for unrelated
Federal programs. Making more fees available sooner will enable
the agency to increase the quality of patents and trademarks
issued. Because America's leadership in science and technology
has a direct impact on our economic and homeland security, we
also are requesting $9.2 million for NIST research in such
emerging areas as nanotechnology, quantum computing, and health
care quality assurance.
We also include a $16.9 million increase for NOAA to study
areas of scientific uncertainty in climate change, and an
additional $29.8 million increase to modernize fishery
management to better protect this $50 billion industry.
Mr. Chairman, the scientists, engineers, and support staff
in our Commerce laboratories are world-class. Unfortunately, in
some cases, the facilities they occupy are not. For example,
the NIST facilities in Boulder, Colorado were built in the
1950s under the Eisenhower administration. I have seen them.
They lack adequate temperature controls. They suffer power
outages and spikes. All of this adversely affects our vital
research. The fiscal year 2004 budget request includes funding
to renovate the NIST Boulder facilities and to bolster safety
and security in NOAA's facilities and throughout the
Department.
One last comment. As I said earlier, these are troubled,
threatening times for our Nation, and we have had to make some
tough choices affecting some very good programs. To enable us
to focus on new economic and homeland security needs, this
budget phases out funding for the Advanced Technology Program
and the Technology Opportunities Program. It includes funding
only for those manufacturing extension partnership centers in
operation for less than 7 years, as the original law specifies,
and it suspends funding for the public telecommunications
facilities planning and construction.
I know that there will not be universal agreement about
these choices. There are members of this committee and other
Members of Congress who will have different views on priorities
and on funding. Let me say here, I sincerely respect those
views and those judgments, and I look forward to working with
you and working through the budget process with you on the many
issues affecting this Department.
Mr. Chairman, we appreciate the support of the committee
and the support of the committee members that provided for the
Commerce programs and initiatives in the past. This budget is
focused on helping our Nation meet the challenges it faces in
these difficult times.
PREPARED STATEMENT
I welcome your comments, and will be pleased to answer any
questions you may have. Thank you, Mr. Chairman.
[The statement follows:]
Prepared Statement of Donald L. Evans
Thank you for the opportunity to appear before you to present the
Department of Commerce's fiscal year 2004 budget request. Our focus is
on funding the core mission of the Department and its bureaus. As you
know, the Administration faces great challenges in its commitment to
fight and win the war on terrorism, while at the same time harnessing
the resources of the Federal government to protect the lives and safety
of all Americans. I hope to fully utilize the resources of the
Department of Commerce not only to provide for the physical security of
the Nation, but also to work with other agencies and the private sector
to promote economic security.
The Commerce Department's budget request of $5.4 billion supports
the President's budget plan to focus resources to strengthen our core
Commerce activities. In particular, our request supports the
Administration's economic revitalization and homeland security
priorities and continues our commitment to fund important work of the
Department to provide infrastructure for technological innovation and
to observe and manage the Nation's oceanic and atmospheric environment.
To complement the digital convergence in the private sector, we will be
proposing legislation to modernize the technology and telecommunication
entities of the Department.
The Commerce Department undertakes a wide range of activities
designed to stimulate growth of the nation's economy. Commerce gathers
and develops economic and demographic data for business and government
decision-making; helps American firms and consumers benefit from open
and fair international trade; issues patents and trademarks that
support innovation; helps set industrial standards and performs
cutting-edge scientific research; forecasts the weather to improve
public safety; and promotes sustainable stewardship of the oceans,
including ocean fisheries.
This diversity of activities is reflected in Commerce's five
strategic goals:
--Foster the Nation's economic growth.
--Secure our homeland and enhance public safety.
--Upgrade the Department's facilities, infrastructure, and safety.
--Improve and streamline the Nation's fishery management system to
better meet commercial, recreational, and conservation
objectives.
--Implement the Administration's Climate Change Research Initiative
to reduce present uncertainties in climate science, and support
policy and management decisions to benefit public safety and
quality of life.
To enhance these activities, resources will be shifted from various
lower priority programs.
ECONOMIC GROWTH
Economic growth is a central theme for the President and for the
Department of Commerce's bureaus for fiscal year 2004. The Economics
Statistics Administration's Bureau of Economic Analysis (BEA) supplies
the nation's key economic statistics, including gross domestic product
(GDP), which are crucial ingredients for business and government
decision making. BEA seeks to strengthen the understanding of the
United States economy and its competitive position by providing
accurate economic accounts data in a timely and cost-effective manner.
BEA's request includes a $5.4 million increase to accelerate the
release of major economic estimates, to incorporate new international
economic data classifications, and to acquire real-time data to improve
the quality and timeliness of economic statistics.
In conjunction with BEA's request, the Census Bureau's budget
request includes an increase of $39.1 million in current economic and
demographic statistics to fill gaps in data collection, to improve
methodologies for collecting that information, and to improve the
measurement of the Nation's service sector. The Census Bureau's budget
for fiscal year 2004 also includes funding to process and to review
data from the Economic Census, and to continue planning and designing
the 2010 Decennial Census.
The International Trade Administration (ITA) is responsible for
assisting the growth of export businesses, enforcing U.S. trade laws
and agreements, and improving access to overseas markets by identifying
and pressing for the removal of trade barriers. ITA's budget for fiscal
year 2004 focuses on promoting U.S. exports and enhancing the
competitiveness of U.S. businesses in the global economy, by fighting
unfair foreign trade barriers and by negotiating and implementing
multilateral and bilateral trade agreements.
The Economic Development Administration (EDA) helps communities
across the nation create economic opportunity by promoting a favorable
business environment to attract private capital investments and higher-
skill, higher-wage jobs. EDA accomplishes this principally through
infrastructure investments and capacity building. A program increase of
$13.8 million is requested for EDA to assist communities that
demonstrate a high level of economic distress.
The Minority Business Development Agency (MBDA) will continue to
focus on accelerating the competitiveness and growth of minority-owned
businesses by closing the gap in economic opportunities and capital
access. MBDA is transitioning from an administrative agency to an
entrepreneurial organization, and is driven by entrepreneurship and
innovation. MBDA will continue to provide minority business development
services, through its Minority Business Information Portal and local
Business Development Centers.
For more than one hundred years, the Nation has relied upon the
Technology Administration's National Institute for Standards and
Technology (NIST) for scientific and technical expertise to promote
economic growth, commerce and trade, and national security. The quality
of NIST work is exemplified by the awards in 1997 and 2001 of the Nobel
Prize, the world's ultimate recognition in science, to two NIST
scientists--Bill Phillips in Gaithersburg, Maryland, and Eric Cornell
in Boulder, Colorado. The work they are leading in super-cold matter
and the strange nature of quantum mechanics is driving whole new areas
of science and technology, from atomic clocks that do not gain or lose
more than a billionth of a second in thirty years, to the potential for
unimaginably powerful computers based on individual atoms, to new forms
of telecommunications that provide the ultimate in information
security.
The President's request includes a total of $340.8 million for the
NIST Laboratories to strengthen the national measurements and standards
infrastructure that enables innovation and economic growth. The request
will enable NIST to expand its work in the areas of nanotechnology,
advanced information technology, and health care diagnostics--all areas
with broad economic impact.
NIST will expand its program in nanotechnology, the so-called
``tiny revolution'' in technology, (total request of $62 million).
Nearly all industrial sectors plan to exploit this emerging technology,
and most of these plans call for appropriately scaled measurements and
standards, which is NIST's specialty. NIST closely coordinates its
nanotechnology work with other Federal agencies through the President's
National Nanotechnology Initiative, or NNI. NIST appropriately has the
lead in providing the measurements and standards infrastructure for the
NNI.
The request also includes $7.3 million to build on NIST's world-
class expertise in quantum computing and communications. This effort,
with teams led by NIST's two Nobel laureates, is developing
revolutionary means of making calculations much more quickly than
traditional electronic computers will ever be able to do. NIST
scientists already have made the working elements of quantum computers
based on individual atoms.
The fiscal year 2004 Budget also requests funding to allow NIST to
strengthen its programs supporting health care diagnostics, which not
only improve the quality of health care, but also ensure that U.S.
manufacturers can compete fairly in the $20 billion global market for
these products. The request includes a total of $17.1 million to
strengthen this effort. Consistent with the President's emphasis on
shifting resources to reflect changing national needs, the President's
fiscal year 2004 Budget proposes terminating the Advanced Technology
Program (ATP) and requests a total of $27 million for administrative
and close-out costs. The fiscal year 2004 President's Budget also
proposes maintaining the fiscal year 2003 policy of significantly
reducing Federal funding for the Manufacturing Extension Partnership
(MEP), for which the budget requests $12.6 million. These programs have
been well-run, but the scarce resources are needed for higher priority
programs. The budget request focuses on NIST's core mission of
measurements, standards, and laboratory research, rather than its
extramural programs, by providing the 21st century facilities the NIST
Laboratories need for success. Investment of limited NIST resources in
the Laboratory programs and facilities will have the greatest impact on
fostering innovation that leads to economic growth.
The U.S. Patent and Trademark Office (PTO) request will support the
second year of the agency's strategic plan to enhance the quality of
products and services and to keep pace with workload growth by
promoting e-government activities and reducing pendency. We understand
that intellectual property protection is paramount to the Nation's
ability to innovate and move products into the marketplace.
Concurrently, Commerce has recently proposed legislation to restructure
PTO fees to better align the fee system with the work undertaken by
PTO. The Department is also working to eliminate the practice of using
USPTO revenues for unrelated Federal programs so that a greater share
of the applicants' fees are available to the agency in the year they
are collected.
HOMELAND SECURITY
The Bureau of Industry and Security (BIS) seeks to advance U.S.
national security and foreign policy interests by regulating exports of
critical goods and technologies that could be used to damage those
interests, while furthering the growth of legitimate U.S. exporters to
maintain our economic leadership. The fiscal year 2004 budget includes
a $5.6 million increase for BIS to address vulnerabilities in
regulating exports of critical goods and technologies. This budget
increase will enable BIS to strengthen export enforcement with
additional agents and capabilities and to enhance the bureau's analysis
of U.S. export control regulations to ensure they reflect the dynamics
of 21st century market and technological changes.
We request an increase of $13.3 million (for a total of $38.7
million) for NIST to address key national needs for homeland security
measurements, standards, and technologies. This request will strengthen
NIST's portfolio of more than 100 projects that address homeland
security technology needs.
Included in this request is an increase of $7 million (for a total
of $10.9 million) as part of a program to use lessons learned from the
NIST-led investigation of the World Trade Center (WTC) collapse to make
buildings, occupants, and emergency responders safer from terrorist
attacks on buildings and other building disasters. NIST has the unique
combination of technical expertise in a broad range of building and
fire sciences and lengthy experience working with the building and
emergency responder communities to provide the Nation with the maximum
benefit from the WTC investigation and associated research.
The NIST homeland security request also includes an increase of
$5.3 million (for a total of $26.8 million) to develop the measurement
infrastructure needed to detect nuclear and radiological (``dirty
bomb'') threats, to improve the use of radiation such as x-rays and
other imaging techniques to detect concealed terrorist threats, and to
use radiation safely and effectively to destroy biowarfare agents such
as anthrax.
Our homeland security request also includes a total of $1 million
to develop standards and test methods for biometric identification
systems, used to positively identify the approximately 20 million non-
citizens who enter the United States each year or apply for visas. This
will enable NIST to carry out the mandate of the USA PATRIOT Act, which
requires NIST to develop technology standards for biometric
identification, recognizing NIST's long history of expertise in this
area.
Ensuring public safety remains a priority of NOAA and its National
Weather Service (NWS). The budget request for NOAA includes an increase
of $7.7 million (for a total of $65.1 million) to enhance homeland
security. This increase includes new funding in the amount of $5.5
million to support a scaled upgrade of the current NOAA Weather Radio
(NWR) operation to an All Hazards Warning Network. This upgrade
includes systems to standardize and automate receipt and dissemination
of non-weather emergency messages. The Administration is also
requesting $2.2 million in new funding for emergency preparedness and
safety to improve physical security at 149 NWS facilities to prevent
unauthorized individuals from entering and/or tampering with NWS
property.
The fiscal year 2004 budget request also includes an increase of
$3.7 million to secure core aspects of ITA's worldwide communications
network, to defend against unauthorized access, and to create recovery
mechanisms should damaging events occur.
FACILITIES, INFRASTRUCTURE AND SAFETY
The fiscal year 2004 budget strengthens key Commerce programs that
provide the infrastructure that enables U.S. businesses to maintain
their technological edge in world markets. Important priorities for
fiscal year 2004 are to upgrade NIST's and NOAA's facilities and
laboratories and begin consolidating PTO facilities. The NIST budget
request includes $36.2 million to address inefficiencies and safety
problems at its facilities in Boulder, Colorado and Gaithersburg,
Maryland. Valuable research continues to be lost or interrupted by
power outages, spikes, and fluctuations. This budget increase will
enable NIST to protect critical research data from degradation, and to
maintain employee safety and security. The budget also requests $8.2
million to equip, maintain, and operate NIST's Advanced Measurement
Laboratory, and to fund time scale and time dissemination backup
elements.
The budget includes a $47.7 million program increase for NOAA to
address safety and security concerns associated with its buildings,
aircraft, and ships, to upgrade weather forecast offices in the
continental United States, Alaska and the Pacific Islands, to modernize
the primary NWS telecommunications gateway, to continue construction of
the NOAA Satellite Operations Facility in Suitland, Maryland, and to
plan the replacement of the World Weather Building to be co-located
with a major research institution. During fiscal year 2004, NOAA will
also continue the tri-agency acquisition (with DOD and NASA) of the
next-generation polar-orbiting satellites, and systems design and
development for the next-generation geostationary satellite series
(GOES R).
In fiscal year 2004, the PTO will begin relocating its facilities
from 18 buildings in Arlington, VA into a consolidated 5-building
campus in Alexandria, VA with an initial move into two of the buildings
this December. The new consolidated facility is designed to meet the
PTO's operational needs, provide flexibility to future program or
process changes, and fully comply with current fire, life-safety and
accessibility guidelines. The budget includes a $44.6 million program
increase for construction inflation costs that occurred during the
project delay generated by litigation and maintaining dual rent and
simultaneous operations during the eighteen-month move period.
To strengthen the spectrum management capabilities of the National
Telecommunications and Information Administration (NTIA), to meet the
increasing demand for Federal wireless communication systems and
services, the Department of Commerce requests an increase of $1 million
for NTIA to establish a paperless system for spectrum issue resolution,
certification, satellite coordination and frequency authorization, and
to intensify research aimed at expanding spectrum utilization through
greater understanding of radio frequency interference. The fiscal year
2004 budget also proposes to suspend the Public Telecommunications
Facilities Planning and Construction (PTFPC) grants, a program
reduction of $41.1 million for NTIA during fiscal year 2004. Up to $80
million in funding for digital conversion grants for public television
stations can be made available from within the Corporation for Public
Broadcasting (CPB) $380 million appropriation, which has already been
enacted. The fiscal year 2004 President's Budget also proposes to
terminate the Technology Opportunities Program (TOP) as funding within
the Department of Commerce has been redirected to higher priority
programs.
GSA, in coordination with DOC, is planning a major renovation of
the 70-year old Herbert C. Hoover Building. This initiative will
restore the great building to its original condition, bring it up to
current code requirements, address the realities of post 9/11 security
needs and extend the useful life of this historic building. It is
essential to the optimal stewardship of the taxpayers money that we
establish a Renovations Office in fiscal year 2004. In addition, the
Department will focus on safety issues by instituting a new
Occupational Safety and Health Program targeted toward preventing
accidents and injuries through incident tracking and proactive
prevention.
FISHERIES
NOAA's budget request for fiscal year 2004 contains a $29.8 million
program increase to modernize and improve the nation's fishery
management system. Specifically, the requested funding addresses the
need to improve socioeconomic data collection, to reduce bycatch in
targeted fisheries, to increase fishery observer coverage, to
streamline the current fisheries regulatory process, and to implement
the Columbia River Biological Opinion effectively. New funds will also
increase the understanding of the effects of climate change on marine
and coastal ecosystems, and build a national observer program for the
collection of high-quality fisheries and environmental data. The fiscal
year 2004 budget includes a reduction of $40 million for the Pacific
Salmon Treaty for which all U.S. obligations have been met.
CLIMATE CHANGE
Finally, one of the highlights of the Department's fiscal year 2004
Budget is the request of $295.9 million for NOAA's climate change
research, observations and services. This amount includes an increase
of $16.9 million as part of a total request of $41.6 million for NOAA's
contribution to the President's interagency Climate Change Research
Initiative (CCRI). The NOAA fiscal year 2004 CCRI request supports
NOAA's efforts to: enhance ocean observations for climate; augment
carbon-monitoring capabilities in North America as well as in key
under-sampled oceanic and continental regions around the globe; advance
the understanding of all major types of aerosols; establish a climate
modeling center within NOAA's Geophysical Fluid Dynamics Laboratory,
which will focus on research, analysis, and policy applications for the
development of model product generation; and coordinate and manage the
Nation's interagency climate and global change programs through the
Climate Change Science Program Office.
The President's CCRI led to the creation of a new interagency
framework in order to enhance coordination of Federal agency resources
and research activities. Under this framework, thirteen Federal
agencies are working together under the leadership of a Cabinet-level
committee on climate change to improve the value of U.S. climate change
research.
The President's fiscal year 2004 Budget request for climate change
activities reflects the President's priorities by focusing Federal
research on the elements of the U.S. Global Change Research Program
(USGCRP) that can best support improved public discussion and decision-
making. Under the CCRI, various agencies will adhere to specific
performance goals, including providing products to decision-makers
within four years. The priorities of the CCRI are: reducing key
scientific uncertainties; designing and implementing a comprehensive
global climate and ecosystem monitoring and data management system; and
providing resources to support public evaluation of a wide range of
climate change scenarios and response options. Even in this time of
difficult budget decisions, the President is committed to fully funding
climate research so that we can continue to reduce the uncertainties
associated with climate change.
As I previously stated, this budget request for the Department of
Commerce has been carefully crafted to focus on those core functions
that the American people rely on from this agency. We will focus on
promoting innovation, entrepreneurship, exports, and safety, while
spreading opportunity to all Americans and ensuring responsible
stewardship of our natural resources.
CIAO MOVED TO HOMELAND SECURITY
Senator Gregg. Thank you, Mr. Secretary. CIAO has been
moved over to Homeland Security, at least in theory. I am
wondering to what extent that has actually occurred, how it is
physically being done, and whether the transfers are affecting
the operations past the infrastructure protection efforts.
Secretary Evans. It has been done. As far as I know the
transfer was made smoothly. We continue within NIST to work
with areas of CIAO in terms of protecting cybersecurity in this
country, but the CIAO group has been moved over.
Senator Gregg. Have they physically left?
Secretary Evans. Yes, gone. At least, I am not seeing them
around there any more. On March 1, 2003, pursuant to Public Law
107-296 Homeland Security Act of 2002, the CIAO was transferred
from the Department of Commerce to the Department of Homeland
Security. There are plans for the CIAO/DHS to move out of the
Herbert C. Hoover Building, but the move has not yet taken
place.
ENTRY/EXIT SYSTEM BASED ON BIOMETRICS
Senator Gregg. NIST is doing biometric identification work.
To what extent is that being coordinated with the INS efforts
to produce an exit/entry system which is based on biometrics,
do you know?
Secretary Evans. I am certain that there is close
coordination, because that is the purpose of it, is to be used
in identifying people coming into this country with biometric
techniques, and so I know there is close coordination. I am not
sure of the specific meetings.
Senator Gregg. I would be interested in getting, or having
your staff get for us an explanation of to what extent you are
working with INS and to what extent NIST has evaluated the INS
efforts in exit/entry, and whether or not they are on the right
track.
Secretary Evans. Sure.
Senator Gregg. This committee has had very serious
reservations about INS' capacity to do exit/entry system based
on biometrics. NIST is an extremely talented agency, filled
with talented people, a very strong agency. I would be very
interested in their evaluation of the INS efforts in this area.
Secretary Evans. You bet.
[The information follows:]
NIST's Work With INS on the Entry/Exit System
Under the USA PATRIOT Act of 2001 and the Enhanced Border
Security and Visa Entry Reform Act of 2002, NIST (with the
Attorney General and Secretary of State) is required to
``develop and certify a technology standard, including
appropriate biometric identifier standards, that can be used to
verify the identity of persons applying for a United States
visa or such persons seeking to enter the United States
pursuant to a visa for the purposes of conducting background
checks, confirming identity, and ensuring that a person has not
received a visa under a different name . . .'' NIST has an on-
going mandate to provide technical guidance on appropriate
biometric identifiers based on technology evaluations and to
write reports with the Departments of Justice, State, Defense,
and Homeland Security/INS on recommendations for entry-exit
systems. The first report, entitled ``Use of Technology
Standards and Interoperable Databases With Machine-Readable,
Tamper-Resistant Travel Documents,'' was submitted to Congress
on February 4, 2003. The NIST appendix to that report is
available at http://222.itl.nist.gov/iad/894.03/
NISTAPP__Nov02.pdf. The second report on biometric standards
has been completed and is currently circulating for comments
within the agencies. NIST is evaluating face recognition and
fingerprint matching systems for the INS and is planning an
evaluation of the INS' Automated Biometric INDENTification
System (IDENT) later in fiscal year 2003.
NIST PROGRESS INVESTIGATING WTC ATTACKS
Senator Gregg. NIST is also investigating the WTC attack
and the destruction of the buildings. Do you have any
conclusions yet that we can share?
Secretary Evans. No--well, I think there are some, Mr.
Chairman. I know that we have been sharing with some of the
designers in New York some of the preliminary findings. I think
there is a preliminary report, I believe that will be out this
summer, but the full study is scheduled to take 2 years, which
means we will not be finished for I think another year or so,
but I know that those who are doing the designs under the new
construction in New York have been talking to NIST, and they
have been communicating, but still the findings, of course, are
preliminary.
Senator Gregg. Do they have the funding they need? There
has been some indication maybe too much stuff has been sent to
the scrap heap and NIST could not get their hands on the
necessary material.
Secretary Evans. Right, Mr. Chairman. That was an issue
that was brought up about 1 year ago. I went back and inquired
and yes, there was concern about that initially. But after
inquiring, my understanding now is, they feel like they have
the necessary materials to provide the public with a full, and
complete, and thorough report of what occurred, and what kind
of standards we ought to think about implementing for providing
more safety and security of these kinds of structures.
BACKLOG OF PATENT APPLICATIONS
Senator Gregg. The Patent Office has a 400,000 backlog of
patent applications, and that is staggering. What is the game
plan for getting that to some sort of reasonable conclusion?
Secretary Evans. Well, as I mentioned, part of the game
plan is more funding, and recruiting more examiners. Part of
the game plan is modernization of the systems going from a
paper-loaded system to a paperless system, which will take some
time. In general, pendency rates have not moved a lot. They
have come down a little bit, but I think the thrust, I would
say, Mr. Chairman, is to move from a paper system to a
technology computer information kind of system where we make
more use of the modern information systems we have today, as
well as continuing to recruit more examiners.
But I must say to you that a substantial amount of the
funding also is going to go into a new program that we are
implementing which is just the requalification of the examiners
themselves. Right now, the way PTO works is, examiners, once
they are a full-time examiner, you would think of it as tenure.
They are always a full-time examiner, and we felt like it was
important to have a system in place where periodically they go
through a requalification process.
One other area, Mr. Chairman, I think--I mean, we are
putting a lot of energy and a lot of effort into this, because
it is so critical not only to protecting patents here in the
United States--not protecting them, but approving them in a
timely kind of way, but also making sure that those patents are
recognized and honored around the world, and we are moving very
aggressively toward a global patent system.
We are working aggressively with USPTO, Europe and with
Japan--85 percent of the patents in the world are in those
three areas, and so we are working toward a system that would
eventually result in the mutual exploitation of search results
in terms of integrating the information we have and sharing it
with the European Patent Office (EPO) and with Japan, and other
intellectual property offices and also them sharing their
information with us. We feel like that would not only make the
patent system more efficient but reduce a lot of duplication
that is out there in the world today.
So just rest assured that I think we have got a very good
team working on this. It is certainly a big focus of ours. We
understand, just industry after industry in our country, how
important intellectual property is, and protecting intellectual
property.
Senator Gregg. Well, I do not know about other Members of
the Senate, but I have heard from a number of folks in New
Hampshire that their frustration with the Patent Office is
fairly significant right now. Some of them have just given up
on going that route, so I would be interested if there is a
plan, a formalized plan for how you are going to reduce the
backlog and how you are going to make it more electronically
controlled, and how you are going to develop this international
system. I would like to see such a plan, if it is a formal
plan.
Secretary Evans. We will be glad to provide that to you,
you bet.
[The information follows:]
The U.S. Patent and Trademark Office (USPTO), in response to
stakeholder input, updated its June 2002 21st Century Strategic Plan on
February 3, 2003, and submitted it to the Congress in support of the
fiscal year 2004 President's budget.
The USPTO prepared its 21st Century Strategic Plan in response to
Congressional direction. For example, the Senate CJS Subcommittee
report language dated July 19, 2001 directed the Secretary of Commerce
to develop a five-year plan with three core objectives: Prepare the
agency to handle the workload associated with the 21st century economy;
improve patent quality; and reduce patent and trademark pendency.
The Committee further said that the plan should include:
Recommendations to improve retention and productivity of examiner
workforce; targeted hiring increases to deal with high-growth areas;
improved training; E-Government and other capital improvements designed
to improve productivity; and benchmarks for measuring progress in
achieving each of these objectives.
The Committee also directed that the ``electronic file wrapper'' be
fully implemented by the end of fiscal year 2004.
The attached plan identifies the specific actions the USPTO is
taking to
--Deliver an operational system to process patent applications
electronically by October 1, 2004.
--Reduce duplication of effort and decrease workload by relying on
search results obtained via partnerships with other
intellectual property offices (see Work Sharing 1).
--Achieve an interim patent pendency goal of 27 months by fiscal year
2008. The USPTO will continue to work toward reducing pendency
and pursue the long-term optimum goal of 18 months pendency
beyond the five-year horizon of the strategic plan.
--Reduce total patent examiner hires through fiscal year 2008
compared to the fiscal year 2003 budget and business plan
projection.
Each of these actions is supported by a detailed analysis of the
issue and an implementation plan. These are posted on the USPTO web
site and can be made available to the Senator's staff.
The 21st Century Strategic Plan
EXECUTIVE OVERVIEW
Today, the United States Patent and Trademark Office (USPTO) is
under siege. Patent application filings have increased dramatically
throughout the world. There are an estimated seven million pending
applications in the world's examination pipeline, and the annual
workload growth rate in the previous decade was in the range of 20-30
percent. Technology has become increasingly complex, and demands from
customers for higher quality products and services have escalated. Our
applicants are concerned that the USPTO does not have access to all of
the fees they pay to have their patent and trademark applications
examined, thereby jeopardizing the benefits intellectual property
rights bring to our national economy. In the United States, these
demands have created a workload crisis. The Congress, the owners of
intellectual property, the patent bar, and the public-at-large have all
told us that we must address these challenges aggressively and
promptly.
We agree. We believe that the USPTO must transform itself into a
quality-focused, highly productive, responsive organization supporting
a market-driven intellectual property system. And we also believe that
we have the tools, the skills, the will and the plan to do so.
--The tools.--The technology exists to create a high-quality, cost-
effective, responsive, paperless patent examination process,
building on our current success in automating trademarks.
--The skills.--We have a cadre of talented staff with the technical
expertise and the vision to help guide and support the
technical and, even more important, the cultural transformation
of the USPTO.
--The will.--Organizational transformations require sustained
commitment and constancy of purpose ``from the top.'' The USPTO
leadership is dedicated to this task.
--The plan.--This strategic plan lays out our approach to creating,
over the next five years, an agile, capable and productive
organization fully worthy of the unique leadership role the
American intellectual property system plays in both the
American and the global economies.
This new 21st Century Strategic Plan is aggressive and far-
reaching. However, anything less would fall short of the expectations
of the U.S. Congress, the applicants for, and owners of, patents and
trademarks, the patent and trademark bar, and the public-at-large.
Additionally, the failure to adopt this strategic plan would have
negative consequences. We would be unable to implement our quality and
e-Government initiatives, pendency would rise to uncontrollable levels,
and our costs would continue to grow.
After the implementation of this strategic plan:
--Market forces will drive our business model.
--Geography and time will be irrelevant when doing business with the
USPTO.
--We will strengthen our ability to be ranked as one of the highest
quality, most-efficient intellectual property organizations in
the world.
--Our products and services will be tailored to meet the needs of
customers.
--Examination will be our core expertise.
--Our employees will be recognized as expert decision makers.
--Independent inventors, U.S. industry and the public will benefit
from stronger, more enforceable intellectual property rights
worldwide.
--Our workplace will become a state-of-the-art facility designed for
the 21st Century.
--Following implementation of this plan and its underlying
assumptions, including the enactment of legislation to
restructure fees, statutory fees will remain steady for the
foreseeable future.
ABOUT THE 21ST CENTURY STRATEGIC PLAN
This five-year strategic plan reflects both a thorough internal
process review and a systematic attempt to incorporate the best
thinking of our applicants, our counterparts in Europe, Japan and other
countries, and our stakeholders, including our Public Advisory
Committees. Key stakeholders also include our dedicated employees,
without whose commitment the strategic plan could not have been
developed and its success could not be assured.
The strategic plan takes a global perspective by envisioning the
patent and trademark systems of the future that American innovators
would need to remain competitive around the world. It is built on the
premise that American innovators want to obtain enforceable
intellectual property rights here and abroad as seamlessly and cost-
effectively as possible. It emphasizes the opportunity for the USPTO to
collaborate with intellectual property organizations in automation,
global patent classification, and exploitation of search results.
Finally, the plan is predicated on changes to the way all players in
the intellectual property system do business with the USPTO and the way
USPTO employees respond.
The strategic plan is supported with detailed documentation
analyzing all of the related issues, a five-year implementation plan
with identified critical tasks, proposed revisions to the fiscal year
2003 budget request to enable timely implementation of the strategic
plan, and corresponding proposed legislation and regulations necessary
for a successful multi-year implementation.
This strategic plan cannot succeed without enactment of the
legislation changing the USPTO's current fee schedule and access to
revenue generated in fiscal year 2003, to the extent provided in the
President's fiscal year 2003 Budget, revisions to current rules, and
legislation for streamlining the patent and trademark systems to
facilitate these changes. There are a number of variables, such as
potential changes in restriction practice and the use of commercial
search services that could affect our projected costs and revenues.
Once they have been clarified, any ensuing revisions to our program
costs and fee schedule will be resolved in the context of the USPTO's
annual budget submission to the Congress.
Proof of Concept
To ensure the USPTO proposes appropriate changes to patent and
trademark laws, makes changes to internal processes that provide
benefits and increased efficiency, and makes sound investment
decisions, the initiatives proposed in this plan will be subjected to
thorough evaluation. Pilot projects will be initiated and tested
wherever necessary. Evaluation plans will incorporate, where
appropriate, measurable objectives, critical measures of success,
baseline data, and conditions for full implementation.
Performance Measures
This plan contains measurable objectives and milestones for each of
the general goals. The annual budget submission to the Congress will
provide additional criteria by establishing key measurements and yearly
milestones that will be used to determine the USPTO's success in
achieving these goals. The annual integrated budget/performance plan is
the most efficient and effective way of establishing accountability by
making sure that performance measures and milestones are consistent
with the views of the Administration and the Congress in the enacted
annual budget.
STRATEGIC AGENDA
Vision
The USPTO will lead the way in creating a quality-focused, highly
productive, responsive organization supporting a market-driven
intellectual property system for the 21st Century.
We believe that quality must permeate every action taken by every
employee of the USPTO. The new initiatives in our strategic plan are
targeted toward creating a cultural transformation whereby quality is
the principal focus of everything we do.
Mission
The USPTO mission is to ensure that the intellectual property
system contributes to a strong global economy, encourages investment in
innovation, and fosters entrepreneurial spirit.
In order to accomplish our mission, we have prepared this strategic
plan. Provided we receive the funding and statutory changes necessary
to implement this new strategy, we will:
--Enhance the quality of patent and trademark examining operations
through consolidation of quality assurance activities in fiscal
year 2003.
--Achieve 27 months overall patent pendency goal \1\ in fiscal year
2008.
---------------------------------------------------------------------------
\1\ Pendency is a measurement of USPTO's traditional examination
processing time; i.e., from filing (under 35 U.S.C. 111(a)) to ultimate
disposal.
---------------------------------------------------------------------------
--Reduce total patent examiner hires through fiscal year 2008 by
2,400 compared to the 2003 Business Plan.\2\
---------------------------------------------------------------------------
\2\ The 2003 Business Plan was submitted to the Congress in
February 2002 as part of the USPTO's fiscal year 2003 Budget.
---------------------------------------------------------------------------
--Accelerate processing time by implementing e-Government in
Trademarks by November 2, 2003, and in Patents by October 1,
2004.
--Competitively source classification and search functions, and
concentrate Office expertise as much as possible on the core
government functions.
--Expand our bilateral and multilateral discussions to strengthen
intellectual property rights globally and to reduce duplication
of effort among offices.
Strategic Themes
To achieve our vision and accomplish our mission, we must transform
our organization and become a more agile, more capable and more
productive USPTO. The Congress has directed us to (1) improve patent
and trademark quality, (2) aggressively implement e-Government to
handle the workload associated with the 21st Century economy, and (3)
reduce patent and trademark pendency. We have identified three
strategic themes that correspond directly to these Congressional
requirements:
--1. Agility: Address the 21st Century Economy by Becoming a More
Agile Organization.--We will create a flexible organization and
work processes that can handle the increasing expectations of
our markets, the growing complexity and volume of our work, and
the globalization that characterize the 21st Century economy.
We will work, both bilaterally and multilaterally, with our
partners to create a stronger, better-coordinated and more
streamlined framework for protecting intellectual property
around the world. We will transform the USPTO workplace by
radically reducing labor-intensive paper processing.
--2. Capability: Enhance Quality through Workforce and Process
Improvements.--We will make patent and trademark quality our
highest priority by emphasizing quality in every component of
this strategic plan. Through the timely issuance of high-
quality patents and trademarks, we will respond to market
forces by promoting advances in technology, expanding business
opportunities and creating jobs.
--3. Productivity: Accelerate Processing Times Through Focused
Examination.--We will control patent and trademark pendency,
reduce time to first Office action, and recover our investments
in people, processes and technology.
We will transform the USPTO by adhering to these themes in each of
the improvement initiatives upon which this strategic plan is based, as
well as in all of our other programs. These initiatives are discussed
in more detail under each of the major theme sections.
Agility: Address the 21st Century Economy by Becoming a More Agile
Organization
An agile organization responds quickly and efficiently to changes
in the economy, the marketplace, and the nature and size of workloads.
In pursuit of an agile organization, the USPTO will focus both
internally and externally.
As a first priority, we have made electronic end-to-end processing
of both patents and trademarks the centerpiece of our business model.
We will create a nimble, flexible enterprise that responds rapidly
to changing market conditions. We will make the USPTO a premier place
to work; we will rely on a smaller cadre of highly trained and skilled
employees; and we will place greater reliance on the private sector,
including drawing on the strengths of the information industry. We will
enhance the quality of work life for our employees by exploring
expansion of work-at-home opportunities and moving to the new Carlyle
campus facility in Alexandria, Virginia.
Further, we will enhance existing and establish new alliances with
our friends in other national and international intellectual property
organizations to strengthen American intellectual property rights
around the world.
Specific actions, with parenthetical cross-references to the
analyses and implementation plans in the Appendices, include:
Implement automation for patent and trademark applications
Develop a trademark electronic file management system and begin e-
Government operations on November 2, 2003, in tandem with
implementation of the Madrid Protocol. [E-Government 1]
Deliver an operational system to process patent applications
electronically by October 1, 2004, including electronic image capture
of all incoming and outgoing paper documents. [E-Government 2]
Develop an automated information system to support a post-grant
patent review process. [E-Government 3]
Establish an information technology security program for fully
certifying and accrediting the security of automated information
systems. [E-Government 4]
Provide back-up systems to ensure maximum availability of computer
systems to examiners, attorneys, the public and other patent and
trademark offices by establishing appropriate back-up systems. [E-
Government 5]
Expand work-at-home opportunities
Increase the efficiency and return on investment of our work-at-
home program and thereby encourage more employees to participate.
[Work-at-Home 1]
Increase flexibility through greater reliance on the
private sector or other intellectual property
offices
Increase reliance on the private sector or other intellectual
property offices for:
Classifying patent documents. [Flexibility 1]
Supporting national application and Patent Cooperation Treaty
search activities. [Flexibility 2]
Transitioning to a new global patent classification system.
[Flexibility 3]
Classifying trademark goods/services and searching design codes.
[Flexibility 4]
Global Development: Streamline intellectual property
systems and strengthen intellectual property rights
around the world
Promote harmonization in the framework of the World Intellectual
Property Organization and its Standing Committee on the Law of Patents;
resolve major issues in a broader context and pursue substantive
harmonization goals that will strengthen the rights of American
intellectual property holders by making it easier to obtain
international protection for their inventions and creations. [Global
Development 1]
Negotiate bilateral and multilateral agreements to facilitate
global convergence of patent standards. [Global Development 2]
Accelerate Patent Cooperation Treaty reform efforts, focusing on
the USPTO's proposal for simplified processing. [Global Development 3]
Develop a ``universal'' trademark electronic application by
leveraging the United States' experience with electronic filing of
trademark applications. [Global Development 4]
Share search results with other intellectual property
offices
Reduce duplication of effort and decrease workload by relying on
search results obtained via partnerships with other intellectual
property offices. [Work Sharing 1]
Planned Agility Accomplishments
Accelerate processing time by implementing e-Government in
Trademarks by November 2, 2003, and in Patents by October 1, 2004.
Competitively source classification and search functions, and
concentrate USPTO expertise as much as possible on core government
functions.
Expand our bilateral and multilateral discussions to strengthen
intellectual property rights globally and to reduce duplication of
effort among intellectual property offices.
Capability: Enhance Quality Through Workforce and Process Improvements
A capable organization has a highly skilled, appropriately sized
workforce; it has systems and procedures that enhance the capability of
every employee; and it has in place effective quality management
processes to ensure high quality work and continuous performance
improvement. In other words, a capable organization is committed to
doing the right job right--the first time and every time. We will be
such an organization.
Quality will be assured throughout the process by hiring the people
who make the best patent and trademark examiners, certifying their
knowledge and competencies throughout their careers at the USPTO, and
focusing on quality throughout the examination of patent and trademark
applications. By bolstering confidence in the quality of U.S. patents
and trademarks, the USPTO will enhance the reliability in the quality
of products and services needed to increasingly spur our economy and
reduce litigation costs.
Specific actions, with parenthetical cross-references to the
analyses and implementation plans in the Appendices, include:
Enhance workforce capabilities by certifying competencies
Create an enterprise-wide training strategy that meets the needs of
the new business model and the e-Government generation. [Transformation
1]
Restructure the USPTO by redirecting resources to core examination
activities, implement revised performance plans to incorporate changes
required to implement an e-Government workplace, meet agency-wide
standards for senior executives, and implement selected award packages.
[Transformation 2 and 3]
Transform the workforce by exploring alternative organizational
concepts and structures. [Transformation 4]
Ensure that professionals, support staff and supervisors
responsible for the patent process possess the requisite skills needed
to carry out their responsibilities. [Transformation 5]
Certification of knowledge, skills and ability in the Trademark
Process. [Transformation 6]
Implement pre-employment testing for patent examiners.
[Transformation 7 and 8]
Recertify the knowledge, skills and abilities of primary examiners
to ensure currency in patent law, practice and procedures.
[Transformation 9]
Certify the legal competency and negotiation abilities of patent
examiners before promotion to grade 13. [Transformation 10]
Improve the selection and training of supervisory patent examiners
to focus on their primary responsibilities of training patent examiners
and reviewing and approving their work. [Transformation 11]
Make improvements in patent and trademark quality assurance
techniques
Enhance the current quality assurance programs by integrating
reviews to cover all stages of examination. [Quality 1]
Expand reviews of primary examiner work. [Quality 2]
Engineer quality into our processing including the selective
expansion of the ``second pair of eyes'' review \3\ of work products in
such advanced fields of technology as semiconductors,
telecommunications, and biotechnology. [Quality 3 and 4]
---------------------------------------------------------------------------
\3\ A secondary review of applications for proper claim
interpretation and to ensure that the closest prior art has been
discovered and correctly applied.
---------------------------------------------------------------------------
Incorporate an evaluation of search quality into the patent work
product review process, and survey practitioners on specific
applications. [Quality 5 and 6]
Enhance the reviewable record of prosecution in patent
applications. [Quality 7]
Certify and monitor the quality of searching authorities to ensure
that patent searches provided by the private sector contractors or
other patent offices are complete and of the highest quality. [Quality
8]
Make process improvements that contribute to enhanced
quality through legislation/rule changes
Propose legislation and/or rule changes that have been identified
as critical for the accomplishment of this strategic plan. Continue the
process of seeking comments from stakeholders on proposed changes.
Planned Capability Accomplishments
Enhance the quality of patent and trademark examining operations
through consolidation of quality assurance activities in fiscal year
2003.
Productivity: Accelerate Processing Times Through Focused Examination
We are committed to promoting advances in technology, expansion of
business opportunities and creation of jobs through the timely issuance
of high quality patents and trademarks. A productive organization
maximizes its output of work performed. Improved productivity is key to
reducing pendency and inventory.
This strategic plan has aggressive timeliness goals: to make
available, on average, a first Office action for first-filed U.S. non-
provisional patent applications, at the time of 18-month publication,
and a patent search report for other patent applications in the same
time frame--by far the fastest in the world. This will be accomplished
through a redesign of the entire patent search and examination systems
based upon multiple-examination tracks, greater reliance on qualified
patent search services, and variable, incentive-driven fees. In
Trademarks, achieve an average 12-month total pendency. This will be
accomplished by a three-track examination system. Likewise, both
Patents and Trademarks will restructure the way they do business to be
compatible with an e-Government environment.
Specific actions, with parenthetical cross-references to the
analyses and implementation plans in the Appendices, include:
Transition to market-driven examination options
Adopt procedures that give greater choice and flexibility to
trademark applicants for filing and examination of applications for the
registration of trademarks, with a focus on using technology to improve
the process and provide a lower cost filing option. [Pendency 1]
Move from a ``one-size-fits-all'' patent examination process to a
multi-track examination process that leverages search results of other
organizations and permits applicants to have freedom of choice in the
processing of their applications. This new process will eliminate
duplication of effort, encourage greater participation by the applicant
community and public, and improve the quality of our patents and
decrease processing time. [Pendency 2]
Address the number of claims presented for examination in an
application and the size of applications through fee-setting
legislation to reflect the cost of processing complex applications.
[Shared Responsibility 1]
Achieve greater examiner productivity by reducing their prior art
search responsibilities. [Pendency 3]
Implement an accelerated examination path option
Offer patent applicants the market-driven new ``rocket docket''
option of choosing an accelerated examination procedure with priority
processing and a pendency time of no longer than 12 months.
[Accelerated Examination 1]
Share responsibility for timely and high quality patents
and trademarks between applicant and the USPTO
Seek enactment of legislation to restructure the USPTO fee schedule
by mid-fiscal year 2003, and thereby create incentives that contribute
to achievement of USPTO goals. For example, the filing fee will be kept
as low as possible to incentivize applicants to file, and the refund
provision expanded to allow the USPTO to refund a portion of the search
fee if the application is expressly abandoned before search or
examination. [Shared Responsibility 1]
Make patents more reliable by proposing amendments to patent laws
to improve a post-grant review of patents. [Shared Responsibility 2]
Planned Productivity Accomplishments
Achieve first Office action patent pendency of 14.7 months in
fiscal year 2008.
Achieve an interim patent pendency goal of 27 months by fiscal year
2008. Note: The USPTO will continue to work toward reducing pendency
and pursue the long-term optimum goal of 18 months pendency beyond the
five-year horizon of this strategic plan. Our best estimate is that it
will take at least a decade to achieve the 18-month goal.
Reduce total patent examiner hires through fiscal year 2008 by
2,400 compared to the 2003 Business Plan projection. [See Figure 1]
Figure 1. Patent Examiner Hiring Comparison
Critical Needs
The performance commitments outlined in this strategic plan demand
extraordinary effort from every USPTO employee, and the full support of
our key stakeholders. Our strategic plan is built around the following
critical needs.
Multilateral and Bilateral Agreements
We need to consult with, and receive support of, other patent
offices in structuring new bilateral and multilateral initiatives.
Legislation/Rules
We will need enactment of legislation by the Congress to adjust
certain patent and trademark fees and access to revenue generated by
mid-fiscal year 2003 to the extent provided in the President's fiscal
year 2003 Budget. We also will need to promulgate final rules to effect
fee changes.
We will need to continue working to develop the proposed
legislation and rule changes that have been identified, and continue
the process of seeking comments from interested parties on ways to
improve our operation.
Labor Relations
We will need to notify the three bargaining units representing
USPTO employees of proposed changes and negotiate, where necessary, any
changes in working conditions.
Budget
We will need enactment of an appropriation for fiscal year 2003
that is consistent with the level of the President's 2003 Budget.
Move to Carlyle in Alexandria, Virginia
We will need to carefully plan the logistics for relocating the
USPTO to a consolidated campus in Alexandria, Virginia, while
minimizing any adverse effects on employees, applicants and the public.
The USPTO is quickly moving into the implementation phase of the
relocation of its facilities from 18 buildings spread throughout
Crystal City to a single lease in a consolidated campus. This
consolidation is expected to save us $72 million over the 20-year term
of the lease, but it is a highly complex and difficult endeavor.
President's Management Agenda
Secretary Donald Evans has committed the Department of Commerce to
speedy implementation of the President's Management Agenda. President
Bush has stated that true government reform must be based on a
reexamination of the role of the Federal Government. In this regard, he
has called for ``active, but limited'' government: a government that
empowers states, cities, and citizens to make decisions; ensures
results through accountability; and promotes innovation through
competition. The reforms that he has identified to help the Federal
Government adapt to a rapidly changing world include a government that
is: Citizen-centered--not bureaucracy-centered; results-oriented--not
process-oriented; and market-based--actively promoting, not stifling,
innovation, and competition.
This strategic plan supports the President's Management Agenda:
Human Capital.--We will provide the tools and the resources to
ensure that we have a highly qualified, certified, knowledge-based,
accountable workforce. Specifically, we will strengthen pre-employment
testing; develop a competency certification program; create a new
labor-management paradigm to meet changing business needs; streamline
our workforce to maximize quality and efficiency; and focus our
training, performance evaluation and assessment environment on our core
expertise--examination.
Competitive Sourcing.--We are committed to achieving performance
enhancements and cost-savings, through the process of competitive
sourcing. This process compares the capabilities and costs of
commercial service providers with current government program providers.
Greater competition drives down costs and yields more innovative
solutions. We will seek improved effectiveness in the following areas:
patent searching, patent documentation classification, and information
technology and logistical support operations.
Improved Financial Management.--The USPTO has a strong, fully
integrated financial management system in place and we will continue to
strengthen our internal controls, improve the timeliness and usefulness
of our management information and continue to achieve an unqualified
financial audit opinion.
E-Government.--We are accelerating deployment of critical automated
information systems, particularly electronic end-to-end processing of
patent and trademark applications. In addition, we are currently
working on ways to improve delivery schedules, reliability,
performance, security and the cost of all our automated information
systems.
Budget/Performance Integration.--We will allocate budget resources
to the programs based on the concept of linking them to the achievement
of both enterprise-wide goals and individual unit performance. The
USPTO will expand the involvement of applicants and the public in
assessing the accomplishment of our goals and performance targets.
As a reflection of our commitment to fund our strategic priorities,
we conducted a comprehensive review of current operations and
redirected substantial fiscal year 2003 resources toward improving
examination quality and implementing e-Government processing.
Long-term Agenda
This strategic plan is only the first step toward creating a
quality-focused, highly productive, responsive USPTO that supports a
market-based intellectual property system for the 21st Century. Once
the initial phases of this plan have been supported, adopted and
implemented, the USPTO will explore further options to enhance its
ability to more fully operate like a business.
Within the framework of the legislative and regulatory packages
there are a number of items that will be implemented in the out-years
of the strategic plan.
Restriction practice.--We will conduct a study of the changes
needed to implement a Patent Cooperation Treaty (PCT) style unity of
invention standard in the United States. The study will be completed
and appropriate legislation will be introduced before the end of the
108th Congress.
Patent term adjustment.--Before seeking legislation to simplify
patent term adjustment, we will explore a number of options to address
this issue with the small business community and other key
stakeholders.
Mutual exploitation of examination results.--In anticipation of
achieving our long-term goal of substantive patent harmonization, we
will take a cautious approach to mutual exploitation of examination
results by first evaluating International Preliminary Examination
Reports during national stage examination. We will subsequently analyze
the potential of whether the acceptance of examination results (granted
patents) from foreign offices is a proper basis for use in counterpart
applications in the United States. However, the USPTO will never
recommend any changes that would compromise our sovereign right to
determine patentability issues or to preclude our right to make further
examinations when necessary.
Copyright issues.--As part of the implementation of the electronic
file wrapper, we will ascertain the best means for assuring that these
documents in an application file that may be subject to copyright
protection can be included in the USPTO's databases. The intent of this
option would be to ensure full public access to all the information
contained in a pending application file.
Third party request for reexamination.--As part of the initiative
to seek post-grant review legislation, we will explore the need for
retention of third-party requested reexamination.
District court actions.--We will evaluate the desirability of a
revision to the provisions for judicial review of USPTO decisions to
make an appeal to the U.S. Court of Appeals for the Federal Circuit the
sole avenue for judicial review of a Board of Patent Appeals and
Interferences or a Trademark Trial and Appeal Board decision.
Patent Cooperation Treaty Activities.--We will actively pursue
revisions to Patent Cooperation Treaty search and examination
guidelines to achieve an enhanced level of reliance on PCT
International Search Reports and International Preliminary Examination
Reports.
Business-like practices.--We also will explore whether we have a
good justification for operating in a more business-like manner.
USPTO Campus.--Once we have settled into the Carlyle campus and
have fully implemented automated patent and trademark processing, we
will be able to assess the feasibility of expanding our work-at-home
program by using such virtual office concepts as telecommuting and
flexible workplace to the maximum potential.
Examiner Training.--We will evaluate the feasibility of reinstating
the Examiner Education Program through corporate sponsorship to enable
patent examiners to gain better insights into technological
developments in the fields in which they examine.
Some Final Thoughts
This 21st Century Strategic Plan sets forth an ambitious agenda to
resolve the crisis all intellectual property organizations are facing.
We believe economic and technological progress in the United States and
the global market can be significantly enhanced through the
implementation of the initiatives proposed in this plan.
We intend to refine and update our strategic plan periodically to
adjust to changing conditions and to incorporate the best thinking of
the entire intellectual property community. We are eager to work with
those who believe, as we do, that American innovators and businesses
must have the very best intellectual property system in the world. This
21st Century Strategic Plan represents an important first step in the
pursuit of this goal.
FREE TRADE CONCERNS
Senator Gregg. Senator Hollings.
Senator Hollings. Thank you, Mr. Chairman.
Mr. Secretary, we have got a hot war ongoing, and there is
no question in this Senator's mind or anybody in this room that
we will win that one, but we have got a cold war economically
that we are losing, and you are the Chairman of the Joint
Chiefs of Staff in that cold war.
As Secretary of Commerce, you are the most important
member, and with the President, the most influential member,
and we are looking at the results. The war did not start when
you folks came to town. This war has been going on since World
War II, and we had the Marshall Plan. It worked. We sent over
the expertise, we sent over the technology and everything else
into Europe and to the Pacific Rim and they revived them.
But now you look and you find out you have got over $420-
some billion in the deficit in the balance of trade last year,
and now it is inching up to over $500 billion this year, and I
am looking at different items--well, I've already lost, don't
worry about my questions being about textiles. They are
Republican and they have gone anyway, so it is a sort of twofer
for me.
Senator Gregg. They left New Hampshire a long time ago to
go to South Carolina.
Senator Hollings. Over two-thirds of the clothing I am
looking at is imported, over 86 percent of the shoes on the
floor are imported, but then I look at the list that you made
of critical items to our national security, and you list about
some 500, and we have a $5 billion deficit in the balance of
trade in those critical items.
We have got a deficit in the balance of trade in
semiconductors. I know I have got a deficit in the balance of
trade in cotton. I am riding through the cotton fields
politicking down home, but I am importing Chinese cotton
because we do not produce enough in this country, and then I
looked and found that we made finally a deficit in the balance
of trade in farm products for the second time in the history of
the country.
Free trade is fine in the textbooks, and fine for England
when she was in control of the world's empire. In other words,
when old Alexander Hamilton got the note that what we ought to
do, having won our little freedom as a colony, we ought to
trade back what we produced best, and they in Britain would
trade back what they produced best, the doctrine of comparative
advantage, David Ricardo, old Hamilton said bug off--we are not
going to remain your colony, just shipping our timber and our
coal and our iron ore and farm products. We are going to build
up our own manufacturing.
So he introduced, and by gosh, old Madison supported him in
the second bill. The first bill was for the U.S. Seal as a
Nation. The second bill that passed the Congress was the 50-
percent tariff bill, protectionism, on about 60 articles, and
we started rebuilding, and in fact we financed the country with
protectionism until 1913, when we finally got the income tax.
Other countries are doing the same thing, after World War
II, the Japanese, the Koreans and everybody coming right on
down the road, and they do not practice free trade, they
practice protectionism.
One of the big reasons behind my Advanced Technology
Program was to try to compete with the subsidization, the
financing of the industry, the banking, and not only that, but
also protecting in every respect the retail markets, and the
pricing by our foreign competitors. My Lexus cost me $30,000.
In downtown Tokyo, that same car, I priced it, is $45,000.
So my point is, I am trying to bring around our
administration to where even Ronald Reagan was. He was long on
common sense. We were losing out on semiconductors and still
are, but he put in a voluntary restraint agreement on
semiconductors and they instituted at the congressional level,
Senator Danforth and myself, Sematech. We had VRAs in steel and
automobiles and machine tools, and it worked, and it saved
those industries.
Now, we have got to start competing here. I am looking at
the Ambassador from Singapore, Frank Levin. He recently
concluded this United States-Singapore free trade agreement,
and Levin said in the long run, and I quote him, the most
significant economic aspect of this FTA, free trade agreement,
could be provisions allowing products assembled in the two
Indonesian outer islands to be counted as Singaporean in origin
for the purpose of the FTA. This would allow U.S. electronics
manufacturers to take advantage of low wage rates on those
islands to assemble components from Singapore and then the
electronic products can enter the United States duty free. Do
you agree with that?
Secretary Evans. Well, I have not seen the statement. You
read the statement. I have not seen it before. I mean, I must
say that I think that when you have a free trade agreement with
Singapore, you have a free trade agreement with Singapore. You
do not have a free trade agreement with some other country, or
some other island. That is who the free trade agreement is
with.
And so I think there is a basic principle, and it is
products and services that come from that country, not from
some other sovereign nation or country to that country and into
the United States, but I must admit, I do not know the exact
relationship of those islands with Singapore. Are they separate
countries or separate sovereign nations, or are they a part of
Singapore? I do not think they are.
Senator Hollings. Well, it is not the technicality of the
thing, it is the actual tenor and thrust of low wage rates.
That is what happened--58,000 textile jobs have gone from my
little State of South Carolina down to Mexico. If your
competition leaves, you have got to leave, so that swishing
sound that old Ross talked about, I am telling you right now,
we can hear it loud and clear in the Piedmont section of South
Carolina, I can tell you.
That is the whole point. What we have got to do is start
competing, and we have done everything for that export
administration. Your Commerce Department has commercial
attaches around the world, and we have done everything to help
our businesses compete.
One other thing that we do is just that, the Advanced
Technology Program. The distinguished Secretary talks growth,
growth, growth. That is the buzzword around here. You get
everybody on the message, so the growth thing is the Advanced
Technology Program. That gives the growth. There is not any
question.
We have got I do not know how many studies. I think there
were 14 studies, the Department of Commerce Inspector General,
the National Academy of Sciences, the National Research
Council, and go right on down the list, and they found that,
quote, ATP could use more funding effectively and efficiently,
and we cut and eliminated that and the Manufacturers Extension
Partnership Program, but we give money to the Bureau of
Economic Analysis to get more analysis. That is not going to
hire any more people, except pointy-headed intellectuals, as
George Wallace would say.
We give money to the Patent and Trademark Office----
Senator Gregg. We don't quote from George Wallace.
Senator Hollings. That's right. Well, I thought I'd get
you. I like to stick the Chairman every now and again.
We give money to the International Trade Administration for
promoting U.S. exports and all those things, they are not going
to get growth. The one thing that is going to get the growth,
and it has proved out, and they are not pork, they have got to
be vetted by the National Academy of Engineering, like you
said, and NIST.
I got together--we had a fellow over there, Craig Fields in
DARPA, and he found out the Navy program for research was rapid
manufactured parts. We got it going through the Department of
Commerce, because a boat would break down in the gulf and the
destroyer is 30 years old, or whatever it is, and the part,
they have to languish there in the gulf for 2 months and then
go back. We have got a system now where they do not languish
over 24 hours.
So we have got DARPA, we have got NIST, we have got the
Advanced Technology Program, and why do we eliminate it?
Secretary Evans. Well, again, like I said, those are good
programs, no question about it.
Senator Hollings. That is all. You do not have to explain
any more. I am going to quote you.
Secretary Evans. You can.
Senator Hollings. Thank you. I would yield to the
distinguished Senator from Wisconsin.
Secretary Evans. Good.
MANUFACTURING EXTENSION PARTNERSHIP PROGRAM
Senator Kohl. Thank you, Mr. Chairman, and Secretary Evans,
I would like to talk a little bit about the Manufacturing
Extension Partnership Program.
I know this administration supports research and
development to maintain American leadership and technology
development and commercialization. To quote from the Commerce
Department's Web site, ``Americans will never win the game to
see who can pay their workers less. We do not want to, and
continued innovation means that we will not have to. Innovation
excellence starts with research and development, and since
taking office, the President has proposed record levels of
Federal R&D.''
So Mr. Secretary, I am concerned and puzzled by your
proposed budget, which includes only $12.6 million for the
Manufacturing Extension Partnership Program, called MEP. This
program has always had bipartisan congressional support. By way
of comparison for fiscal year 2003, we funded the program at
well over $100 million. Given the current situation, I
therefore cannot understand why you would virtually eliminate a
program like this, which truly makes a difference.
The United States is losing hundreds of thousands of
manufacturing jobs and production know-how to low-wage
countries like China. We have our largest imbalance with China,
an imbalance growing by 30 percent a year. In my State of
Wisconsin, the jobs we are losing to overseas production are
high-paying jobs.
To help counter this trend, my State MEP centers work
directly with small manufacturers to help these companies
compete by being more productive and more effective, and so my
question is, why are you virtually gutting Federal support for
this program? Virtually half of the program's costs and
expenses come from the Federal Government. Small manufacturers
in my State have said this program is important to them, and so
I do not know what I should be telling them with respect to
what I know is your commitment to the development of small
manufacturing innovation, efficiency, technology, and your
apparent opinion that the MEP program is not all that
important. I just give you this map for you to peruse.
Secretary Evans. Sure, thanks Senator.
Senator Kohl. Those MEP centers, as you can see, are all
over the country. There are hundreds and hundreds of MEP
centers, and without Federal support they may well evaporate.
Senator Gregg. Aren't they called Hollings centers?
Senator Kohl. Pardon me?
Senator Gregg. No, I think they're called Hollings centers,
aren't they?
Senator Kohl. Hollings centers?
Secretary Evans. You know, I will say what I said earlier,
I think, that there are certainly some very good stories from
ATP that one can look to and can say were successes. I think
the same thing applies to MEP, the Manufacturing Extension
Partnership Program. I travel all across the country on
university campuses, from time to time, talk to universities
and how they are participating in these MEPs with the Federal
Government, with other cities, with counties and so I am very
much aware of the programs.
First of all, I would just say it is a matter of
priorities, and understanding at some point you have to draw
the line, and we are not all going to draw the line at exactly
the same place, and I know that and you know that, and so I am
more than happy to work through the budget process with the
committee and talk about our differences with respect to these
programs, but when you look at the MEP program, what confuses
me is why this program would not be a success in the private
sector, and the reason I say that is because the studies people
show me and want to give to me in the way of results are the
sizeable returns that people enjoy by participating in the MEP.
Well, having been somebody that was out there in the
private sector for some 26 years of my life, that looks like to
me a pretty good opportunity to start a business, because if I
can give those kinds of returns to some of the small businesses
in the area, then it seems like they would be willing to pay me
for that service I am providing to them.
You know, I had the same kind of issue, the same related
issue with ATP, and that I really felt like if we were going to
provide funding for seed capital, or venture capital for
research, and if it is successful, then maybe some of that
ought to come back to the American taxpayer that funded it to
begin with.
So I think it is good programs that--what I see opportunity
for, I see some opportunity for the private sector to step in
and provide the same kind of service. And I also see an
opportunity, if it is successful, if it works, then maybe there
is an opportunity to return some of the benefits, not all of
them, but some of those benefits back to the American taxpayer
to help pay for the program, if the program were to continue.
Senator Kohl. I do not totally disagree with what you are
saying, but my response is that this is not entirely a Federal
program. This is a 50-50 partnership between the Federal
Government and private industry, and so the question is not
really why does the Federal Government have to fund this
program entirely. It is that, what is wrong with the
partnership concept?
I mean, if this were 100 to nothing, or 100 to zero in
terms of percent of funding, I would understand what you are
saying, but it is 50-50. It seems to me that is reasonable--
reasonable, and I guess my question is, why would you all take
the position that on your list of priorities, in terms of
funding, that almost comes down to zero?
Secretary Evans. Well, again I guess I would say, Senator,
it is priorities. I mean, like you, we think about the Federal
debt and the deficit, and there are lots of worthwhile programs
that we would like to see funded, but the resources are not
there to fund all of the programs that we would all like to see
funded, and so you have to draw the line some place. You have
to make tough choices, and I understand that, we will have
differences of opinion as to where the line should be drawn,
and this is one of those areas where we have a difference of
opinion.
I am not here saying that these programs have not provided
a service. I am not here saying that there is not some good
results to point to historically, but I am saying that one,
particularly at this moment in our history, we have some
priorities of homeland security and national security that we
are all certainly very focused on, and these are just some
tough choices that have to be made, but certainly, as I
mentioned, I look forward to working through the process,
working with the committee and working through our differences
of opinion.
Senator Kohl. Well, thank you. I will keep on badgering if
I can, and see if we cannot get something.
Secretary Evans. Sure, sure.
Senator Gregg. The Senator from Wisconsin is a very good
badger.
Secretary Evans. Very good, very good. Not bad. Very good,
Chairman.
Senator Gregg. Mr. Secretary, following up on the Senator's
point, your comment that maybe there should be a greater return
to the taxpayer when these MEPs produce a commercial event that
has profitability, do you have language that you would insert
to change the programs to create that atmosphere?
Secretary Evans. No, Mr. Chairman, I have not. It is
something that we would be glad to look at and would be glad to
think about. It just seems that if you have a company that
enjoys some 25 percent return or 35 percent return from the
services they have been provided, then maybe they would want to
return some funding back to the center to help some other small
manufacturer who comes along.
Senator Gregg. I'm attracted to the idea, so if we end up
refunding these as a result of the Senator from Wisconsin's
energies, I would be interested if you had language that could
accomplish that as a part of the exercise.
Secretary Evans. I know if I was out there running a small
business and I had this available to my company, and it was
successful, and we had great results from it, I would feel some
kind of responsibility to support that program in a pretty
direct kind of way, and so that the program could benefit other
small, or other manufacturing companies that come along behind.
Senator Kohl. They do. I say, the program is supported 50
percent by these companies, so it is not as though they are
only taking. They are also giving to the program.
Senator Gregg. On ATP, we really do not have any place in
the Government right now where people who are coming up with
creative ideas on the issue of counterterrorism, technology
ideas, can go and get a grant quickly that would allow them to
expand their efforts, and I do not know about other offices.
Maybe once a month somebody comes in with some fairly unique
idea as to how they are going to screen somebody, or what they
can do, or how they are going to develop something.
RESEARCH AND DEVELOPMENT FOR COUNTERTERRORISM
Would it make sense if we reauthorized or refunded ATP to
redirect it into an exercise of being more focused on
counterterrorism, producing technology for counterterrorism,
experimental or commercial?
Secretary Evans. I guess what has been called to my
attention is, Homeland Security is requesting some $900 million
in this area of R&D for counterterrorism.
Senator Gregg. How are they going to oversee that? Well, we
will have Secretary Ridge. We will ask him.
We have been joined by the chairman of the full committee.
Senator Stevens. Good morning, Mr. Secretary.
Senator Gregg. Do you have anything more?
Senator Hollings. Yes, I will, but for example, from 1992
to 2004, the ATP funded $270 million in projects with primary
relevance to the detection of and protection from and response
to potential terrorist activity. They have been coming to my
office, too, and I have been sending them over there and it is
working. You are helping Secretary Ridge.
Senator Gregg. I think it makes a lot of sense.
Senator Stevens, do you have any questions?
Senator Stevens. No, I had no questions this year. I just
stopped by to see our friend and say hello.
Senator Hollings. Well, I have a few more questions, and I
am like Senator Stevens and I am going to work with the
chairman. Your budget is in good shape, and I will work with
Chairman Gregg for what he thinks we ought to do.
But frankly, I am worried about this war, and I have moved
from the military to the trouble we have in the world
community. If the President asked me to come over in the next
10 minutes and asked me what to do, I would say, I would get
that best friend of yours, Secretary Evans, up to Canada. You
cannot just get everybody--I see on my TV this morning the
President is on the phone trying to still get support. Isn't
that a hell of a note? But he is on the phone this morning
trying to get support.
Now, we all support it, we are committed, but in my war,
World War II, the first in was Canada. So we have got to get
you back involved. You come with the calling card of President
Bush--and you know how to talk to people. You can help us with
Vicente Fox. You know him down there in Mexico.
When you start an engagement of this kind, and can't even
get Mexico and Canada, we have got to start working back
upstream now to get some help from the United Nations and
everything else like that, and do not worry about budgets and
ATP and MEP and all that other stuff. Right now, let us get
going on this war. Yes, sir.
Senator Gregg. Senator Stevens.
Senator Stevens. Mr. Secretary, we lost a big one yesterday
as far as my State is concerned, but I know we have had talks
about the Alaska gas pipeline. We have a new hybrid proposal we
want to discuss with the administration, and I hope we can get
some time on your schedule to discuss that sometime soon.
Secretary Evans. We can.
Senator Stevens. We will be coming in this week and next
week to talk about it. It's not an immediate project--it won't
run gas to our system before 2011, but it is an 8-year project
at a minimum. If we can get it off the ground this year it will
be very meaningful. I hope you are both familiar with that
project.
All of the gas that is produced with 17 billion barrels of
oil we produce and send down the Alaska pipeline was separated
out and put right back in the ground right there at Prudhoe. We
do not have to explore for it. All we have to have is a
mechanism to transport it, and it is a substantial amount of
gas.
Secretary Evans. I would be glad to come by at your
calling. Just give me a call and I will be there.
Senator Stevens. Maybe we can arrange for you to come back
up to our State again this summer and take a look at it.
Secretary Evans. Good. Thank you, Senator.
Senator Gregg. While we are here, I do want to acknowledge
and thank the chairman of the committee for returning a hearing
room to its rightful spot.
Senator Hollings. I thank you, Mr. Chairman.
Senator Gregg. We very much appreciate it.
Senator Hollings. I was chairman of legislative
appropriations. I walked in here and it was just a pile of wood
and paint cans and everything else, and the Architect of the
Capitol was using this just as a storeroom to do repair work
all over, and we cleaned it up.
Senator Gregg. I believe this was the room that the
Dartmouth College case was argued in by Daniel Webster.
ADDITIONAL COMMITTEE QUESTIONS
Senator Hollings. And Marbury v. Madison.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Judd Gregg
HOMELAND SECURITY
Question. Mr. Secretary, BIS' work towards controlling the
proliferation of sensitive dual-use technologies is critical to our
national security. We are now faced with a restless nuclear power on
the Korean Peninsula that has already acquired the necessary
technologies to create weapons of mass destruction. There are many more
regimes in the world that are hostile to the United States and are
aggressively pursuing these technologies. How is BIS adapting to this
rapidly changing global security environment? How has its mission
changed since 9/11? Have BIS' requirements changed?
Answer. The Bureau of Industry and Security (BIS) administers U.S.
export controls for dual-use items, including items that may be used
for the development of weapons of mass destruction, delivery vehicles
for these weapons, and advanced conventional arms. Its mission remains,
as before, to advance U.S. national security, foreign policy, and
economic interests. Since September 11, 2001, BIS has been actively
working with its counterparts in the Departments of State, Energy, and
Defense to ensure that export controls address current global security
challenges and, in particular, are adequate to prevent the acquisition
of such items and use by hostile nations or terrorist groups. To that
end, we have advocated proposals to strengthen export controls and
procedures in all four multilateral export control regimes (the Nuclear
Suppliers Group (NSG), the Australia Group (AG), the Missile Technology
Control Regime (MTCR), and the Wassenaar Arrangement).
For example, in the NSG, the United States has proposed a ``watch
list'' of non-controlled commodities that could be of use to North
Korea's nuclear program. This list would be shared with non-regime
partners to make them more aware of the commodities that could aid
North Korea's nuclear program. The AG has accepted U.S. proposals to
tighten the controls on small fermenters that terrorists could use to
produce biological warfare agents. The AG also has agreed to a U.S.
proposal to tighten controls on technology transferred through
intangible means such as the Internet. In the MTCR, the United States
has advocated expanding the controls to include small unmanned aerial
vehicles that could have applicability in spreading chemical and
biological weapons agents. In the Wassenaar Arrangement, the United
States advocated amending the ``Initial Principles'' to include, as a
core regime objective, the prevention of terrorism.
These regime changes support BIS efforts to address security
concerns originating not only from hostile nations but also from
terrorist groups and individuals.
Question. Your fiscal year 2004 request for the Bureau is only $3.5
million above the fiscal year 2003 enacted level. Is this amount
adequate to meet all of the new requirements you will surely face in
the upcoming months and years?
Answer. BIS is comfortable with the funding request contained in
the President's budget. In order to address new requirements, BIS
believes that the budget request should be funded in full.
Question. Is BIS' technology infrastructure adequate? From high-
powered data warehousing at headquarters to satellite phone capability
in the field, does BIS have the tools it needs to do its job?
Answer. BIS currently has an adequate technology infrastructure to
perform its mission-critical functions. BIS is in the process of
modernizing its Export Control Automated Support System (ECASS), which
was developed in the mid-1980s, from a mainframe-based system to a
modern server-based system with a relational database. BIS also has
upgraded all personal computers, desktop software, and
telecommunications links to provide its users with up-to-date
technology and to improve productivity. BIS continues to seek ways to
modernize its technology infrastructure to empower its employees to
deliver critical services to its customers.
To that end we note that in the President's fiscal year 2004 budget
proposal, additional resources are requested to support BIS's Seized
Computer Evidence Recovery System (SCERS) program. This program, which
uses evidence seized from computer disk drives, has a significant
backlog of evidence awaiting analysis. This delay has hindered the
processing of cases and the completion of time-sensitive
investigations. In the President's fiscal year 2004 budget, BIS seeks
additional personnel (one agent and two technical analysts) to staff a
modern SCERS lab, thus alleviating the burden placed on SCERS agents in
the field currently performing this work.
Question. To what extent will BIS be working with the Department of
Homeland Security? In your opinion, what is the appropriate
relationship between BIS and Homeland Security? To what degree will the
new Department influence BIS' mission, policies, and agenda?
Answer. BIS has an excellent working relationship with various
agencies now located in the Department of Homeland Security, and we
anticipate that we will continue to work well with those agencies. BIS
has long had an excellent working relationship with the U.S. Customs
Service in the administration and enforcement of dual-use export
controls. BIS also maintains a good working relationship with the
Information Analysis and Infrastructure Protection Directorate of DHS,
to which BIS's Critical Infrastructure Assurance Office was transferred
earlier this year. The creation of the Department of Homeland Security
has not altered BIS's mission, policies, or agenda.
Question. To what extent is the Bureau of Industry and Security
working with the Department of State, which has responsibility for
regulating weapons exports? Could you describe how this relationship
has evolved since September 11? Are State and BIS sharing information
and lessons-learned? Are State and BIS collaborating their efforts
overseas, for example, sharing information about end-use checks,
monitoring, enforcement, and the like?
Answer. BIS continues to have a close working relationship with the
Department of State on the implementation of U.S. export controls. BIS
has been involved with the Departments of State, Defense, and Energy,
and the National Security Council in a comprehensive review of goods
and technologies on the U.S. Munitions List (USML). The State
Department implements export controls under the USML. In addition, by
Executive Order, State reviews export license applications submitted to
BIS and BIS-promulgated regulations concerning exports of U.S. dual-use
goods and technologies. BIS also works closely with State on changes to
the multilateral export control regime lists. Through these various
processes, State and BIS share information about countries and end-
users of concern. Moreover, since the mid-1990s, BIS has worked closely
with State to share information relevant to each other's watch lists
and end-use checks. Finally, BIS works closely with the State
Department in rendering technical assistance to other countries to
assist the development of strong indigenous export control systems and
improve cooperation in export controls, under the State Department
administered Export Control and Border Security program.
CRITICAL INFRASTRUCTURE PROTECTION
Question. Mr. Secretary, CIAO was created within the Department of
Commerce in fiscal year 1999. A conscious decision was made to put CIAO
at Commerce because of Commerce's strong ties to the private sector,
which controls the lion's share of our national critical infrastructure
(the Internet and utilities, to name just two examples). This month,
CIAO began its transition to the Department of Homeland Security.
How do you think CIAO's mission will change once it is incorporated
into the new Department? Will CIAO continue to have primary
responsibility for liaising with the private sector on matters relating
to critical infrastructure protection and for ensuring that the private
sector does not inadvertently create weaknesses in our national
critical infrastructure, or will this responsibility remain at
Commerce?
Answer. CIAO's mission consisted of three main functions related to
critical infrastructure protection when it transferred into the
Department of Homeland Security (DHS): national outreach and awareness,
planning and policy coordination, and critical asset and
interdependency identification for federal government agencies (Project
Matrix). Consistent with the requirements of the Homeland Security Act
of 2002, these functions were fully integrated into the Information
Analysis and Infrastructure Protection Directorate. Since private
industry owns and operates 85-90 percent of the nation's critical
infrastructures, we anticipate that DHS will need to continue to work
closely with U.S. industry, and has primary responsibility for doing
so. The Planning and Partnerships Office of the new Directorate retains
CIAO's core public-private partnering competencies and previously-built
contacts with the private sector. Commerce stands ready to assist where
appropriate.
Question. Do you think Homeland Security is well-suited to handle
the task of liaising with the private sector, as CIAO did while it was
at Commerce? How do you think companies will react to having DHS--which
is essentially a law enforcement agency--involved in their internal
efforts to strengthen their systems against attack?
Answer. Our experience suggests that U.S. industry generally
cooperates well with government agencies on issues of national security
and homeland defense. As we all have seen since September 11, 2001,
national and economic security depends on homeland security. Private
industry in general recognizes this new reality. We are optimistic that
industry and the Department of Homeland Security will have a productive
and mutually beneficial relationship with respect to critical
infrastructure protection. The Commerce Department stands ready to
assist in this effort as appropriate.
Question. With the transfer of CIAO, will the Bureau of Industry
and Security have any role in critical infrastructure protection?
Answer. The Department of Commerce generally, and the Bureau of
Industry and Security specifically, will continue to carry out programs
and activities relating to the economic security component of critical
infrastructure protection--as they did before CIAO was created in the
Department of Commerce. For example, the National Telecommunications
and Information Administration has responsibility for spectrum
management and chairs the interagency Internet Protocol version 6
(IPv6) task force. The Technology Administration's National Institute
for Standards and Technology will continue its leading role in
developing standards relating to the physical and cyber security of
products, services, and processes, which are shared internationally as
well as domestically.
The Bureau of Industry and Security (BIS) continues to have
significant defense industrial base responsibilities. The defense
industrial base was recognized as one of the fourteen critical sectors
in the National Homeland Security Strategy. BIS administers the
priorities and allocations authority under Title I of the Defense
Production Act to ensure the timely delivery of industrial products,
equipment, materials, and services for approved national defense and
homeland security programs. Under that authority, BIS has assisted the
Transportation Security Administration and the FBI in acquiring
products and equipment needed for the war on terrorism. BIS also
conducts assessments of the viability of various critical industry
sectors. Finally, consistent with its mission of furthering U.S.
national security and economic security, BIS continues to advocate the
importance of protecting the country's critical infrastructures and
assets.
NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY (NIST)/HOMELAND SECURITY
Question. It is clear that NIST and the Department of Homeland
Security (DHS) must develop a close working relationship. Have you had
any preliminary talks with Secretary Ridge on this subject? Do you
believe the Director of NIST has a clear understanding of what will be
expected of NIST under the new homeland security framework? Does he
have the resources he needs to meet these requirements?
Answer. There have been extensive discussions between the
Department of Commerce (DoC) and the Department of Homeland Security
(DHS) on the need to develop a close and effective collaboration. Such
discussions led to the signing of a Memorandum of Understanding (MOU)
on May 22, 2003, between the Technology Administration (TA) of DoC and
the Science and Technology (S&T) Directorate of DHS. The MOU allows the
S&T Directorate to leverage TA's, and specifically NIST's, expertise in
measurement science and standards to accelerate the development,
testing, evaluation, and deployment of homeland security technologies.
S&T and TA seek to collaborate on research and planning activities, and
share where appropriate facilities, personnel, and scientific
information. This MOU builds on the long history of collaboration
between NIST and the various agencies incorporated into DHS, such as
the Federal Emergency Management Agency (FEMA), and the Office for
Domestic Preparedness (ODP). To further improve ties between NIST and
DHS in the areas of measurements and standards, NIST has detailed on a
full-time basis the Division Chief from its Ionizing Radiation Division
and a staff member (part time) from its Computer Security Division to
the Office of Standards in the DHS S&T Directorate.
The Director of NIST has a clear understanding of NIST's role in
homeland security. This role is defined by NIST's unique mission to
develop and promote measurement, standards, and technology to enhance
productivity, facilitate trade, and improve the quality of life.
Because of the overwhelming importance of homeland security to the
quality of our life, NIST will work with the new DHS to ensure that the
appropriate measurements and standards are in place to support the
efforts of DHS in chemical, biological, radiological, nuclear, and
explosive detection and defense, cybersecurity, critical infrastructure
protection, first responders, etc. NIST's partnership with DHS will
build upon years of experience working with a number of the agencies
making up the new Department.
NIST is also building upon its experience in consensus standards
and its partnerships with standards development organizations (SDO's)
to address the needs for homeland security standards. The Chief of
NIST's Standards Services Division is the government co-chair of the
ANSI Homeland Security Standards Panel that is coordinating the efforts
of standards development organizations (SDOs) in developing standards
required for homeland security technologies.
Because of the importance of homeland security to our citizens,
NIST has redirected resources to develop the critical measurements and
standards in this area. When appropriate, NIST homeland security
efforts are supplemented by funds from other government agencies. When
sufficient funding is not available through these approaches, the
Administration has proposed budget initiatives for NIST in the area of
measurements and standards for homeland security. For fiscal year 2004
the following homeland security budget initiatives have been proposed:
Homeland Security: Standards, Technology, and Practices for Buildings
and First Responders ($4.0 million, 7 permanent positions, and 5 FTE);
Measurement Infrastructure for Homeland Security ($5.3 million, 12
permanent positions, and 9 FTE); and Standards for Biometric
Identification Systems ($1.0 million, 4 permanent positions, and 3
FTE).
NIST/LAW ENFORCEMENT TECHNOLOGIES STANDARDS
Question. Mr. Secretary, a great deal of funding has been earmarked
during the last two years to help first responders purchase the
equipment they need to effectively combat terrorism. Justice has been
doing some work in the area, but standards-development is really NIST's
bailiwick.
The President's budget does not request any direct funding for the
Office of Law Enforcement Standards at NIST. Are you planning to
request funds for OLES in the fiscal year 2005 budget request? Wouldn't
you agree that there is a significant need in this area and that NIST
is uniquely qualified to fill it?
Answer. In response to your statement, developing performance
standards for communication and personal protection equipment for first
responders is very important and the National Institute of Standards
and Technology (NIST) has an important role to play here. For several
years, NIST's Office of Law Enforcement Standards (OLES) has been
working with the Department of Justice's National Institute of Justice
(NIJ) and other government agencies developing performance standards
for first responders.
The ability of law enforcement and public safety agencies to
communicate and exchange data in critical situations is fragmented by
equipment incompatibilities and the lack of standards to provide a
common, nationwide approach to telecommunications and information
sharing. In its efforts to resolve this issue, NIST's OLES has been
working hard on a Public Safety Communications Standards program geared
toward solving public safety interoperability and information sharing
problems by developing and adopting NIJ standards for voice, data,
image, and video information transfers for first responders. In
addition, OLES has been holding discussions with end users about their
requirements and evaluating commercial devices instrumental to ensure
that the equipment and technologies currently being used by the U.S.
first responders community are interoperable, safe, dependable, and
effective.
In addition, OLES has been managing a program since 1999, to
develop CBRNE (chemical, biological, radiological, nuclear, and
explosive) protective equipment standards for emergency first
responders. This program, initially funded by NIJ, will continue with
funding provided by the Office for Domestic Preparedness (ODP). An
Interagency Agreement has been signed between the ODP, formerly of the
Office of Justice Programs, now part of the Borders and Transportation
Security Directorate, Department of Homeland Security, to continue the
program managed by OLES for the development of a national suite of
CBRNE protective equipment standards for emergency first responders.
This program led to a National Institute of Occupational Safety and
Health (NIOSH) standard for Self-Contained Breathing Apparatus (SCBA)
and Air Purifying Respirators (gas masks) and produced an important set
of guides and databases to help emergency first responders in the
evaluation and purchase of chemical and biological detection, personal
protective, and communications equipment. The continuation of this
program under ODP will be significantly expanded beyond development of
personal protective equipment standards to address radiological
threats, decontamination standards, and explosive detection standards.
Yes, the National Institute of Standards and Technology (NIST)
believes there is a significant need in the criminal justice and public
safety area and NIST is uniquely qualified to fill it. NIST has
successfully filled these needs over the past 32 years through a number
of reimbursable agreements with other agencies, such as the Department
of Justice's National Institute of Justice, the Department of
Transportation, and most recently with the Department of Homeland
Security's Office of Domestic Preparedness.
The $3 million funding for NIST's Office of Law Enforcement
Standards (OLES) provided in the fiscal year 2003 Omnibus
Appropriations Act will go a long way in helping NIST to ensure that
NIST has the critical personnel with the expertise to implement law
enforcement standards initiatives proposed by their partner federal
agencies as specifically stated in the Act itself. This funding
supports NIST with an appropriation in fiscal year 2003 for the staff
and administrative costs related to the Office of Law Enforcement
Standards, giving NIST the means to independently hire, maintain and
manage the appropriate technical expertise to perform its
responsibilities to the law enforcement community. In addition, it
allows NIST to devote the entirety of its funding from reimbursable
sponsors to the technical needs of those sponsors, without diverting
any funding from sponsors to cover staff and administrative costs at
NIST.
At the time the fiscal year 2004 President's budget request was
submitted, the fiscal year 2003 Omnibus Appropriations Act had not been
enacted. Therefore, the fiscal year 2004 President's budget request
builds from the fiscal year 2003 President's budget request, which did
not include any direct appropriated funding for NIST's OLES. Decisions
on the funding priorities to be included in the President's fiscal year
2005 budget have not been finalized, and we will bear your concerns in
mind as we evaluate the many competing requests for funding.
NIST/WORLD TRADE CENTER INVESTIGATION
Question. Before NIST took over the World Trade Center
investigation, there was a huge controversy over whether too much of
the structural steel from the Twin Towers had been sold to scrap yards,
creating an impossible situation for NIST's scientist and engineers.
Now that NIST is seven months into the investigation, has it been able
to gather enough evidence including structural steel to conduct the
investigation? Could you report on NIST's progress or any preliminary
findings from the investigation?
Answer. Yes, the National Institute of Standards and Technology
(NIST) is basing its review, analysis, modeling, and testing work for
the World Trade Center (WTC) investigation on a solid foundation of
technical evidence.
NIST has in its possession nearly 250 pieces of WTC steel. The vast
majority of the pieces are of significant size and include perimeter
prefabricated column-spandrel elements, rectangular box beams, wide
flange sections, truss sections, channels and several smaller pieces,
such as bolts. As of March 28, 2003, NIST has catalogued 235 pieces of
WTC steel which includes a database with photographic records and
member markings. In addition, NIST has examined additional steel stored
by the Port Authority at JFK airport and has transported 12 specimens
to NIST. NIST believes that this collection of steel from the WTC
towers is adequate for purposes of the investigation.
NIST has also received considerable cooperation and large volumes
of information from a variety of organizations and agencies
representing the building designers, owners, leaseholders, suppliers,
contractors, and insurers.
Local authorities providing information include the Port Authority
of New York and New Jersey (PANYNJ or Port Authority) and its
consultants and contractors; the Fire Department of New York (FDNY);
the New York Police Department (NYPD); the New York City Department of
Design and Construction (DDC); the New York City Department of
Buildings (DOB); and the New York City Office of Emergency Management
(OEM). In addition, the Occupational Safety and Health Administration
(OSHA) provided correspondence sent to it regarding the evacuation
experience of WTC occupants on September 11, 2001.
NIST also has received information from Silverstein Properties
(Silverstein) and its consultants and contractors; the group of
companies that insured the WTC towers and its technical experts; Nippon
Steel; Laclede Steel; Isolatek International, formerly known as U.S.
Mineral Products; Marsh & McLennan (a tenant of WTC 1), and Roger Morse
Associates. The information from Silverstein and the insurance
companies includes the large body of technical work completed by both
parties as part of the insurance litigation involving the WTC towers,
such as reports on the structural collapse, fire spread and severity,
and wind tunnel test results for the WTC towers. In addition, technical
experts for both parties independently provided extensive briefings to
the WTC investigation team and discussed the tenability environment and
the evacuation procedures in the buildings.
Solid progress has been made by the investigation team at the one-
third mark of the ongoing 24-month effort. On May 7, 2003, NIST
released a progress report (http://wtc.nist.gov/) on the WTC
investigation, its second since the effort began in August 2002. This
interim report does not include any conclusions or make any
recommendations, since the investigation is still in its early stages.
Key points in the progress report included:
--a status update on efforts to collect critical data about the WTC
disaster of September 11, 2001, such as building documents,
video and photographic records, emergency response records and
oral histories (a complete listing of materials collected to
date and those items still needed are included in the report);
--an interim report that documents the procedures and practices used
to provide the passive fire protection (fireproofing) for the
floor system of the WTC towers (nothing in the interim report
based on a review of factual data in documents obtained by NIST
should be taken to imply that the floor trusses played a
critical role in the collapse of the WTC towers);
--a detailed description of the key factors that NIST is considering
in its analysis of the various collapse scenarios hypothesized
for the WTC buildings, including fire endurance testing of a
typical WTC floor system and individual steel members;
--a look at the integrated approach for identifying the most probable
of the technically possible collapse sequences for WTC 1 and 2
(the Twin Towers) and WTC 7; and
--a review of NIST plans originally presented in April 2003 for
studying the WTC evacuation and emergency response by
collecting first-person data from survivors (both WTC occupants
and first responders), families of victims, and individuals
with operational and command authority during the WTC disaster.
NIST/WARWICK, RHODE ISLAND FIRE INVESTIGATION
Question. Mr. Secretary, in January, we in New England suffered a
horrible tragedy when 96 people were killed in a nightclub fire in West
Warwick, Rhode Island. Was the National Construction Safety Team Act
successful in helping avoid confusion over responsibility for the
investigation into this tragedy? How is the Administration proposing to
fund this and future investigations? If NIST is going to be responsible
for investigating these events when they occur, should funds be set
aside within NIST for this purpose to avoid the delay in starting the
investigation?
Answer. The tragic fire in West Warwick, Rhode Island, is the type
of event that the National Institute of Standards and Technology (NIST)
would have investigated under its existing authority prior to the
passage of the National Construction Safety Team (NCST) Act. What the
Act has done, however, is to allow us to respond immediately and to
raise the awareness and appreciation of our activities in the eyes of
local officials and the other Federal agencies that are conducting
investigations. The Act provides for the criminal investigation to have
priority over NCST activities. We have briefed local and state
authorities on the role and objectives of the NCST investigation, and
established liaisons with the Rhode Island State Fire Marshal's office,
the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the
U.S. Fire Administration. The NCST is gathering evidence, to the extent
possible, independent of any criminal investigations.
The Rhode Island investigation plan was issued based upon the
redirection of base funds. The plan targets completion of the
investigation by the end of calendar year 2003.
NIST has not been appropriated any additional funding for
activities associated with the NCST Act. Where appropriate, NIST will
continue to undertake investigations of major building disasters as
authorized by law.
PATENT AND TRADEMARK OFFICE, INCREASE IN USER FEES
Question. PTO's fiscal year 2004 budget request includes a 15
percent increase in user fees. This fee increase will mean an
additional $300 million in fee revenue for the PTO that it would
otherwise not collect. How is a 15 percent increase in user fees
justified when, under the current plan, PTO does not expect to
significantly decrease patent pendency?
Answer. The fee legislation currently pending in Congress will
generate additional revenues and ensure the implementation of the
USPTO's 21st Century Strategic Plan. If the fee legislation is not
implemented for fiscal year 2004, the USPTO's projection of fee
collections is $1,302.7 million and if the fee legislation is
implemented before fiscal year 2004, the USPTO's projection of fee
collections is $1,503.8 million in fiscal year 2004. This equates to an
additional $201.1 million, or a 15 percent increase. The proposed Fee
Modernization Act of 2003 is a critical component to the successful
implementation of the strategic plan. The strategic plan aims to
modernize the agency for the 21st century by addressing patent pendency
as well as quality, workload, and e-Government. As Under Secretary
James E. Rogan has testified before Congress, without the additional
fees secured by passage of a fee bill this year, average patent
pendency will climb to more than 40 months by 2008.
The USPTO has been responsive to concerns that it continually
attempts to address workload demands by hiring increasingly more patent
examiners. The 21st Century Strategic Plan addresses this concern
through a number of initiatives that will enable patent examiners to
focus on the core mission of the organization--the examination of
patent applications. These initiatives include the multi-track patent
examination process, the mutual exploitation of search results,
competitive sourcing of search, and the proposed fee restructuring.
These initiatives, plus Under Secretary Rogan's top-to-bottom review
resulted in a plan that reduces patent examiner hires through fiscal
year 2008 by 2,400 compared to the fiscal year 2003 Business Plan.\1\
As noted in the strategic plan, average patent pendency time will
increase over the short-term and be at 27 months in 2008. The USPTO
will continue to work toward reducing pendency and pursue the long-term
optimum goal of 18 months pendency beyond the five-year horizon of the
strategic plan.
---------------------------------------------------------------------------
\1\ The 2003 Business Plan was submitted to the Congress in
February 2002 as part of the USPTO's fiscal year 2003 Budget.
---------------------------------------------------------------------------
[ATTACHMENT]
CONSEQUENCES OF FAILING TO ENACT FEE LEGISLATION IN 2003
Inability to Hire Needed Examiners.--In fact, patent pendency will
increase dramatically because of our inability to hire 2,900 new patent
examiners. An inability to hire patent examiners beginning in fiscal
year 2003 and the out years will increase processing delays and
severely impact USPTO's ability to bring down pendency. Over 140,000
patents will not issue over the next five years if the USPTO is held to
current fees and funding levels.
Unexamined Patent Applications Skyrocket.--If recommended funding
levels are not appropriated in future years, the inventory of
unexamined patent applications would skyrocket to over 1,000,000
applications by 2008 (more than double the current amount).
Average Patent Pendency Skyrockets.--As measured from the time of
filing, pendency would jump to over 40 months in 2008, the highest
pendency rate in more than four decades.
Delaying Full e-Government.--Inability to meet the stated goals of
a fully electronic, e-Government environment for patent and trademark
applications.
PTO/FIVE YEAR STRATEGIC PLAN
Question. Mr. Secretary, I understand the PTO is now placing a
higher priority on goals like quality assurance and e-government
initiatives (the latter goal being driven primarily by OMB). While I
agree that these are valid goals, I remain concerned about the issue of
patent pendency. I understand that there is currently a 400,000 patent
backlog. How will the Five Year Strategic Plan help decrease patent
pendency? Will the PTO remain committed to the goal of 18 months for
patent pendency? When can we realistically expect PTO to meet this
goal?
Answer. As you know, there is general agreement among the nation's
CEOs, the inventor community, throughout lawyers in the bar, and people
in the capital equity markets that issuing U.S. patents faster (vis-a-
vis reducing pendency) without adequate quality assurance behind them
would lead to uncertainty for the tech community and be a terrible
mistake overall. Further, if we do not complete our e-government
initiatives to electronically process patent applications, we would
remain less able to respond quickly to changes in workloads.
As Under Secretary Rogan has also testified before Congress,
without the passage of the Fee Bill, the USPTO's patent application
backlog is predicted to rise to 1,000,000 by 2008 and more than 140,000
patents will not issue in that time frame. We continue to work on all
of these agency goals--pendency, backlog, quality assurance--through
the 21st Century Strategic Plan and its initiatives. [See following
graphs.]
While the USPTO is making quality and e-Government initiatives an
immediate priority, it continues to implement initiatives to support
the USPTO's long-term pendency goals. The 21st Century Strategic Plan
has aggressive timeliness goals: to make available, on average, a first
Office action for first-filed U.S. non-provisional patent applications,
at the time of 18 month publication, and a patent search report for
other patent applications in the same time frame--by far the fastest in
the world. This will be accomplished by redesigning the entire patent
search and examination system based upon multiple-examination tracks,
greater reliance on qualified patent search services, and variable,
incentive-driven fees.
Upon enactment of the Fee Modernization Act of 2003, the USPTO will
move from a ``one-size-fits-all'' patent examination process to a
multi-track examination process that leverages search results of other
organizations and permits applicants to have freedom of choice in the
processing of their applications. The new process will eliminate
duplication of effort, encourage greater participation by the applicant
community and the public, and improve the quality of patents and
decrease processing time. For example, the proposed fee legislation
contains significant authorities needed to implement the strategic
plan, such as providing refundable search and examination fees rather
than the composite fee currently charged. This change will provide
patent applicants with the opportunity to terminate the application
process because an invention does not have sufficient commercial
viability and obtain a refund. This would abandon the application and
obviate the need for the USPTO to proceed with the examination of the
application. The USPTO will continue to work toward reducing pendency
and pursue the long-term optimum goal of 18 months pendency beyond the
five-year horizon of the strategic plan. Their best estimate is that it
will take at least a decade to achieve the 18-month goal.
Under a new paradigm, the USPTO will concentrate Office expertise
as much as possible on the core government function of examination, and
over the five-year horizon of the strategic plan, expects to hire 2,400
fewer patent examiners than originally envisioned. However, they will
make available, on average, a first Office action for first-filed U.S.
non-provisional applications at the time of 18 month publication, and a
patent search report for other patent applications in the same time
frame which industry acknowledges is a highly beneficial interim
pendency solution.
PAPERLESS PATENT APPLICATION PROCESS
Question. Could you describe PTO's progress towards instituting a
paperless patent application process? How high a priority is this for
the PTO? How is this related to PTO's implementation of the various e-
government initiatives?
Answer. The USPTO's priorities in the 21st Century Strategic Plan
are to (1) improve patent and trademark quality, (2) aggressively
implement e-Government to handle workload associated with the 21st
Century economy, and (3) reduce patent and trademark pendency. One of
the USPTO's highest priority e-Government initiatives is delivering an
operating pipeline to process patent applications electronically by
October 1, 2004, including electronic capture of all post-filing paper
correspondence. At the center of the e-Government strategy is the
collaboration with the European Patent Office (EPO) to use their
ePHOENIX system, and collaboration with the Trilateral Offices (EPO and
the Japan Patent Office) to achieve common goals and share systems
already in use or development. The USPTO's Tools for Electronic
Application Management (TEAM) project will also continue to support the
e-Government strategy.
The USPTO is on schedule to meet its October 1, 2004 planned
electronic patent application processing date as follows:
In May 2003, a prototype Image File Wrapper (IFW) system was
installed in five Patent Examining Pilot Art Units, and more than 100
patent examiners and support staff were trained on the use of the
system.
In June 2003, the USPTO will begin scanning all newly filed patent
applications into the IFW system, and the digital copy replaces paper
as the official patent file.
In July 2003, the USPTO will begin full production roll-out of the
IFW system. Seven Art Units, comprised of about 100 employees, will be
added to the system each week. Upwards of 7,000 applications will be
scanned per week resulting in adding over 8 million pages to the
database each month.
In December 2003, all working patent application files of the three
Technology Centers moving to the USPTO's new Carlyle facility in
Alexandria, Virginia, will be operating on the IFW system. At this
time, there will be over 2,000 total users of the system.
In January 2004, the USPTO will begin the final phase of full
deployment of the IFW system throughout the Patent Examining Corps.
In October 2004, all patent application processing will occur in a
totally electronic environment that will be used by over 4,000 patent
examiners and 2,500 support staff.
Beginning in fiscal year 2004, the USPTO will collaborate with the
European Patent Office to initiate an effort to process captured patent
application images into text and associated images. This effort will
use an eXtensible Markup Language (XML)-based data representation
enabling text-based patent application processing (e.g., document
navigation, document searching) by fiscal year 2006.
SOFTWOOD LUMBER
Question. Mr. Secretary, are you aware of the softwood lumber
issue, and can you give us a status report on the countervailing and
antidumping investigations? Are you aware of the particular problem
that some loggers and landowners in New England have had, which is that
a dumping tax was, in effect, imposed on U.S. lumber that is shipped to
Canada for processing? Is there going to be any opportunity for these
companies to present their case and thus rectify this situation?
Answer. After complex and thorough investigations, antidumping and
countervailing duty orders on softwood lumber from Canada were issued
in May 2002.
I am aware of the issue involving duties being imposed on U.S.
lumber shipped to Canada for processing and re-imported into the United
States. In fact, in February 2003, based on comments we received, the
Department issued a scope ruling to address this very issue. In
essence, we clarified that U.S.-origin softwood lumber that is further
processed in Canada may re-enter the United States free of antidumping
and countervailing duties so long as, at the time of importation, the
Bureau of Customs and Border Protection (BCBP) can be satisfied that
the lumber was first produced in the United States. We believe that
this matter has now been resolved. Since the Department issued its
scope clarification, we have heard of no instances of BCBP collecting
duty deposits on U.S. lumber processed in Canada and returned to the
United States.
In addition, during May 2003, we received numerous requests for
administrative reviews of both the antidumping and countervailing duty
orders. We will be initiating the administrative reviews by the end of
June 2003.
WORKING CAPITAL FUND
Question. Mr. Secretary, what would be the advantages and
disadvantages of directly appropriating funds for central
administrative services, rather than depending upon the Working Capital
Fund?
Answer. The Department's Working Capital Fund (WCF) was established
on June 28, 1944, pursuant to 5 U.S.C. 607 (15 U.S.C. 1521). The
Working Capital Fund is a no-year revolving fund established to support
departmental services delivered more efficiently, economically, or
advantageously on a centralized basis. Although activities and services
have changed over the years of operation, the WCF continues to display
full costing of services in bureau budgets. We see no advantages to
directly appropriating funds for central administrative services.
The disadvantages of directly appropriating funds for central
administration services include the loss of:
--Responsiveness/Flexibility for Bureaus.--The WCF provides a
mechanism where Bureaus can request additional services based
on their needs and funding availability, which varies year to
year. For example, additional guard service and security
investigations are requested as needed by Bureaus. If directly
appropriated, bureaus would lose this flexibility.
--Flexible Cost Sharing Mechanism.--As a result of the 9/11/01
tragedy, applications for government jobs through the Postal
Service were significantly delayed throughout the federal
government. Hiring came to a halt in most federal agencies.
However, DOC job applications continued to be processed through
Commerce Opportunities On-Line (COOL), an automated job
application system. Individual DOC Bureaus may not have been
able to fund this initiative alone, but collectively through
the WCF this on-line job application system was developed and
is being used successfully by all participating Bureaus.
--Economies of Scale.--The WCF provides a better vehicle to manage
inventory accounts and purchase large equipment or quantities
of items in which the Bureaus share in expenses and cost
savings. For example, we consolidate buying power and
management of services through large orders for administrative
services such as janitorial and printing. The WCF serves as a
better vehicle to realize volume cost savings.
--Full Cost in Bureau Budgets.--Costs charged through the WCF ensure
that the Bureau's full cost of doing business is reflected in
Bureau budgets, not in a general administration budget.
______
Question Submitted by Senator Pete V. Domenici
PUBLIC TELECOMMUNICATIONS FACILITIES, PLANNING AND CONSTRUCTION
Question. Secretary Evans, public television stations all across
the country are facing a federal mandate to convert to digital
broadcasting. Approximately 192 stations out of 355 have filed with the
Federal Communications Commission for a waiver because they are not
going to meet the May 2003 deadline due to lack of funding. These
stations are counting on the Public Telecommunications Facilities
Program (PTFP), which provides grants to public radio and TV stations
for equipment, to help them cross the digital TV finish line with a
federal matching grant.
The President's fiscal year 2004 budget submission doesn't request
funding for this important matching grant program. Can you please
explain the thinking behind this decision?
Answer. The President's fiscal year 2004 Budget proposes to suspend
funding for the PTFP grant program in fiscal year 2004. The President's
fiscal year 2004 Budget also proposes that Federal support of public
television's digital television conversion be funded through monies
previously appropriated to the Corporation for Public Broadcasting
(CPB). As you probably are aware, CPB is funded through a two-year
advance funding procedure. CPB's fiscal year 2004 appropriation of $380
million was enacted into law on January 10, 2002, as part of the Labor/
HHS/Education appropriation, Public Law 107-116.
The Administration proposes that up to $80 million in funding for
digital conversion grants be made available from within CPB's $380
million appropriation. The President's fiscal year 2004 budget
recognizes that the FCC digital conversion requirement should be
addressed in the next fiscal year.
To date, public television stations have kept pace with their
commercial counterparts in the digital conversion. PTFP's 2003 funding
will assist approximately 109 stations meet the FCC's 2004 deadline. In
addition, CPB has been appropriated $48 million for the digital
transition as part of its fiscal year 2003 appropriation. NTIA has been
in contact with CPB officials and understands that CPB will award these
funds later in the year. Given competing national budget priorities and
the availability of funds within CPB, the Administration believes that
suspending PTFP grants for a year is prudent.
______
Questions Submitted by Senator Daniel K. Inouye
TOURISM
Question. Our country's engagement with Iraq has begun. The
apprehension caused by this military conflict and terrorist incidents
within the United States has led to a decline in air travel. This,
coupled with weak economic conditions, has led to a decline in tourism
such as we saw after September 11, 2001, and Desert Storm.
Has the Commerce Department developed a strategy to reduce the
effects on the tourism industry from this decline in business? Does the
fiscal year 2004 budget request the necessary resources to shore up
this important industry?
Answer. In the fiscal year 2003 Omnibus Appropriation, Congress
appropriated $50 million to market and promote the United States as a
tourism destination. We are working with industry to implement this
program and expect the tourism promotion campaign to commence in fiscal
year 2004.
The Department of Commerce is working in a number of ways to
support the travel and tourism industry and to assist in its recovery.
Immediately after 9/11, I reconvened the Tourism Policy Council (TPC)
to coordinate throughout government the programs and policies that
impact travel and tourism. The TPC provides the private sector with a
forum for making known to the Federal government the industry's ideas
and concerns. The TPC also ensures that the various Federal programs
are coordinated to maximize support for the industry.
The Department has launched a public-private partnership between
the United States and Japan to restore travel and tourism between our
two countries. Through promotional programs and events, this ``Tourism
Export Expansion Initiative'' also seeks to address Japanese concerns
about security and to convey that the United States is a safe
destination--key to restoring travel from this market.
The Department provides support to the travel and tourism industry
through its Market Development Cooperator Program (MDCP). The MDCP is a
competitive, matching grants program that seeks to leverage limited
Federal support for expanding exports of small and medium-sized
businesses. The Western States Tourism Policy Council received an award
to focus on a cooperative strategy to restore international tourism in
gateway communities in and around the federal public lands.
The Department also provided a $788,000 grant to the State of
Hawaii to help offset some of its losses attributable to the lack of
tourism resulting from 9/11. The project was awarded to the Hawaii
Visitor and Convention Bureau (Hawaii VCB) for a marketing campaign to
attract visitors. Marketing will be multi-media and focused on mainland
cities. The Hawaii VCB is based in Honolulu County but the project will
benefit all counties of Hawaii.
The Department provides support to the travel and tourism industry
through its market research program. The Department is responsible for
collecting and disseminating international traveler statistics,
including arrival statistics and visitor expenditures.
NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION (NOAA)
Question. Support for NOAA activities and resources in Hawaii. I am
concerned with what appears to be a lack of Administration support for
NOAA's commitment to address critical needs in Hawaii and the American
Flag Territories. I have two items of particular concern. First, the
NOAA ship VINDICATOR (to be renamed HI'I ALAKAI) will be converted this
fiscal year to support the National Ocean Service's activities in the
Pacific including coral reef research. I understand that while the
vessel will be ready for deployment during fiscal year 2004, the
Administration's budget proposal does not include any funding for the
operations of this vessel. Please explain in full detail why funds were
not requested by the Administration for the operation of the
VINDICATOR?
Answer. At the time the fiscal year 2004 budget was being
formulated, NOAA was still defining the multi-disciplinary mission
requirements that would be used to develop the specification package to
convert HI'I ALAKAI to meet the requirements. The likely date for award
of the shipyard conversion contract was still unknown as was the
expected amount of time that would be required for conversion and
shakedown of new or modified systems. Considering those unknowns, it
seemed unlikely the ship would be ready for operations early enough to
require fiscal year 2004 operating funds.
Second, the National Marine Fisheries Service will finally
establish the new Pacific Islands Region next month. I am informed that
NOAA does not have the two SES positions needed to provide the new
Region with its top level managers: a Regional Administrator and a
Science Director. In addition to the SES positions, I have not received
any credible confirmation that there will be adequate FTE positions to
staff the new Region.
Question. Please explain how you plan to address these personnel
problems and when we can expect these problems to be resolved.
Answer. With respect to the two Senior Executive Service (SES)
positions, the National Marine Fisheries Service has requested
authority from the Department of Commerce to recruit for a Pacific
Islands Regional Administrator and Science Center Director. We expect
to receive approval shortly and have these positions filled permanently
by the end of the year. To fully staff the Pacific Islands Region and
Science Center, we have projected a long term requirement (2010) of 187
FTE positions in addition to approximately 70 contract employees to
primarily assist in carrying out science related activities. Currently,
there are 117 funded FTE positions (including the two SES positions)
and 70 contract employees located in Honolulu that constitute the
initial staff for the Pacific Islands Region.
Question. Streamlining Fisheries Management. According to your
written statement, one of your Department's strategic goals is to
``improve and streamline the Nation's fishery management system to
better meet commercial, recreational, and conservation objectives.''
How do you plan to implement this goal on a national scale, and how far
will the Administration's request of $29.8 million in fiscal year 2004
go toward meeting this goal?
Answer. The National Marine Fisheries Service (NOAA Fisheries) has
responsibility for the management of sustainable fisheries, the
recovery and protection of marine mammals and endangered and threatened
species, and the conservation and restoration of marine habitat. NOAA
Fisheries works closely with regional fishery management councils,
states, and other constituents to carry out these mandates. The
regulatory process affects not just marine resources but also the
associated people, businesses, and communities.
The goal of the Regulatory Streamlining Project (RSP) is to improve
the efficiency and effectiveness of regulatory operations and decrease
NMFS's vulnerability to litigation. While the RSP initiative highlights
the National Environmental Policy Act (NEPA) as a critical component of
the regulatory process, there are many other requirements that must be
addressed to ensure compliance with all of the agency's mandates.
Extensive analyses and documentation are required to comply with the
Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-
Stevens Act) and other associated mandates such as the Endangered
Species Act (ESA), Marine Mammal Protection Act (MMPA), Administrative
Procedure Act (APA), Regulatory Flexibility Act (RFA), Paperwork
Reduction Act (PRA), Coastal Zone Management Act (CZMA), and Executive
Orders 12612, 12630, and 12866. NOAA's fiscal year 2004 budget request
for NOAA Fisheries includes $1.5 million specifically to implement RSP
during fiscal year 2004, as well as requests for additional resources
for increasing the number of stock assessments around the country and
the collection of comprehensive biological, economic, and sociological
data on an increasing number of species and the environmental factors
that influence their health and abundance. Current and improved
analyses are critical to front-loading the management and regulatory
process.
There are a number of other initiatives that are critical to
regulatory streamlining on a national level. These include electronic
rulemaking and information systems, improvements to the regulatory
process, professional training to ensure compliance with all relevant
laws and executive orders, and quality control/quality assurance.
Fiscal year 2004 funding would support the development of an
electronic web-based system for all regulatory and information
collection activities, including rule development, the maintenance of
administrative records or dockets that support rulemaking, and rule-
related communications with stakeholders. This initiative will directly
support the RSP by expanding constituent participation, facilitating
information dissemination, encouraging a more transparent decision
making process, fostering better collaboration with stakeholders, and
contributing to problem-solving early in the rulemaking process. NOAA
Fisheries' performance will be greatly enhanced as the time required to
review and process rules and regulations is reduced and long-term cost
savings are generated. NOAA Fisheries is developing a training program
specific to our rulemaking needs. The program will ensure that all
appropriate staff are fully conversant with Federal Register
documentation requirements, Agency documentation standards, compliance
with all legal requirements, etc. Existing internal and external
training opportunities will be utilized to the extent possible.
Nevertheless, it will be necessary to develop specialized training
which incorporates all applicable requirements relative to the fishery
management context. These needs will be assessed and addressed in
conjunction with development of revised Operational Guidelines. As
additional responsibility is transferred to the Regions under the RSP,
the Regional staff will need specialized training to able to fulfill
their changing responsibilities. In addition, during 2004, NOAA
Fisheries will undertake a retrospective bench-marking of past
performance dealing with litigation, timeliness, and the need for
Federal Register corrections.
As part of RSP, NOAA Fisheries delegated signature authority for
Endangered Species Act (ESA) section 7 consultations to Regional
Administrators, except for those that are national in scope (i.e.,
programmatic, multi-Regional, etc.) or for permits issued by the Office
of Protected Resources. In NOAA Fisheries Headquarters, the
consultation program must conduct national consultations, provide
guidance, training, expertise and program review to the Regional
Offices, as well as all Federal agencies, Congress, and constituents.
Regional Offices require additional resources to conduct a variety of
consultations and to provide expert advice to fishery management
councils and constituents. One important goal of the RSP is to have
NOAA Fisheries alert fishery management councils and others early in
their planning process of potential endangered species-fisheries
interactions.
A centerpiece of successful ESA section 7 delegation will be NOAA
Fisheries' continued commitment to train managers and consulting
biologists to ensure that they maintain the knowledge, skills, and
abilities that are necessary to implement the agency's section 7
program consistently, efficiently, and effectively. In particular, the
following programs would be supported by fiscal year 2004 funding:
Develop and implement basic and advanced section 7 training; develop
and implement section 7 training for managers and Senior Executives;
develop and implement annual regional section 7 workshops; and develop
and implement training sessions for special topics.
Question. You have highlighted the climate change request of $295.0
million for fiscal year 2004. However, $266 million, or 89 percent of
that figure, is listed as ``other programs,'' which are maintained at
fiscal year 2003 level funding. Please explain how the majority of
NOAA's $16.9 million increase for the Climate Change Research
Initiative shows a commitment to ``fully funding climate research''
when no new funds are being requested for long standing, well
respected, NOAA climate programs?
Answer. The $16.9 million request for the Climate Change Research
Initiative (CCRI) represents a single NOAA climate request that is
targeted toward the highest priority national needs as described in
this Presidential initiative and in the National Academy of Sciences
2001 report Climate Change Science: An Analysis of Some Key Questions.
This is on top of providing full funding for NOAA's long-standing
climate programs, including provision of inflationary costs and planned
pay raises in the President's fiscal year 2004 budget. The request
makes full use of NOAA's long-standing climate programs. In particular,
of the $16.9 million request, we are using existing programs and
laboratories as follows:
--Global Ocean Observing System (+$6.3 million request).--This effort
will be managed by NOAA's Office of Global Programs (OGP) and
is expected to include support for Scripps Institution of
Oceanography, University of Miami, Woods Hole Oceanographic
Institution, and University of Hawaii, among others.
--Carbon Cycle Observing System ($5.0 million).--This system, focused
on determining the amount of carbon dioxide taken up by North
America, is to be operated by NOAA's Climate Monitoring and
Diagnostics Laboratory (CMDL) in conjunction with the Climate
and Global Change Program. CMDL has substantial experience in
operating large-scale atmospheric observing systems, having
operated the Baseline Observatories (including Mauna Loa) that
document the global rise in greenhouse gases. The Climate and
Global Change Program will ensure university involvement in
modeling and data analysis.
--Aerosol-Climate Interactions ($1.0 million).--This increase builds
on an existing program aimed at one of the most prominent
uncertainties in climate projection, namely the impacts of fine
airborne particles on climate. This will be administered
through NOAA's Office of Global Programs and the Aeronomy
Laboratory.
--Supercomputing ($3.5 million).--This will support an increase in
climate computational ability at NOAA's Geophysical Fluid
Dynamics Laboratory, which originated the modeling of climate
in the 1960's.
The remaining $1.1 million in NOAA's fiscal year 2004 requested
CCRI increase would be to fund the Climate Change Science Program
Office, which would provide coordinated national leadership for the
President's interagency climate and global change program, including
the coordination for CCRI among the Departments of Commerce, State,
Interior, Health and Human Services, Energy, Agriculture, and Defense,
and the Environmental Protection Agency, the National Science
Foundation, the National Aeronautics and Space Administration, the
Smithsonian Institution, the Office of Management and Budget, and the
Office of Science and Technology Policy.
In addition, fiscal year 2003 CCRI funding is also being used in
existing programs. CCRI supports expansion of the Regional Integrated
Science and Assessments Program (RISA) of OGP, which focuses on
developing pilot projects for using climate information and enhancing
collaboration among researchers, decision-makers, and the public. This
year, a new RISA project will be started in Hawaii at the East-West
Center looking at the options, risks, and uncertainties in mitigating
and adapting to year-to-year climate variability and long-term climate
change.
TRADE ADJUSTMENT ASSISTANCE
Question. The Commerce Department administers a small program,
Trade Adjustment Assistance for Firms, that is authorized to be funded
at $16 million, but is currently operating at $10.4 million. Small
companies in my state have benefited from expertise provided through
this program and have improved their competitiveness against imports. I
was pleased that the fiscal year 2004 budget request includes funding
of $13 million, but am concerned by reorganization proposals. It is my
understanding that the Trade Adjustment Assistance Centers (TAACs) may
be moved into the Economic Development Administration regional offices
providing another level of bureaucracy to this small and successful
program. I am aware that discussions have been initiated to keep the
TAACs as free-standing programs under the International Trade
Administration. It is also my understanding that the formula is being
recalculated in a manner that would be unfavorable to the Western
Region TAAC. Could you discuss these proposed changes and the effect
they may have on the program?
Answer. EDA's transition to a decentralized program delivery
structure was begun during the last Administration. Current EDA
leadership is simply completing the process. EDA's Public Works,
Economic Adjustment and Local Technical Assistance (including
University Centers) programs are all administered by EDA's six regional
offices. The Trade Adjustment Assistance (TAA) for Firms program is the
only regional program activity that is administered by EDA headquarters
rather than by the EDA regional offices.
The realignment of the TAA for Firms program to mirror the
decentralized structure of EDA's other programs will simply transfer
TAA for Firms processing functions, currently being performed in EDA
headquarters, to the regional offices. The requirements and basic
processes for the TAA for Firms program will remain unchanged. As with
EDA's other programs that have been successfully decentralized to the
regional level for many years, this action will bring the TAA for Firms
program closer to the firms it serves and in line with the President
Management Agenda. This change will not affect the structure of the 12
Trade Assistance Adjustment Centers (TAAC).
Under this structure, the TAACs will interact with new, more
locally-based EDA personnel, but the structure will not result in an
additional level of bureaucracy. In fact, the more robust program
delivery capability of EDA regional offices is expected to improve
EDA's overall administration of the TAA for Firms program.
EDA funding allocations for the TAACs for fiscal year 2003 were
calculated following the same methodology used in fiscal year 2002 and
previous years. EDA is presently working with the TAAC community to
establish a formalized and quantifiable funding formula that can be
replicated year-to-year, allocating funding based on various factors,
including TAAC performance levels. EDA has not yet proposed a funding
formula for 2004 and beyond. On March 5, 2003, EDA staff met with
representatives of the TAACs to seek input and to discuss possible
funding formulas. On May 29, 2003, the TAAC community responded with a
suggested funding formula, which EDA currently is considering. In
addition, some TAACs, including the Great Lakes TAAC (Ann Arbor, MI)
and the Western TAAC (Los Angeles, CA) expressed concerns about the
overall TAAC community's recommendations to EDA. These minority
opinions are also being considered by EDA. EDA intends to proceed with
the development of a formalized and quantifiable funding formula, in
consultation with the TAAC community, that will not only provide each
TAAC with a base level of funding but will also reward those TAACs with
the highest performance levels.
______
Questions Submitted by Senator Barbara A. Mikulski
TRADE AGREEMENTS--IMPACT ON SUGAR
Question. Mr. Secretary, the Administration has sought to move the
WTO and FTAA negotiations into a more serious phase, concluded
negotiations on free trade agreements (FTA's) with Chile and Singapore
and launched four new FTA negotiations--with Central America, Morocco,
the South Africa Customs Union, and Australia. And more such FTA
initiatives may be on the way.
I am concerned that negotiations pursued piecemeal, with inadequate
attention to industry-specific problems, as they seem now headed, could
bring disastrous results to American sugar beet and cane producers and
refiners.
Do you share my concern that inclusion of sugar trade provisions in
bilateral or regional trade agreements could leave the U.S. sugar
industry vulnerable to increased competition without opening European
and other consumer markets?
Answer. The U.S. Department of Agriculture has jurisdiction over
this issue and therefore is the appropriate agency to respond to this
question.
Question. Every other major sugar producing country excludes sugar
from their regional and bilateral trade agreements, even so-called
``free trade agreements.'' Why would the United States include
sensitive products like sugar in FTA's if other countries do not?
Answer. The U.S. Department of Agriculture has jurisdiction over
this issue and therefore is the appropriate agency to respond to this
question.
Question. Should trade in sugar therefore be addressed only in the
multilateral negotiations of the World Trade Organization (WTO)?
Answer. The U.S. Department of Commerce, primarily through its
International Trade Administration unit supports bilateral and multi-
lateral trade negotiations and monitors the results of signed trade
agreements. However, in relation to sugar trade issues the U.S.
Department of Agriculture has jurisdiction and therefore is the
appropriate agency to respond more fully to these questions.
Question. How do you plan to address other countries' policies
distorting trade in sugar, which create a ``dump'' in the market with
prices averaging barely half the world average cost of production for
the past two decades? Do you seek to impose restrictions on sugar
trade-distorting policies on developing and developed countries alike?
Answer. In general, the Department of Commerce is examining the
role of market distortions and their effect on trade in the context of
the Doha Round. We note that in their mandate for negotiations on Rules
in the Doha Round, the Trade Ministers included disciplines on ``trade-
distorting practices'' as an explicit area for further clarification
and improvement. Accordingly, the United States has addressed this
issue already in our submissions to the Rules Negotiating Group. For
example, in our October 22, 2002 Basic Concepts and Principles paper,
we noted that:
``A government's industrial policies or key aspects of the economic
system supported by government inaction can enable injurious dumping to
take place. Although these policies take on many different forms, they
can provide similar artificial advantages to producers. For instance,
these policies may allow producers to earn high profits in a home
`sanctuary market,' which may in turn allow them to sell abroad at an
artificially low price. Such practices can result in injury in the
importing country since domestic firms may not be able to match the
artificially low prices from producers in the sanctuary market.'' (TN/
RL/W/27, at 4)
We believe that addressing market- and trade-distorting practices
is essential to a rules-based multilateral trading system where U.S.
domestic producers and U.S. exporters can compete on a level playing
field, and we will press strongly throughout these negotiations for
strengthened disciplines in this area.
More specifically, the Department of Commerce vigorously enforces
the unfair trade laws, and has three outstanding antidumping duty
orders covering sugar from Belgium, France, and Germany. There is also
a countervailing duty order covering sugar from the European Community
in effect. As you know, our antidumping and countervailing duty laws
apply to developed and developing countries alike.
TRANSPARENCY IN TRADE NEGOTIATIONS
Question. Representatives of American workers and industries report
that they have not been consulted or even briefed sufficiently on
ongoing trade negotiations, including Free Trade Agreements and the
U.S.-Mexico sweetener agreement. What measures are you taking to
improve transparency of trade negotiations with key American
constituencies?
Answer. Transparency throughout the negotiating process
significantly strengthens the ability of U.S. negotiators to craft
trade agreements that will benefit the U.S. economy. The Department of
Commerce makes every effort to consult with American constituencies
before, during, and after trade negotiations on all aspects of trade
negotiations in which the Department is involved. The U.S.-Mexico
sweetener agreement has been handled by the Department of Agriculture
and the U.S. Trade Representative.
At the launch of negotiations, and when major policy issues arise,
the Administration issues a Federal Register notice. After carefully
reviewing and cataloging the responses, we draw on this material to
inform our positions throughout the negotiation. We also participate in
public hearings to get additional input.
During the negotiations, Department staff regularly brief industry
groups on the status of trade negotiations. It is extremely important
to share as much information as possible, as early as possible, with
interested parties. One of the ways we seek private-sector input is
through the Industry Consultations Program, which is jointly
administered by Commerce and the United States Trade Representative,
and includes 21 industry sector and functional advisory committees and
approximately 345 industry executives as members.
We also brief other industry groups, associations, and individual
companies as requested. We coordinate with broad industry associations,
such as the National Association of Manufacturers, to seek input on
trade negotiations. Industry-specific trade specialists within the
Department's Trade Development Unit canvass their sectors for input
regarding all relevant policy decisions. Staff regularly draft material
that contributes to trade negotiation summaries which are posted on
USTR's public website. We also hold public hearings at important
junctures in negotiations so interested parties can hear first-hand
from the negotiators or from more senior U.S. officials how
negotiations are proceeding. The Department uses other avenues such as
World Trade Week and our export assistance centers to try to reach a
broad spectrum of interests.
After the negotiations are concluded, we prepare user-friendly
summaries and industry-by-industry reports that are posted on our web
site.
STEEL TARIFFS--WTO DECISION
Question. Are the temporary tariffs on steel, imposed under section
201 of the Trade Act, having the desired effect?
Answer. In March 2002, following a thorough U.S. International
Trade Commission (ITC) investigation and after reviewing the ITC
recommendations, the President implemented the steel safeguard remedy
to provide the temporary relief the industry needed to facilitate the
adjustment and rationalization of the U.S. steel industry.
The U.S. steel industry has experienced an unprecedented level of
consolidation and restructuring, with additional consolidation likely
in the near future. The International Steel Group led the way by
acquiring and reorganizing the integrated production facilities of LTV
and Acme Steel and last month bought Bethlehem Steel. US Steel recently
acquired National Steel. These and other companies have negotiated more
flexible labor agreements that are expected to generate significant
cost savings. In the mini-mill sector, Nucor is investing heavily to
modernize the mills it purchased from Trico Steel and Birmingham Steel.
A number of smaller companies have closed and others have emerged from
bankruptcy, downsized and under new ownership.
Any decision regarding modification of the Section 201 remedy will
follow submission of the ITC's mid-term review to the President and
Congress on September 20, 2003. Our trade law requires the ITC to
prepare this report, which will document the efforts of the domestic
industry to adjust to import competition.
After the President receives the mid-term report, the statute gives
him greater authority to ``reduce, modify, or terminate'' the
safeguard. A decision under this authority will be taken by the
President, and we cannot prejudge what his decision may be.
Question. What progress has been achieved in reducing excess steel-
making capacity abroad?
Answer. Since September 2001, the steel initiative at the
Organization of Economic Cooperation and Development (OECD) has engaged
in a serious review of the world steel capacity situation in light of
the adverse impact on world steel markets from excess inefficient
capacity. To this end, the OECD established the Capacity Working Group
to examine approaches that could be used to monitor and encourage the
closure of inefficient excess capacity and restructuring developments
in the industry through market forces. The primary tool for the
Capacity Working Group is the periodic peer review of the reports from
the participating countries on their respective steel industry. These
reports describe capacity and production levels, likely closures and
new capacities. Information on significant legal and policy changes
that affect the steel making capacity are also contained in these
reports. The peer reviews are conducted at OECD among the participating
countries. When the governments present their reports, the
participating countries ask any questions they might have on the
reports. The purpose of the peer review to highlight any significant
problems related to inefficient excess capacities in the global steel
market.
As of May 2003, the participating countries have reported 107.07
million metric tons of crude steel capacity that have been closed
during 1998 to 2002. The United States accounts for approximately 14
million metric tons of this reduction. They also forecasted an
additional 29.00-35.60 millions of closures for the period of 2003-
2005. However, some countries are also estimating some increase in new
capacity or replacement of old capacity. On an aggregate level, we
expect 16.75-17.05 million metric tons of new capacity for 2003-2005.
Question. When can we expect to achieve a better balance between
steel-making capacity and global demand?
Answer. Global production and consumption of steel reached 902 and
812 million metric tons respectively in 2002. While analysts generally
agree that the figure for global capacity is about 1 billion metric
tons, there is no definitive number. In 2002, production and
consumption of steel products significantly increased from 2001, and
most of the increase in demand and production has been from China. In
some ways, the increase in demand for steel products in 2002 has
diminished the need to reduce capacity in many regions. For example,
there is no evidence that significant elimination of capacity or
decreases in production have taken place in Russia and Ukraine, both
countries which analysts cite as having significant amounts of
inefficient excess capacity. Similar to the situation in China, these
governments are reluctant to face the social cost of dismantling steel
mills in towns where the steel mills are the major employment source.
Meanwhile, we believe that Russia, Ukraine, Japan, Korea and India have
all increased exports to China in 2002. Many analysts wonder how long
China's growing economy will sustain this frantic pace of demand.
China, which became the largest steel importer in the world in 2002,
importing close to 30 million metric tons, is responsible for much of
the increase in worldwide demand. Without continued import demand from
China, countries that count on exports to sustain their production
levels might become sources of excess supply. The OECD Capacity Working
Group's peer review process will allow us to quickly detect excess
capacity. It is therefore difficult to predict when we can achieve a
better balance of capacity and demand. However, we do know that
eliminating subsidy and other market-distorting practices from the
world steel market is the key to permanently removing inefficient
excess capacity.
Question. Is the Administration prepared to continue the temporary
steel tariffs, for as long as necessary, even if the World Trade
Organization dispute settlement panel rules against the United States?
Answer. The United States disagrees with many of the WTO panel's
preliminary conclusions, but we are pleased that the panel rejected
some of the complainants' claims. The WTO dispute settlement process
regarding the steel safeguard measures is not yet complete, so it is
premature to discuss any response to the panel report. In the WTO
dispute settlement system, a report from either a panel or the
Appellate Body is not final unless formally adopted. The steel panel
report has not yet been publicly released in final form, and the appeal
has not even begun.
In the meantime, the steel safeguards measure will remain in place.
From the beginning, we planned to reduce the supplemental tariffs by
one-fifth each year. We made the first such reduction in March of this
year. The panel report does not affect this process.
Under our domestic safeguards laws, the International Trade
Commission issues a report on domestic producers' condition midway
through the term of a safeguard measure, which will occur toward the
end of September 2003 in the steel case. The President may reduce,
modify, or terminate a safeguard measure after receiving this report.
______
Questions Submitted by Senator Robert C. Byrd
BYRD AMENDMENT
Question. U.S. Trade Ambassador Zoellick assured me, personally,
and publicly, that the Bush Administration would defend the Byrd
Amendment against the case brought by our trade competitors before the
World Trade Organization. Imagine my surprise, then, to learn that the
Administration had recommended a repeal of the law in its fiscal year
2004 budget request. In fact the press apparently was notified by the
Administration of its intent to recommend a repeal of the Byrd
Amendment the day before the WTO Appellate Body issued its final
determination of the case.
Why would the Administration advise me and recipients of Byrd
Amendment funds across the nation that it strongly supported the Byrd
Amendment, if, at the same time, the Administration was planning to
request its repeal in the fiscal year 2004 budget?
Answer. The Administration vigorously defended the Byrd Amendment
at the WTO. Unfortunately, the WTO ruled against the United States on
this issue. The Administration continues to believe that the decision
on the Byrd Amendment (Continued Dumping and Subsidy Offset Act of
2000) was not inconsistent with WTO rules.
We look forward to working with USTR, Treasury and Congress to
develop a response to the WTO's decision. We recognize that the
ultimate response to the WTO decision lies with Congress, and your
constitutional authority to determine whether, when, and in what way to
comply. There may be a number of ways in which U.S. law could be
amended to address the issues raised by the WTO Appellate Body without
sacrificing our goal of providing effective assistance to companies and
workers that have been injured by unfair trade.
Question. On February 4, 2003, I sent a letter to the President
signed by 70 Members of the U.S. Senate, urging the Administration to
negotiate a solution to the Appellate Body's ruling on the Byrd
Amendment, and to consult closely with the Congress on the particulars
of these negotiations. Obviously, there is no support in Congress for a
repeal of this law.
How does the Administration intend to resolve this issue in WTO
negotiations? When will the United States put this issue on the agenda
of the WTO negotiations?
Answer. The Office of the United States Trade Representative is the
agency primarily responsible for developing the U.S. agenda for these
negotiations. We would look forward to working with Congress in
crafting a strategy that would allow us to comply while at the same
time ensuring the effectiveness of our trade laws.
EMERGENCY STEEL LOAN GUARANTEE PROGRAM
Question. Last year, in its fiscal year 2003 budget request, the
Bush Administration recommended rescinding $96 million from the
Emergency Steel Loan Guarantee Program. In its fiscal year 2004 budget
request, the Administration again recommended rescinding whatever
monies for the program remained in the budget. Congress rightfully
rejected the Administration's recommendation for fiscal year 2003, and
I fully anticipate it will reject the Administration's recommendation
with respect to the fiscal year 2004 budget, as well.
How can the Administration continue to tell America's steelworkers
that it is doing all it can to support the U.S. steel industry on the
one hand, while, at the same time, seeking to eliminate this program?
Answer. Due to the lower than anticipated demand for steel loan
guarantees, the Emergency Steel Loan Guarantee Program has been subject
to proposed rescissions in both fiscal year 2003 and fiscal year 2004.
The Administration believes that this program has not been an effective
method of supporting the U.S. steel industry.
Question. What do you say to families like the 25,000 in the Ohio
River Valley, who, right now, are looking to the Emergency Steel Loan
Guarantee Program to save their jobs and preserve their pensions?
Answer. The Emergency Loan Guarantee Board has approved, with
conditions, a loan guarantee for a loan amount of $250 million to
Wheeling-Pittsburgh Steel Corporation, which is located in the Ohio
River Valley.
Question. Can you provide me with the names of any steel industry
consultants that were recommended by Bush Administration officials to
advise members of the Emergency Steel Loan Guarantee Program about the
validity of the application submitted by Wheeling-Pittsburgh Steel?
Answer. Bush Administration officials did not recommend steel
industry consultants to advise members of the Emergency Steel Loan
Guarantee Board or loan program staff concerning the application
submitted by Royal Bank of Canada on behalf of Wheeling-Pittsburgh
Steel Corporation. The loan program staff chooses and retains steel
industry consultants to assist with review and analysis of applications
for loan guarantees. Choices are made based on factors such as specific
related prior experience, recommendations from third parties involved
in the steel industry, general reputation, satisfactory performance on
prior applications, and absence of conflicting relationships.
IMPORT MONITORING PROGRAM
Question. What is the Administration's position regarding
instituting a program to monitor surges of all [steel] imports into the
United States, not just those steel imports that were originally
subject to the 201 investigation of steel products? If the
Administration will not support such an import monitoring program, why
not?
Answer. The Administration currently monitors steel imports through
two steel import monitoring programs administered by the Department of
Commerce's Import Administration. These two import monitoring programs
differ in scope of coverage and source of information.
One program, which was instituted as part of the safeguard remedy,
applies only to products subject to the safeguard, and draws upon
aggregate information collected from proprietary information reported
on steel import licenses. Information on these imports is collected and
reported by product category and country of origin. The primary purpose
of this program is to provide early identification of import surges,
particularly those from excluded developing countries, that could
undermine the relief provided to the industry by the President.
The other steel import monitoring program, which is much broader in
scope, covers all imports of steel mill products. This monitoring
program was established prior to the safeguard remedy, and is based on
the early release of steel import data collected by the Census Bureau.
It has been expanded over the past year to provide detailed monthly
statistical information on steel imports including import quantity,
value and unit values. This early release data is the most timely and
reliable monthly data available on U.S. steel imports and is issued
roughly three weeks after the close of the import month. Import volume
and value data are collected and reported by AISI category as well as
section 201 remedy category and by country of origin.
To increase the usefulness of the monitoring programs, detailed
information on steel imports compiled from both steel import monitoring
programs is available to interested members of the domestic steel
industry, government and public through the steel import monitoring
website--www.ia.ita.doc.gov/steel/license/. The data is reviewed
continuously and is updated on a regular basis--the day of release for
monthly Census import data; each week for import license data.
Expansion of the current import monitoring programs, particularly
the extension of the licensing requirement to products beyond the scope
of the section 201 remedies, would require additional authorizing
legislation. Depending upon the scope of the expansion and the number
of new product categories and additional Harmonized Tariff Schedule's
(HTS) to be added to the system, the expanded monitoring system could
entail a considerable outlay of new resources, particularly if the same
level of detailed reporting is to be maintained.
Currently, more than 25,000 licenses are issued each month and the
website generates approximately 7,000-8,000 tables and graphs which
must be reviewed and updated each week. Expansion to all steel mill
products would more than double the number of licenses. The number of
covered tariff numbers would almost triple and depending upon the
number of steel categories added, the number of tables and graphs would
likely triple as well. This is far beyond the capabilities of the
existing database and monitoring program and would likely cause a
decrease in service, timeliness and/or accuracy. Expansion to all
tariff numbers in HTS Chapters 72 and 73 would greatly increase the
number of licenses, covered tariff numbers and reported product
categories and further tax the system.
201 MID-TERM REVIEW
Question. The ITC has begun its mid-term review of the remedies
that were imposed last year on imported steel under section 201. What
criteria will the Bush Administration use to decide whether to lift the
tariffs and other remedies that were imposed as a result of last year's
investigation under section 201? Does the Administration plan to base
its decision this fall on information gathered by the ITC during mid-
term review, and on advice offered by the entities referenced in 19
U.S.C. section 2254, or on additional input, including extraneous
comments submitted to the White House, or the U.S. Commerce Department,
by foreign countries or foreign exporters, or by U.S. importers of
steel products otherwise subject to the 201?
What impact will foreign policy concerns have on the
Administration's decision in this respect?
Answer. The President implemented the steel safeguard remedy to
provide the temporary relief needed to facilitate the adjustment and
rationalization of the U.S. steel industry. Since the implementation of
the steel safeguard remedy, the U.S. steel industry has experienced an
unprecedentedly high level of consolidation and restructuring, with
additional consolidation likely in the near future.
As required by section 201, the International Trade Commission
(ITC) recently initiated a mid-term review of the effectiveness of the
steel safeguard remedy and the restructuring efforts undertaken by the
industry. The ITC will collect information from a broad range of U.S.
steel producers, foreign steel producers, and steel importers. Based on
a request from the House Ways and Means Committee, the ITC will also
review the impact of the safeguard remedies on steel consumers. The ITC
will issue its report to the President in September.
The President may reduce, modify or terminate the section 201
remedies imposed in March 2002; he may also leave the measures
unchanged. In accordance with the statute, the President will take into
account the report and advice of the ITC, as well as the advice of the
Secretaries of Commerce and Labor, in reaching a decision under section
204. In addition, the President may consult with the House Ways and
Means Committee or the Senate Finance Committee.
However, the statute does not limit the President to consider only
these sources in his decision. As it does in every section 201
proceeding, the Administration will consider any information that is
potentially relevant to an evaluation of the statutory factors,
including information or advice from members of Congress, U.S. steel
producers, U.S. steel consumers, U.S. importers and other interested
parties. The Administration will also consider any information
presented to it by foreign governments or foreign parties that is
relevant to the inquiry under section 204.
DEDUCTING 201 DUTIES FROM AD/CVD MARGINS
Question. In a recent case, the Department considered but made no
final determination regarding whether to deduct from the U.S. price of
a dumped or countervailable product the amount of 201 duties that had
already been imposed on an imported steel product. 201 duties reflect a
decision by the President to increase normal customs duties,
temporarily, and such duties can be deducted from the U.S. price in
determining the margin in an antidumping or countervailing duty case.
What is the Department's position concerning the deduction of 201
duties from U.S. price in determining the margin in an antidumping or
countervailing duty case?
Answer. To date we have not made a decision concerning this
important issue. We intend to address it in the context of upcoming
antidumping case decisions after we have received comments from
interested parties.
The issue of how to treat section 201 duties in our dumping margin
calculations was raised in the final weeks of our statutory time period
in our recent investigation on steel wire rod from Trinidad and Tobago.
In that case, the foreign respondent, the domestic producers and the
United Steelworkers of America submitted comments on this issue, but
the domestic producers and the United Steelworkers of America requested
that the Department allow more time for broader comment on this far-
reaching policy determination. Since the adjustment in the steel wire
rod from Trinidad and Tobago case would have had an insignificant
effect, we did not address the treatment of section 201 duties in that
case.
We have a few cases currently pending in which this issue has been
raised. We are allowing all interested parties to comment fully on this
issue, including parties not involved in these specific proceedings. We
will carefully consider all comments before reaching a decision.
IMPORT ADMINISTRATION
Question. My office has been advised that the Office of Policy
within the Department's Office of Import Administration has been
steadily expanding over the past several years. There is a concern that
available resources within Import Administration are being diverted to
the Office of Policy at the expense of the other offices within Import
Administration that actually conduct the antidumping and countervailing
duty investigations and administrative reviews. Could you please
provide me with detailed information how the Office of Policy within
Import Administration has expanded over the past five years? And for
what purpose?
Answer. At no time has the Office of Policy been expanded at the
expense of the Operations offices. With the additional fiscal year 2001
funding, management also increased the funding of the three Operations
offices within IA that conduct AD/CVD cases. The growth of the Office
of Policy resulted directly from increases in the annual
appropriations, and represents a conscious decision of both the
Executive and Legislative branches during the past two Administrations
to develop tools for supporting and supplementing the enforcement of
U.S. trade laws to address foreign unfair trade practices. There were
no reductions in the budgets of the Operations during this period for
the purpose of expanding the Office of Policy, nor was funding diverted
to support Office of Policy growth.
IMPORT ADMINISTRATION STAFFING OFFICE OF POLICY VS. OPERATIONS OFFICES
FISCAL YEAR 1999-2002
------------------------------------------------------------------------
DAS Groups
Fiscal Year Policy (I, II,
III)
------------------------------------------------------------------------
1999.......................................... 27 222
2000.......................................... 27 222
2001.......................................... 55 222
2002.......................................... 65 \1\ 222
------------------------------------------------------------------------
\1\ Does not include miscellaneous overhires to work on steel issues.
(Source: IA Staffing Plans).
During the past five years, IA received two budget increases
through the annual appropriations process in fiscal year 1999 and
fiscal year 2001. The fiscal year 1999 appropriation included a funding
increase for IA to conduct new AD/CVD program activities set forth in
the Uruguay Round Agreements Act (URAA). IA management directed the
Office of Policy to assume responsibility for the new activities
described below.
--AD/CVD Sunset Reviews
--Subsidies Enforcement
The fiscal year 2001 appropriation included a funding increase to
support the Trade Compliance Initiative (TCI) first proposed by the
Clinton Administration and subsequently supported by the Bush
Administration. IA's new TCI program activities were assigned to the
Office of Policy and included the following new activities:
--Overseas Compliance Program
--China Trade Compliance and Japan Trade Compliance
--Import Surge Monitoring, Expedited Investigations & Subsidies
Enforcement
--IA Senior Official Stationed in Geneva, Switzerland.
In particular, a significant portion of these funds and increased
staffing were used to support Import Administration's increasing
activity on three fronts--(1) steel issues, (2) pre-petition support to
potential users of the AD/CVD laws, and (3) WTO negotiations on rules.
Of the new policy analysts hired in the past two years, more than half
have been dedicated to these new areas.
IMPORT ADMINISTRATION: CUSTOMS INSTRUCTIONS
Question. I learned of possibly misallocated resources when my
office was advised that certain companies have been unable to obtain
funds from the special accounts that have been established at the
Treasury Department under the Byrd Amendment. It is my understanding
that certain companies cannot access funds in the relevant accounts
because investigators in Import Administration have been too short-
staffed to send necessary instructions regarding certain cases to the
U.S. Customs Service. Consequently, some U.S. companies that have been
eligible to receive funds under the Byrd Amendment have been told by
Customs that there is simply no money in relevant accounts at the U.S.
Treasury Department. Are you aware of this problem and can you tell me
whether there has been any effort by the Department to address this
issue?
Answer. As explained below, it is true that, in some instances,
there has been a delay at the Department of Commerce in issuing
liquidation instructions. It should be understood, however, that the
DOC does not maintain the special accounts established under the Byrd
Amendment and cannot, therefore, speak to the reason(s) why any
particular claimant has been unable to receive distributions.
DOC conducts administrative reviews of antidumping (AD) and
countervailing duty (CVD) orders where a request for review is timely
filed by an appropriate interested party. If a review is initiated, the
entries covered by the review remain suspended until the Department
completes the review (typically 12 to 18 months from initiation). If
the Department's final results are not challenged (in either the Court
of International Trade or NAFTA), Import Administration issues
liquidation instructions, whenever possible, within 15 days of the
issuance of the final results of the administrative review. However, if
parties challenge our final results and obtain an injunction against
liquidation of the entries covered by the review, those entries will be
suspended until the litigation is resolved. If the Department does not
receive a request for administrative review, or if a review request
covers only entries from certain producers/exporters, the Department
advises the Department of Homeland Security's Bureau of Customs and
Border Protection (BCBP) to liquidate the entries for which a review
was not requested.
The Department's liquidation instructions indicate to the BCBP how
much in the way of special duties to assess on entries of merchandise
subject to an AD and/or CVD order. BCBP then assesses duties on the
entries and places the proceeds in special accounts pursuant to the
Byrd Amendment. When claims are made for the funds in the special
accounts, BCBP determines whether--and to what degree--the claims will
be satisfied.
The Department takes a proactive approach to ensure that
liquidation instructions are properly issued. Despite these efforts,
given the sheer volume of cases and instructions that must be issued by
the Department to the BCBP, there may be instances where entries have
inadvertently not been liquidated. Typically, the Department is
notified of these instances by the BCBP or private parties (such as the
domestic producer or the U.S. importer). Import Administration makes
every effort to work with parties and the BCBP to identify the problem,
and to address it as expeditiously as possible. We closely monitor the
accuracy and the timeliness of our issuance of instructions to BCBP and
immediately address any problem that we identify or is brought to our
attention. We are not aware of any instances in which customs
instructions were not sent due to staffing issues.
Finally, we note that, to address concerns that there had been
significant delays in the issuance of liquidation instructions in
certain cases, the Department conducted a review of all completed
proceedings to ensure that BCBP has been issued appropriate
instructions. Import Administration officials reviewed more than 200
final decisions in the course of this project, which took several years
to complete. As a result, the Department ensured that all liquidation
instructions had been issued for all entries subject to the orders/
findings involved.
VALIDITY OF OUTSIDE CONTRACTOR PATENT SEARCH
Question. Why does the PTO trust that an outside contractor with no
relevant patent experience would conduct a valid patent search in the
same thorough and learned manner as a patent examiner with years of
experience?
Answer. The USPTO is confident that a certified outside contractor
can conduct a valid patent search in the same thorough manner as an
experienced patent examiner. The USPTO's decision to split the search
and examination functions--a key component of the 21st Century
Strategic Plan--is not an unprecedented or untested approach. The USPTO
and its sister patent offices throughout the world have considerable
experience in splitting the two tasks of search and examination. For
example, search and examination have been separated within the European
Patent Office (EPO) for more than twenty years without any detriment to
quality. Indeed, search quality will actually improve under a
Contractor Search Service (CSS) system, as the examiner will be acting
as a second pair of eyes relative to the search contractors.
The USPTO will provide detailed search guidelines and quality
measures to ensure the quality and uniformity of prior art searches
performed by a CSS. Prior to contract award, all offerors will be
evaluated to ascertain the technical background and skills of their
employees and their abilities to provide a high quality search.
The USPTO plans to have multiple levels of Quality Control/Review
and will promptly terminate its contract with any provider whose
searches and search reports do not meet the standards. Furthermore,
patent examiners can always request a further search or perform a
supplemental search with approval of their supervisor if the examiner
feels the search supplied is inadequate.
With these quality assurance measures, there should be no adverse
effects on the presumption of validity or the public confidence in
patents. In fact, this collaborative effort in prior art searching will
improve both efficiency and substantive focus in the preparation,
examination, and prosecution of patent applications in a more cost
effective and expeditious manner. It will, with the implementation of
the quality measures outlined in the 21st Century Strategic Plan,
strengthen the validity of patents, thus providing a more substantive
and valuable end product for our customers.
COST OF OUTSIDE CONTRACTOR PATENT SEARCH
Question. Why is the PTO not concerned that outsourcing this
function could increase, rather than a decrease agency costs?
Answer. The USPTO believes that, overall, it will be cost effective
to competitively source patent searches. The USPTO has been criticized
for ``hiring its way out'' of its growing patent workload problem. For
example, in 2002 the Senate Appropriations Committee stated, ``PTO
management has not been sufficiently innovative. Although patent
filings have increased dramatically over the past decade, PTO
management chose to remain wedded to an archaic patent process and
attempted to hire its way out of its workload problems.''
Competitive sourcing of searches is part of the USPTO's effort to
address incoming work and an inventory of pending applications by
allowing patent examiners to concentrate on patentability
determinations rather than spending time on searching. The removal of
search functions will allow examiners to process more patent
applications, assisting the USPTO in lowering pendency and reducing
backlogged applications.
Competitive-sourcing of the search will be validated by a proof of
concept before we proceed to full implementation.
RELIABILITY OF OUTSIDE CONTRACTOR PATENT SEARCH
Question. How does the PTO plan to address the issue that searches
conducted by an outside firm could prove faulty or unreliable and, as a
result, could undermine the validity of patents issued by the PTO?
Answer. In addition to the steps outlined in response to the
question above regarding confidence in contractor abilities to conduct
prior art searches, the USPTO has benchmarked models that other
intellectual property organizations have used for many years. For
example:
--The Japan Patent Office (JPO) also has experience in splitting the
two tasks of search and examination. The Japanese government
established the Industrial Property Cooperation Center (IPCC)
in 1985 for such purposes as providing search reports on patent
applications pending before the JPO, indexing patents according
to the F-term classification scheme used by the JPO, and
assigning classifications to patents according to the
International Patent Classification system. Since then, more
than one million prior art searches have been conducted by IPCC
for JPO's patent examiners and more than two million F-term
assignments have been made to JPO's searchable database. The
IPCC is now staffed with about 1,100 engineers, only 40 of whom
were previously employed as patent examiners. Based on such an
extensive base of empirical data, together with on-site
benchmarking reviews that have been conducted with JPO
officials over the past decade, we have no doubt that searches
can be done with high quality by experienced and skilled
engineers.
--Closer to home, the USPTO has allowed examiners to elect the
services of searchers to search non-patent literature and
foreign patents in the Office's Electronic Information Centers
for the last decade. Thus far this year, examiners have
requested 13,011 searches. These searches are conducted by
contract staff or Government employees who have extensive
knowledge of the database content, search strategy formulation,
and command language of several commercial online providers,
such as Dialog and Lexis-Nexis. They also have knowledge of
internal search systems, such as the Examiner's Automated
Search Tool (EAST) and the Web-based Examiner Search Tool
(WEST), and are adept at searching the Internet.
--The European Patent Office (EPO) serves as another benchmark. The
EPO has extensive experience that clearly demonstrates that a
high quality search can be generated by someone other than the
substantive patent examiner with no diminution in the quality
of the patentability determination or the patent examiner's
ability to keep current with his or her understanding of, or
currency with, the technology and/or state of the art. Since
1978, EPO searchers in The Hague and Berlin (and more recently,
Munich) produced almost 1.8 million searches of which half were
for EPO's substantive patent examiners in Munich. In fact, the
USPTO has already received more than 75,000 patent search
reports from the EPO over the past few years pursuant to the
Patent Cooperation Treaty (PCT). While that is not a direct
``contractor'' model, conceptually there is virtually no
difference with the IPCC model described earlier.
The EPO, where the search was carried out by an examiner in The
Hague or Berlin and the examination was conducted by a three-man
examining division in Munich, currently is moving towards combining the
search and examination functions to improve productivity, not because
there are quality issues associated with the separation of search and
examination. Survey data collected from U.S. patent attorneys over the
past five years show that the EPO's searches and patentability
decisions are consistently of high quality.
As Director Rogan explained in his April 3, 2003, testimony before
the House Judiciary Committee's Subcommittee on Courts, the Internet
and Intellectual Property, the USPTO and its sister patent offices
throughout the world have considerable experience in splitting the two
tasks of search and examination, as described above. Contrary to the
assertion that quality suffers under such a structure, the reverse is
true. During the hearing, Director Rogan entered into the record a
letter from the President of the EPO, Dr. Ingo Kober, which discusses
Europe's experience in this area. See attachment.
While the EPO does not competitively source the search function,
search and examination have been separated within the EPO for more than
twenty years without any detriment to quality.
For firms that would like to offer search services, the USPTO will
follow the Federal procurement process to enter into contractual
arrangements with them. The USPTO would maintain the authority to
certify that a private firm, individual, or commercial entity was
capable of providing a valid, thorough, and complete search of the
prior art for patent examination processes.
[ATTACHMENT--EUROPEAN PATENT OFFICE LETTER]
March 4, 2003.
Mr. James E. Rogan,
Under Secretary of Commerce for Intellectual Property and Director of
the United States Patent and Trademark Office, 2121 Crystal
Drive, Suite 906, Arlington, VA 22202 USA.
Dear Mr. Rogan, I understand that some organisations and
individuals in the United States have recently expressed certain
misconceptions concerning a program of the European Patent Office,
namely, Bringing Examination and Search Together or BEST. I would like
to clarify some basic facts about this program to ensure it is properly
understood.
Any characterisation that the European Patent Office chose to
``adopt'' the American system of searching and examining patent
applications is simply not true. Our decision to combine the search and
examination functions was based on the need to increase examiner
productivity. As you know, these changes occurred during a time of
transition to a more automated environment and a significant expansion
of our staff.
Indeed, the previous arrangement was initially dictated by
historical and geographical reasons which no longer apply. However,
this separate search and examination program, where the search was
carried out by an examiner in The Hague or Berlin and the examination
was conducted by a three-man examining division in Munich, produced
high quality results and served us very well over a period of more than
25 years. In fact, feedback we have received from our interested
circles has consistently indicated high satisfaction levels with our
searches.
Finally, all major industrial property offices in the world
currently confront a workload crisis that demands creative solutions.
That is why I agreed to sign a bilateral record of discussion with you
to explore the potential of exploiting searches generated by our
respective Offices for counterpart patent applications. I am convinced
that this will help improve patent quality, increase efficiency and
productivity, and reduce operating costs.
It is unfortunate that recent statements made by commentators on
the EPO's current and future plans as well as on the USPTO's plans have
characterised our processes as diverging, when in fact they are indeed
converging.
Should you wish further clarification of my views on this matter, I
shall be glad to provide additional details.
Yours sincerely,
Dr. H.C. Ingo Kober,
President.
VALIDITY OF OUTSIDE CONTRACTOR PATENT SEARCH
Question. Why does the PTO trust that an outside contractor with no
relevant patent experience would conduct a valid patent search in the
same thorough and learned manner as a patent examiner with years of
experience?
Answer. The USPTO is confident that a certified outside contractor
can conduct a valid patent search in the same thorough manner as an
experienced patent examiner. The USPTO's decision to split the search
and examination functions--a key component of the 21st Century
Strategic Plan--is not an unprecedented or untested approach. The USPTO
and its sister patent offices throughout the world have considerable
experience in splitting the two tasks of search and examination. For
example, search and examination have been separated within the European
Patent Office (EPO) for more than twenty years without any detriment to
quality. Indeed, search quality will actually improve under a
Contractor Search Service (CSS) system, as the examiner will be acting
as a second pair of eyes relative to the search contractors.
The USPTO will provide detailed search guidelines and quality
measures to ensure the quality and uniformity of prior art searches
performed by a CSS. Prior to contract award, all offerors will be
evaluated to ascertain the technical background and skills of their
employees and their abilities to provide a high quality search.
The USPTO plans to have multiple levels of Quality Control/Review
and will promptly terminate its contract with any provider whose
searches and search reports do not meet the standards. Furthermore,
patent examiners can always request a further search or perform a
supplemental search with approval of their supervisor if the examiner
feels the search supplied is inadequate.
With these quality assurance measures, there should be no adverse
effects on the presumption of validity or the public confidence in
patents. In fact, this collaborative effort in prior art searching will
improve both efficiency and substantive focus in the preparation,
examination, and prosecution of patent applications in a more cost
effective and expeditious manner. It will, with the implementation of
the quality measures outlined in the 21st Century Strategic Plan,
strengthen the validity of patents, thus providing a more substantive
and valuable end product for our customers.
PILOT OF OUTSIDE CONTRACTOR PATENT SEARCH
Question. If the PTO plans to test these searches in some sort of
``pilot program,'' what assurances are there that such a pilot program
will actually be undertaken? How will the PTO measure success? Who will
measure success? Will the Congress be involved?
Answer. To meet the requirements of their customers and to
determine the feasibility of competitively sourcing search functions,
the USPTO will implement a proof of concept through a pilot program.
The Office will assure quality of contractor performance through
continuous monitoring of the pilot and the conduct of a formal
evaluation. The planned proof of concept will be widely vetted with
USPTO's key stakeholders and the Patent Public Advisory Committee. The
results of the pilot will also be widely shared. USPTO will conduct a
formal review of the pilot prior to making a final decision as to
whether or not to proceed with full implementation. The Congress will
be kept informed throughout the process. Although the specifics of the
pilot and evaluation have not been finalized, the USPTO is considering
using an outside contractor to validate the quality of the searches.
The USPTO already has obtained public comment on its plans and
posted on its website for many months the answers to questions or
suggestions they have received from the public, patent examiners, and
the professional associations with whom it has worked extensively. The
Office recently published on its website a detailed action plan which
describes the implementation approach. What follows are the highlights
of the administrative structure and processes USPTO is fully prepared
to implement, including a description of the proof of concept.
The USPTO will use the contractors to prepare complete and accurate
search reports for patent applications. One or more contracts would be
awarded. It is anticipated that there will be at least one contract
specializing in each discipline. The contractor may be a private or
commercial search entity with demonstrated expertise and search skills.
The request for a search and the resulting search report are activities
between the USPTO and the contractor.
The USPTO would administer the same preliminary processing
procedures currently established for new application filings. A copy of
the application would be forwarded to the contractor approximately
three months prior to the examination. The contractor would perform a
prior art search and prepare a report using Patent Cooperation Treaty
(PCT) guidelines and USPTO search guidelines for additional non-patent
literature (NPL) resources as stated above.
Upon completion of the report, the application would be forwarded
to the Patent Technology Center to await review by the examiner. The
examiner would then review the report and prior art cited. If the
report was inadequate or if the examiner was personally aware of other
prior art, the examiner could request time to search them, or have the
report sent back to the contractor with an explanation of the
deficiency and a request for supplemental information.
The USPTO would maintain the authority to certify that a private
firm, individual, or commercial entity was capable of providing a
valid, thorough, and complete search of the prior art for patent
examination processes. A certification process would be done at the
USPTO. The process could be given to firms or individuals or a
combination thereof. The certification process may be based on industry
specific criteria and be given on an individual basis based on the
firm's or individual's qualifications. Similar to the Primary Examiner
at the USPTO, a senior member of the firm could sign off on an
``assistant's'' search. Thus, while there are multiple options
available, a preferred one would be to certify the ``firm'' which, in
turn, would be responsible for certifying their individual searchers.
The critical measures of success would be determined based on the
contractors' ability to: (1) determine if disclosed invention is
subject to an international search; (2) identify a field of search that
would cover the disclosed invention; (3) select the proper tools and
art collections to perform the search; (4) determine the appropriate
search strategy for each of the selected search tools and art
collections; (5) search the art collections using the selected search
tools and search strategy, and using any additional strategy suggested
by the art that is found; (6) retrieve sufficient information from art
that is identified during the search to evaluate the pertinence of the
art; (7) select the prior art that is most pertinent to the claimed
subject matter; (8) record the results of the art that is selected
according to the criteria set forth in the guidelines; and (9)
determine if certain claims are found to be searchable subject matter
and/or lack clarity or distinctness.
The contractor would have to prove that it has ready access to the
appropriate industry-specific search tools. Much of the work in
developing industry-specific search tools is either in the process of
being done or has already been published on the USPTO intranet in the
form of Search Guidelines. These guidelines were developed by Quality
Action Teams and represent a listing of appropriate search tools and
databases for each technology. The guidelines include PCT Minimum
Document requirements, appropriate text search systems, as well as the
pertinent commercially available databases. In addition to using the
established guidelines, a classified search using the U.S. Patent
Classification (USPC) system would also need to be performed, if
appropriate.
Another requirement would be the technical qualifications of the
contractors' staff. Just as in examining, varying levels of technical
expertise are required for searching different technologies. In
addition, the contractor would have to provide proof of a thorough
understanding of the patent examining procedures and patent statutes.
It is essential that any contractor have the ability to read and
analyze claims, as well as broadly apply the prior art to produce a
PCT-type search report, which would be submitted to USPTO. The
contractor would need to be aware of patent law and practice and be
able to understand such concepts as ``motivation'' for example. This
could be ensured through testing requirements. Finally, the
contractors' ability to provide timely reports would be essential to
the program's success. Special attention would be paid to ensure treaty
deadlines were enforced.
For proper examination and quality comparisons, a search submission
would be expected to include, at a minimum, a listing for every search
including: (1) text search systems; (2) commercial databases; (3) USPC
classified search, if appropriate; (4) the complete search statement
and logic; and (5) a statement regarding the teachings and
applicability of each reference against each claim.
The USPTO also would have to maintain a ``search quality review
process'' in order to ``sample'' the quality of searches submitted by
the certified search authorities. A component of the in-process review
activity is to evaluate the quality of the search results for each
contractor. A statistically valid sample of cases would be reviewed
using criteria such as whether the search was based on what is claimed
and reasonably expected to be claimed. Additionally, an experienced
examiner will conduct a separate search on the same application, to
ensure the contractor used the proper search procedures.
The Office would retain the ability to terminate any contract and
``de-certify'' authorities that submit a number of poor searches from
either the test sample or from other sources such as examiner reports,
requests for re-examination or post-grant opposition that show clear
errors.
It is possible that separate contractor support would be needed to
set up, implement, and maintain the necessary certification procedures,
along with a dedicated staff of search and examination experts.
Contractors may be required to supply certified translations or
English language equivalents, with valid dates, for any non-English
language prior art references cited, which would also eliminate the
need for examiners requesting certified translations, partial
translations and/or on-the-spot translations of non-English documents.
Proof of Concept: The USPTO recognizes that the use of contractors
to provide prior art search and/or opinion reports for patent
applications is a major change to current patent examination processes.
The USPTO also understands customer concerns for excellence in a prior
art search. To ensure quality art searches are maintained and that
there is uninterrupted service to all USPTO customers, the Office would
use the results of the PCT pilot as its foundation for competitively
sourcing all other search activities within the Office. By using the
pilot study, the USPTO will be able to assess accurately the
feasibility of competitively sourcing prior art searches. Performance
and product will be reviewed to ensure the highest quality is
maintained, using both an in-process review procedure and separate
searches performed by experienced examiners.
The PCT competitive sourcing pilot will be implemented in multiple
arts to ensure the contractors can provide a quality search report for
any technology. Between three and six different art areas, all with
generally high backlogs, would be selected as pilot areas. The results
of the PCT pilot will provide the Office with the information necessary
to implement the best possible transition from examiner searches to
contractor searches. Prior to full-scale implementation, a final report
would be developed that identifies the strengths, weaknesses, costs and
benefits. This report would be published and made available for general
review prior to a decision on whether to further implement competitive-
sourcing in other areas of the Office.
There would be multiple evaluations of the search and reports
prepared by the contractors. Examiners would complete an evaluation
every time a contracted search is used in the examination of a U.S.
application. There would also be independent evaluations both during
in-process reviews, and by independent third parties (similar to a
quality review of the examination). Failure of a contractor to maintain
the high quality expectations could result in the ``forfeit'' of the
contract to the contractor.
Regarding the costs of the commercial search, the USPTO's
stakeholders' view is that quality has not been properly emphasized in
recent years. Accordingly, the USPTO has listened to patent applicants
and the consistent message they have conveyed is that quality must be
improved and the cost of improving quality is something for which they
are prepared to pay.
STOPPING PILOT OF COMPETITIVE-SOURCING
Question. Is there any certainty that the outsourcing will stop if
the pilot program proves that the experiment is not working?
Answer. Yes. First, the planned proof of concept will be vetted in
advance with the USPTO's key stakeholders and the Patent Public
Advisory Committee.
Second, the USPTO has committed to developing a final report
documenting the strengths, weaknesses, costs and benefits. The report
will be published and made available for general review prior to a
decision on whether to implement further competitive-sourcing.
The final decision to implement further competitive-sourcing will
rest with the Director, based on the recommendation of the Management
Council, which is chaired by the Deputy Director and comprised of
senior managers from all USPTO divisions. The Management Council has
responsibility for monitoring implementation of the 21st Century
Strategic Plan. Once the proof of concept has been completed and the
results documented, the Management Council will be responsible for
making a final recommendation to the Director.
SEARCH CONTRACTORS OWNING PATENTS
Question. Finally, what safeguards are in place to make sure that
the contractors who are chosen to conduct these patent searches do not,
themselves, have a financial stake in the patent system?
Currently, by law, patent examiners may not own patents with narrow
exceptions such as by inheritance. Will the PTO likewise bar search
contractors from owning patents?
Answer. The Federal Acquisition Regulation (``FAR''), 48 C.F.R.
Sec. 9.5 et seq., provides guidance and prescribes responsibilities and
procedures for identifying, evaluating and resolving organizational
conflicts of interest (``OCOI''). In particular, FAR Sec. 9.504
requires the contracting officer, before issuing a solicitation, to
prepare an analysis and a recommendation for avoiding, neutralizing, or
mitigating organizational conflicts of interest. Pursuant to this
guidance, the USPTO is presently considering various plans and methods
to avoid and neutralize actual and potential OCOIs that may occur as a
result of contracting out patent search services. At a minimum, the
USPTO will require patent search firms not only to disclose actual or
potential OCOIs, such as past or present associations with major patent
application filers, but also to submit suitable OCOI mitigation plans
as an integral part of the evaluation of proposals to conduct patent
search services. PTO will also seek to ensure that any personal
conflicts of interest by employees of the search firms are minimized to
the maximum extent practicable. The USPTO plans to award multiple
contracts to fulfill its needs and require that all applicable OCOI
requirements flow-down to any subcontractors and employees as well.
The USPTO will include in all solicitations and contracts for
patent search services clauses that: (1) invite the offerors' attention
to FAR part 9.5; (2) state the nature of the OCOI or potential OCOI;
(3) require the prompt disclosure of actual and potential OCOIs; and
(4) state the proposed remedies available to the government upon
discovery of an OCOI. As part of the procurement process, the Office
also plans to solicit comments and suggestions on how the Agency can
best mitigate actual or potential OCOIs.
The USPTO also plans to include in its contracts for patent search
services clauses which reference 35 U.S.C. Sec. 122 and prohibit the
disclosure of information contained in patent applications as well as
requirements to safeguard patent applicants' proprietary and trade
secret information.
Although the USPTO has not yet made a decision to impose a total
ban on the ownership of patents, if ownership of patents creates an
impermissible organizational or personal conflict of interest, which
cannot be neutralized or mitigated, the USPTO may disqualify that firm
from competing for the search contracts. In addition, the USPTO may
structure the resulting contracts to allow for termination of the
contracts for impermissible conflicts of interest.
As described above, the USPTO fully intends to obtain early
exchanges of information from all interested parties through a variety
of means, such as additional Requests for Information or draft
solicitations, to determine whether a total ban on the ownership of
patents will be required from search firms. Further, on May 22, 2003,
the USPTO will be holding an ``Industry Day,'' a vendor conference
whereby USPTO will be showcasing existing and new agency initiatives.
During Industry Day, the Office will be soliciting comments regarding
the initiatives from vendors who conduct or will conduct business with
the USPTO. The Office will include the issue of OCOI among search firms
as a topic for discussion at that time.
SUBCOMMITTEE RECESS
Senator Gregg. Thank you, Mr. Secretary.
[Whereupon, at 10:40 a.m., Thursday, March 20, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]