[Senate Hearing 108-622]
[From the U.S. Government Printing Office]



                                                        S. Hrg. 108-622

  CHALLENGES AND ACCOMPLISHMENTS AS THE EUROPEAN UNION AND THE UNITED 
      STATES PROMOTE TRADE AND TOURISM IN A TERRORISM ENVIRONMENT

=======================================================================

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON EUROPEAN AFFAIRS

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 13, 2004

                               __________

       Printed for the use of the Committee on Foreign Relations


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                     COMMITTEE ON FOREIGN RELATIONS

                  RICHARD G. LUGAR, Indiana, Chairman

CHUCK HAGEL, Nebraska                JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island         PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia               CHRISTOPHER J. DODD, Connecticut
SAM BROWNBACK, Kansas                JOHN F. KERRY, Massachusetts
MICHAEL B. ENZI, Wyoming             RUSSELL D. FEINGOLD, Wisconsin
GEORGE V. VOINOVICH, Ohio            BARBARA BOXER, California
LAMAR ALEXANDER, Tennessee           BILL NELSON, Florida
NORM COLEMAN, Minnesota              JOHN D. ROCKEFELLER IV, West 
JOHN E. SUNUNU, New Hampshire            Virginia
                                     JON S. CORZINE, New Jersey

                 Kenneth A. Myers, Jr., Staff Director
              Antony J. Blinken, Democratic Staff Director

                                 ------                                

                    SUBCOMMITTEE ON EUROPEAN AFFAIRS

                    GEORGE ALLEN, Virginia, Chairman

GEORGE V. VOINOVICH, Ohio            JOSEPH R. BIDEN, Jr., Delaware
CHUCK HAGEL, Nebraska                PAUL S. SARBANES, Maryland
JOHN E. SUNUNU, New Hampshire        CHRISTOPHER J. DODD, Connecticut
LINCOLN CHAFEE, Rhode Island         JOHN F. KERRY, Massachusetts

                                  (ii)




                            C O N T E N T S

                              ----------                              
                                                                   Page

Allen, Hon. George, U.S. Senator from Virginia, opening statement     1
Connors, Mr. Bill, executive director and COO, National Business 
  Travel Association, Alexandria, VA.............................    29
    Prepared statement...........................................    30
Faull, Mr. Jonathan, Director General, Justice and Home Affairs, 
  European Commission, Brussels, Belgium.........................    14
    Prepared statement...........................................    17
Hagel, Hon. Chuck, U.S. Senator from Nebraska, prepared statement     2
Koch, Mr. Christopher L., president and CEO, World Shipping 
  Council, Washington, DC........................................    32
Verdery, Hon. C. Stewart, Jr., Assistant Secretary, Border and 
  Transportation Security Directorate, U.S. Department of 
  Homeland Security, Washington, DC..............................     8
    Prepared statement...........................................    10

                                 (iii)

  

 
  CHALLENGES AND ACCOMPLISHMENTS AS THE EUROPEAN UNION AND THE UNITED 
      STATES PROMOTE TRADE AND TOURISM IN A TERRORISM ENVIRONMENT

                              ----------                              


                         THURSDAY, MAY 13, 2004

                               U.S. Senate,
                  Subcommittee on European Affairs,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met at 2:35 p.m., in room SD-419, Dirksen 
Senate Office Building, Hon. George Allen (chairman of the 
subcommittee), presiding.
    Present: Senator Allen.


               opening statement of senator george allen


    Senator Allen. Good afternoon. I welcome everyone this 
afternoon to this hearing of the European Affairs Subcommittee 
on the challenges and accomplishments as the United States and 
the European Union promote trade and tourism in this 
environment of terrorism.
    The terrorist attacks that occurred in this country on 
September 11, 2001 dramatically changed the challenges that we 
in the United States face to secure our borders and prevent 
future terrorism. The attacks in Madrid on March 11 of this 
year demonstrate that the European Union faces the same 
challenges.
    Now, the European Union and the United States have the 
largest bilateral trading and investment relationship in the 
entire world. It amounts to $1 billion every single day and for 
my State, the Commonwealth of Virginia, 68 percent of 
investment in our Commonwealth of Virginia comes from European 
countries. That is $14.6 billion coming from Europe, and it is 
from all sorts of countries, different countries in Europe, 
from Sweden and Denmark and the Netherlands to Germany and 
Austria, France, Great Britain, all the way to Iceland, a very 
important investment in jobs.
    Also, international travel is important to our country here 
in the United States, obviously to Europe as well. Since 2001, 
travel has dropped a significant amount, but it is still high. 
While it has decreased, there still are 42 million 
international travelers per year visiting the United States and 
they spend $66.5 billion per year in our country. So enhancing 
international transportation security, while maintaining the 
efficient flow of tourists and commerce, is a challenge but an 
important challenge for both the EU and the United States.
    The purpose of this hearing--and I so much thank all our 
witnesses for being here with us--is to review five efforts to 
meet and address this challenge: No. 1, the Container Security 
Initiative; No. 2, the lost and stolen passport program; No. 3, 
access to airline passenger name records; No. 4, the issue of 
biometric passports; and No. 5, the visa waiver program.
    Now, we are very fortunate today to have four individuals 
who are uniquely qualified to give the subcommittee, and indeed 
the whole committee and in fact the U.S. Senate, your insights, 
your perspective on these efforts.
    I am particularly pleased that our first panel has an 
official from the European Union with us. It is not often that 
a representative from a foreign government appears before the 
Foreign Relations Committee. I am grateful that the European 
Union agreed to let their official appear before us today, and 
that is a testament to the level of cooperation that exists 
between the European Union and United States on this very 
important matter to our commerce, to our trade, as well as our 
security.
    Before I introduce our first panel, I would like to 
acknowledge the leadership of a colleague on this committee, 
Senator Chuck Hagel of Nebraska, who chairs the Subcommittee on 
International Economic Policy, Export and Trade Promotion. We 
will be talking about trade this afternoon and Senator Hagel is 
a great leader in this area. He cannot be with us today, but he 
is one who cares a great deal about immigration and trade 
reforms. He has asked and I will submit for the record a speech 
given yesterday by Secretary of State Powell on travel and 
tourism, delivered at the U.S. Chamber of Commerce here in 
Washington, DC. It is included as part of Senator Hagel's 
statement.
    [The prepared statement of Senator Hagel follows:]

               Prepared Statement of Senator Chuck Hagel

    Mr. Chairman, The Secretary of State gave a speech yesterday to the 
U.S. Chamber of Commerce which is very relevant to this hearing. I ask 
unanimous consent that his remarks be submitted for the record. 
Secretary Powell has been the champion of advancing the Bush 
administration's policy of ``Secure Borders, Open Doors.'' Most 
recently, the Secretary and his team have been working to ensure that 
the October 26, 2004 biometric passport deadline for Visa Waiver 
Program countries be extended, so as to not impede legitimate travel 
and tourism by our neighbors and allies.

                              *    *    *

  Remarks on Securing the Future of Travel and Tourism at the Second 
             Annual Summit of the U.S. Chamber of Commerce

Secretary Colin L. Powell
U.S. Chamber of Commerce
Washington, DC
May 12, 2004
(1:40 p.m. EDT)

    Well, thank you very much, ladies and gentlemen, for that warm 
welcome. And thank you, Tom, also for your very kind and generous 
introduction. And at this point, let me thank you for the support that 
you have provided to me in a variety of capacities over the years, 
especially during that time of my life when I was out in the private 
sector and chairing America's Promise and working with young people and 
forming partnerships with groups such as the Chamber. It was also 
during that period that I was on the speaking circuit, where I got to 
know the travel and tourist industry very, very well. (Laughter.) Ahh, 
yes.
    And so I want to thank you for giving me this opportunity, Tom. I 
want to thank the Chamber. I want to thank the National Chamber 
Foundation and the Travel Business Roundtable for co-hosting this 
important summit on securing the future of travel and tourism.
    I am pleased to have the opportunity to share with all of you what 
the State Department is doing to advance President Bush's policy, a 
simple policy, of Secure Borders, Open Doors. Secure borders. We ought 
to know who's coming into our country, what they're coming in here for, 
where they're going, how long they're going to be here for and when 
they leave. Not unreasonable. We also have to make sure that, in having 
those secure borders, we also convey an attitude of openness. Open 
Doors. We want you to come. We want you come share the American 
experience.
    Because to be true to ourselves as a democratic nation and to 
protect our national security, we must continue to be a welcoming 
country even as we take effective means to keep our enemies out. We 
must do both at the same time. And that is what our Secure Borders, 
Open Doors policy is all about.
    Throughout America's history, openness has enriched our democracy, 
our culture and our economy. And in today's globalizing world, it has 
never been more true that a strong economy is just as essential to our 
national security as is a strong defense, a strong military. And the 
travel and tourism industry is one of the most vital segments of that 
vital economy. Last year, approximately 42 million foreign visitors 
spent over $83 billion touring, working or studying in the United 
States and U.S. travelers going overseas spent $78 billion.
    Your industry is one of America's largest employers, directly 
generating some 7 million travel-related jobs. You also contributed 
nearly $157 billion in payroll income and over $93 billion generated in 
local, state and federal tax revenue. You are a big part of our 
economy, for sure, and President Bush and our whole Administration 
share your goal to succeed in what you're doing.
    The attacks of 9/11 brought home to all of us the chilling fact, 
however, that in a 21st century world, terrorists and other adversaries 
have unprecedented reach and unprecedented mobility to strike us in 
ways that we could never have imagined. The defenses we used to have in 
the past against Cold War enemies or the Nazis or other enemies that we 
had, state enemies, were easy to see, easy to protect ourselves from. 
They didn't strike directly at our homeland.
    In this instance, the terrorists struck directly at our homeland. 
They murdered some 3,000 people, not just Americans, people from 90 
countries, in the World Trade Center. They also delivered a blow to the 
United States economy and to world markets. Your industry in particular 
felt that impact, and your recovery has been all the more difficult 
because of the global economic slowdown that we saw over the last 
several years.
    As we approach this summer, however, I am glad to report that at 
the State Department, anyway, we are seeing some very encouraging signs 
that the turnaround is here for you, that travel is on the upswing from 
its dramatic decline of the first couple of years after 9/11. More 
Americans are going overseas and more foreign visitors are coming to 
the United States. Our Passport Office is seeing a jump in passport 
applications of more than 22 percent over last year. And though we 
still have a very long way to go before we reach the volume of visa 
applicants that we had before 9/11, applications for visitor visas to 
the United States are also on the rise.
    The picture is mixed with respect to student visas. The number of 
international students enrolled in the United States has grown each 
year, even in the post-9/11 period, but the rate of increase has slowed 
down. The international market for students is much more competitive 
than it used to be: France, Germany, elsewhere in the world, Australia, 
students have a broad choice. And clearly, we have to do a better job 
of attracting them here, attracting the world's rising generation to 
come study in America, come learn our values, come learn what kind of a 
people we are and take all of that back with you, as well as whatever 
education you picked up.
    In February, for example, I welcomed to the State Department 25 
Fulbright pioneers from a newly free Iraq. We've issued the first 25 
Fulbright scholarships to Iraq now that it has rejoined the family of 
nations. And I wish you could have seen these wonderful people. They 
are now in some of our best universities. They're studying law, they're 
studying business, they're involving themselves in public health 
education, in journalism, public administration, education and 
environmental science, picking up the skills they need to go back to 
what will be a democratic Iraq and help to rebuild that country.
    Where else would I have wanted these youngsters to go, and not so 
youngsters, as it turned out? Where else would I want them to go, but 
to the United States of America? What other values would I want them to 
pick up, except the values and the education that they pick up here in 
the United States? These young Iraqis are so full of hope for the 
future and they are absolutely determined to return to their country 
and contribute to its reconstruction.
    I reminded the students that other Fulbrighters just like them had 
risen to the challenge of leadership when their countries made historic 
transitions to democracy. Fulbright scholars stood at the forefront of 
Poland's first post-communist government. Poland's Foreign Minister is 
a Fulbrighter. A Fulbrighter helped to lead East Timor's struggle for 
independence. President Toledo of Peru is also a former Fulbrighter.
    More than 200 of the State Department's International Visitors 
program participants have become heads of state or government. What a 
record. Among those leaders: Prime Minister Tony Blair of the United 
Kingdom, President Megawati of Indonesia, President Saakashvili, the 
new President of Georgia, who proudly tells me about the education he 
received here in the United States, and most of the members of his 
cabinet have been exposed to our international programs for education. 
President Konare, the former President of Mali and now the Chairman of 
the African Union Commission is also one of those graduates of our 
programs. It is likely that tomorrow's leaders are among the 30,000 men 
and women who participate each year in our State Department exchange 
programs.
    Perhaps the next generation of leaders from the Arab and Muslim 
world will be found among the students selected for our Partnerships 
for Learning Initiative. Partnerships for Learning is an outreach 
effort that we put in place in the wake of 9/11. Under this initiative, 
160 young people from predominantly Islamic countries are now studying 
at American high schools and living in American homes, and over 70 
undergraduates from the Middle East countries are studying at American 
universities.
    I had some of these young high school students into my dining room 
a few months back for an IFTAAR dinner. And rather than just have 
intellectuals and people from the think tank community around me at 
this dinner I said, ``Well, just go get some young people. You know, 
c'mon. I'm an old geezer. Give me some young people to have dinner 
with.'' (Laughter.)
    And they sat these high school students around the table with me, 
and they were all Muslim, all representing the various parts of the 
Muslim world, and it was such an experience for me to sit and talk to 
them and tell them about the American experience; tell them about the 
American immigrant experience; tell them about the diversity of our 
country; tell them about our value systems; tell them about the things 
they never will see in their television sets or not often enough. And 
when they left, I think they carried a little bit away from that 
dinner, but they carry a little bit away from every encounter they have 
for the year that they are here. And they will go back with a better 
feeling about our country, with a better understanding of what we stand 
for.
    The personal and professional relationships that are developed 
during such exchanges can form a foundation of understanding and 
lasting partnerships, not just between young people, but between 
nations, between societies, between cultures.
    By the same token, if we lose legitimate foreign scholars, if we 
lose them to procedural frustrations because it's too hard to get a 
visa, because they don't want to be bothered, because they're going to 
be hassled at the airport coming into the United States, we risk losing 
their goodwill, and that is a priceless thing to lose. The essential 
embracing spirit of America's attitude toward people is our greatest 
asset. And we must work together to ensure that our country remains a 
beacon for students, international tourists, immigrants, and business 
people.
    These past few years have been fraught with challenges, but I 
believe that the United States is doing a better job than ever of 
balancing security with openness. The past 30 months have seen the 
creation of the Department of Homeland Security under the gifted 
leadership of Tom Ridge, who spoke to some of you last night, the 
largest reorganization of our government since World War II. And there 
have been other major changes in the measures we take to safeguard our 
borders and protect the integrity of the nation's immigration system. 
Norm Mineta, of course, now responsible for airport surveillance and 
security, as people come into the nation.
    The Department of State is working closely with the Department of 
Homeland Security, with the Department of Transportation, and other 
government organizations to make even more improvements that minimize 
the negative impacts of new security procedures on legitimate 
travelers.
    We are implementing an interlocking system of border security 
called US-VISIT, which I'm sure Tom may have spoken to you about, and 
this begins with our consular officers overseas collecting scanned 
fingerprints. The system ends with immigration officers of the 
Department of Homeland Security at our Ports of Entry and Departure 
verifying the identity of travelers. When this system was first put in, 
it got a lot of attention. We had problems with a couple of countries 
who felt offended by the fact that we would ask their citizens to place 
the two fingerprints on the scanner and have a photo taken.
    But after awhile, people got used to it. And as we explained why we 
were doing it, not to harass them, not to hassle them, but to protect 
us, and also to protect them, so that they knew who their fellow 
travelers were, it has gained acceptability as a way of doing it. It is 
non-intrusive. It is inkless. You don't have to wipe your hands off. 
It's simply that, take a picture, you're through, it adds a few seconds 
to the process.
    Since this program went into effect, US-VISIT, in January, three 
and a half million travelers have processed through US-VISIT without 
any appreciable lengthening of the wait times. And US-VISIT has 
prevented over 200 known or suspected criminals from entering our 
country. Secure Border, Open Door.
    As you know, we have another problem that I talked to Tom and some 
of the others about a few moments ago. It comes about from our Visa 
Waiver Program. Congress set October 26, 2004, this Fall, as the 
deadline when the 27 countries that are in our Visa Waiver, visa-free 
travel program, to begin issuing passports to these kinds of travelers 
that contain biometrics and are machine-readable, in the form of 
photographs or electronic chips. The law stipulates that the citizens 
of countries who don't meet the deadline of October 26, 2004, will no 
longer have the privilege of visa-free travel to our country and 
they'll all have to now apply for visas.
    It isn't likely that any of the countries in this program can make 
the deadline of October 26, 2004. Not because of a lack of interest or 
a lack of trying. It's that the standards for these new machine-
readable passports were only put in place a year or so ago, and it 
takes time to put in place a passport system that will be foolproof, 
technically secure. And we have to give our friends the time to develop 
the right kinds of passports and to make sure that they have been 
checked out and tested, and they're ready to work.
    We need an extension of that deadline. And if we don't get an 
extension of that deadline from Congress, we estimate that an 
additional five million people will have to go through our embassy 
procedures in these 27 countries in order to obtain passports. The 
other half of that is, though, that it won't be five million people 
because many of them will say, ``We're not going to put up with it. Why 
should I go to the United States to go to a resort area when I could 
easily go somewhere else without this kind of a problem?'' We cannot 
allow this to happen and we have been working with the Congress.
    Secretary Ridge and I testified a couple of weeks ago on the 
importance of giving us an extension to this deadline, and we have 
asked for a two-year extension of the deadline, and I hope that 
Congress will give us this extension. It is so essential.
    This is part of our effort to rationalize our system in ways that 
people will understand, that speed up the whole process of obtaining a 
visa, but at the same time, making sure that we are not risking our 
security.
    For the foreign travelers from non-waiver countries who must submit 
a visa application, things have gotten a lot better. Some 97 percent of 
the visa applications that we receive are processed in one or two days.
    We're increasing the capacity of our databases to talk to one 
another so that we're not querying multiple databases. Increasingly, 
it's a centralized system where we can get rapid turnaround after 
searching all of our databases to make sure there is no derogatory 
information.
    For the two-and-a-half percent of non-immigrant visa applicants 
who, for national security reasons, are subject to extra screening--
they popped up in some way--we have made the screening process less 
onerous and more efficient by speeding up the exchange of information.
    And so last year, the wait time for students and scholars who 
required clearances from Washington averaged two months. Today, 80 
percent of these visas are issued within three weeks.
    We recently increased to one year the validity of the clearances 
granted to certain groups, scientists and scholars, who participate in 
joint-research programs. I was getting killed by our friends around the 
world who kept saying, ``You invite us to these scholarly conferences 
and you want our people to come and work with you, but it's too 
difficult to get them visas in time. You know that they are no risk to 
you. You know them as a group. They have been to your country on many 
occasions previously. Why do we have to go through this?''
    So we are trying to create certain classes that can be allowed to 
come in on an expedited basis, making it even easier for them to 
acquire their visa. Travelers who need to make repeated visits within a 
given year may now do so without our consular officers having to go 
back to Washington for an additional name check if they are part of the 
categories I just discussed.
    At the same time we're doing everything we can to cut wait times, 
to streamline our procedures. We have also, at the same time, taken 
steps to strengthen security. We have worked with the law enforcement 
and intelligence agencies, as I mentioned earlier, to make sure not 
only is the information consolidated, but the information is available 
to anyone who needs it--whether you're a consular officer or whether 
you're an immigration official at a port of entry.
    We are hiring additional consular officers. One of the things we've 
succeeded in doing at the Department over the last several years is to 
persuade the Congress to let us to hire more people--above the level of 
attrition. For years, the State Department was starved of funds and we 
were not hiring the people necessary to meet the new workload.
    A generous Congress supported President Bush's very, very 
significant request, significant request for a significant increase in 
the number of people that would be available to the Department, and you 
will see the result as we put more and more consular officers out in 
the field.
    These security measures that I've touched on not only enhance the 
security of our own citizens, they make travel safer for the foreign 
public as well.
    Keeping our homeland secure and our society open is too big a job 
for government alone. The private sector--you all--have to play a vital 
role in this process as well. And you do. And on behalf of all of my 
colleagues at the State Department, I want to express our appreciation 
to the Chambers of Commerce and the Travel and Tourism Industry for all 
that you have already done to help us make travel to and from the 
United States easier and safer for all.
    As we implement President Bush's Secure Borders, Open Doors policy, 
we need to hear from you. I told Tom and I'll tell everybody here: When 
you have a problem or you think we're not doing it right, please write 
me, let me know, scream at me. Every major university president is now 
writing me letters at my invitation. (Laughter.) Come on, scream at me, 
and then I can scream at Tom Ridge. That's the way it works. 
(Laughter.)
    But, more importantly, I want to make the case here in Washington 
to my colleagues in government who fully understand this problem, but 
also the Congress, that what we have to do is protect ourselves, but 
we've got to do it in a way that never causes us to lose that openness.
    Share your insights with us. Give us ideas as to how we can speed 
up the process. Tell us what your problems are. Otherwise, I'll just 
sit over there on the 7th floor of the State Department thinking I know 
what's going on, but until you tell me how you see it in the field, I 
really won't know what's going on. Let me know how we are affecting 
your business. Give me anecdotes. As I heard earlier, people don't want 
to come here for a conference if they can go to London for a conference 
because it's easier. Oh, we've got to fix that. Don't want that to 
happen. I've got nothing against London; I just would prefer to have 
people come to the United States.
    We encourage each and every one of you to view our Web site: 
state.gov. And it will give you insight, a lot of information on what's 
going on around the world, what's going on with our visa policies, 
what's going on in our organization to help you do your job better and 
to encourage people to come to the United States.
    Since our nation's earliest days, people have come from all around 
the world. I love to say we are a nation of immigrants and we are 
enhanced by this. We are enhanced by the people who come here to live, 
the people who come here just to watch, the people who come here to get 
their healthcare taken care of, the people who come here to enjoy our 
resorts, the people who come here to get an education. We are so 
enriched. It's a shame that some of my colleagues in other nations 
around the world don't have the same kind of opening--opening attitude 
toward immigration and toward visitors coming into their country that 
has made us such a vibrant society, made us such a vital force in the 
face of the Earth.
    We have seen people come to this country and stay, and their 
children have thrived, as I am one of them. Most of you can tell a 
similar story. Others have not stayed. They have returned to their 
countries of origin, taking with them a better understanding of our 
nation and our values.
    Today, the trendlines for travel and tourism are encouraging again 
and President Bush and I believe that the future of the U.S. Travel and 
Tourism Industry is bright. But, you know, it's not just tourism and 
industry and your business. You're helping me do foreign policy. This 
is not an abstraction for me. When I go around the world--I'm going to 
Jordan this weekend--and when I talk to my colleagues from around the 
world, I've got to make sure they understand that we are open. I've got 
make sure that they understand that we're doing everything we can to 
attract their youngsters to our shores.
    It is a vital part of my foreign policy and the President's foreign 
policy goals, because if people think that America is hiding behind a 
fence, that America is not engaged in the world, if America is so 
concerned about its security that it is not open to people in other 
lands coming to visit, then it is not the same America we've been 
telling them about for all these years, that wonderful nation that has 
drawn from all nations and touches every nation in return, is still 
here, is still welcoming, still has that Statue of Liberty that stands 
in New York Harbor. Just like that Statue of Liberty, our nation has a 
spine of iron and steel, but also a welcoming torch.
    Together, we will guard our country with vigor and vigilance just 
as the Statue of Liberty has guarded New York Harbor for all these 
years. And even as we hold high a welcoming light to good people across 
the globe, we will protect ourselves. But above all, let them see that 
welcoming light. Come, visit, travel, stay, if you will. Enrich us and 
we will enrich you. Thank you very much.
    (Applause.)

    Senator Allen. There may also be other Senators who may 
wish to submit their statements, and if possible, if they have 
questions, they may pose them to you in writing. I hope you 
will be able to answer them.
    Now, the subcommittee is going to hear from the first 
panel, obviously, and let me introduce those two panelists. 
First is C. Stewart Verdery, Jr. He was confirmed on June 19, 
2003 by the U.S. Senate to be the first Assistant Secretary for 
Homeland Security for Border and Transportation Security Policy 
and Planning. In this capacity, Mr. Verdery is the principal 
advisor to the border and transportation security for policy 
development in the substantive areas, including immigration and 
customs inspection and investigations, cargo and trade policy, 
transportation security, counter-narcotics, and Federal law 
enforcement training.
    Mr. Verdery was general counsel to the United States Senate 
Assistant Republican Leader Don Nickles of Oklahoma. As part of 
his leadership duties, he handled the lead staff duties for the 
Senate Republican High-Tech Task Force of which I was chairman, 
and so I have had the pleasure to work with him as we reached 
out to the technology community.
    He also served in years previous on two Senate committees 
and to Senator John Warner and Chairman Orrin Hatch on the 
Judiciary Committee, served as lead counsel for the committee's 
crime unit.
    Our second panelist on the first panel is Director General 
Faull, who has served for more than 20 years in the European 
International Community and is currently Director General of 
Justice and Home Affairs to the European Commission. Mr. Faull 
was chief spokesman and Director General of Press and 
Communications from 1999 to 2003, having previously served as 
head of the Press and Communications Service and Deputy 
Director General in the Directorate-General for Competition 
from 1995 to 1999. Mr. Faull was Director for Competition 
Policy, Coordination, International Affairs and Relations.
    He is an author of articles on various topics of EU law and 
policy and in 1999 was co-editor of the EC Law of Competition. 
In 1989 he became a professor at law at the Free University of 
Brussels, at which he still instructs today.
    We are pleased to have a representative, again, of the 
European Union appear before the subcommittee. It is uncommon 
that this occurs and we are certainly grateful, Mr. Faull, for 
your appearance.
    With that, I would like to hear from our panel. We will 
hear first from you, Mr. Verdery.

STATEMENT OF HON. C. STEWART VERDERY, JR., ASSISTANT SECRETARY, 
BORDER AND TRANSPORTATION SECURITY DIRECTORATE, U.S. DEPARTMENT 
                      OF HOMELAND SECURITY

    Mr. Verdery. Chairman Allen, thank you for the invitation 
to be here today before your subcommittee. It is nice to see 
you again, of course, and we welcome the opportunity to be 
here. I am especially glad to be here with Mr. Faull, with whom 
we have developed a very productive relationship at the 
Department, both between myself and my boss, Under Secretary 
Asa Hutchinson at BTS. So it is very appropriate that we are 
here today to talk about some of the issues you outlined in 
your opening statement.
    Our respective principals, the Homeland Security Secretary, 
Tom Ridge, and the European Commissioner, Antonio Vitorino, 
have just concluded a very productive set of meetings as part 
the G-8 ministerial this week, and the written testimony 
submitted for the hearing describes in quite some detail our 
ongoing transatlantic efforts between our Department and our 
partners in Europe. I would like to speak just briefly to some 
of those key initiatives in my oral statement today. These are 
designed to combat not only the terrorist threat but to find 
ways to enhance transportation security and border enforcement 
and facilitate legitimate trade and tourism.
    As you mentioned, the recent bombings in Madrid caution us 
that terrorism is an international threat that cannot be 
conquered by the United States alone. Rather, we must engage in 
a global effort with our colleagues in the European Union and 
elsewhere on a daily and sometimes even hourly basis to make 
sure that our lifesaving work is both thorough and coordinated. 
As part of this effort, we are working with our allies on 
improving standards for travel documents, aviation safety, and 
exchange of watch list information, to name a few issues. We 
are seeking ways to address the security challenges of lost and 
stolen passports, as well as exploring new technology to detect 
identity and document fraud, and even things such as explosives 
in the transportation environment.
    In terms of aviation security, we are building a layered 
approach for the transatlantic aviation that is so crucial to 
our economy. We are looking at enhancements to visas, use of 
airline passenger data, boosting airline security, and 
utilizing air marshals on some international flights of 
concern.
    We continually engage our European counterparts to discuss 
and coordinate on these important measures.
    Let me move on to the cargo arena. As was mentioned in your 
opening statement, on April 22 of this year the EU and DHS 
signed an agreement that calls for prompt expansion of the U.S. 
Customs and Border Protection's Container Security Initiative, 
or CSI, throughout the European Union. The purpose of CSI is to 
ensure that all containers that pose a risk or a potential risk 
for terrorism are identified as early as possible in the 
international trade supply chain before they are ladened on 
board vessels to the United States.
    On lost and stolen passport security, we are very excited 
about the recently announced program under which the United 
States will provide current information on issued passports 
that have been reported lost or stolen to Interpol in their 
lost and stolen document data base, which is available to 
border authorities worldwide.
    On passenger data, I am very happy to report positive 
progress toward implementation of the negotiated agreement for 
screening passengers that we have with the European Commission. 
During my tenure at the Department, I have been the lead 
negotiator for the United States in our efforts to establish a 
legal framework to allow CBP, Customs and Border Protection, to 
access passenger name record information, the so-called PNR 
data, from airlines that carry passengers between Europe and 
the United States, both our domestic carriers and European 
carriers who are flying transatlantic.
    Throughout these yearlong negotiations, both sides have 
worked together to find a workable solution that outlines the 
type of data that may be transferred, the period of time it can 
be retained, the purpose for which it may be used, and also 
establishes aggressive redress mechanisms for passengers. While 
implementation is pending a final review by the European 
Council, we are encouraged by the Commission's efforts and 
especially the support we have received from European 
Commissioner for Internal Market, Frits Bolkenstein, the 
Commissioner for External Relations, Chris Patten, Commissioner 
Vitorino, and Director General Faull.
    When the agreement is finalized--and hopefully that will be 
extremely soon--it will be an historic achievement that will 
protect both the privacy of travelers and the borders of the 
United States and the European Union.
    I also wanted to mention that we are working to further 
enhance security and facilitate legitimate travel with the 
Transportation Security Administration's efforts to develop a 
successor program to the first generation computer-assisted 
passenger prescreening program, or CAPPS I. The CAPPS I program 
flags a very large number of persons for secondary screening, a 
hassle to passengers, and a resource drain on carriers and TSA.
    The replacement program we are working on has strong 
privacy and data protection measures built in and will use 
passenger data to reduce the number of persons incorrectly 
flagged as potential security risks and better identify real 
risks. TSA is working very closely with industry to accurately 
quantify costs, reduce duplication, and craft a regulatory 
framework that is transparent and industry friendly. And it is 
important to note that the ancillary benefits of the successor 
program will eliminate between $150 million and $200 million of 
annual costs the air carriers currently incur operating CAPPS 
I.
    As we move further into the 21st century and adopt 
biometric technology and other advancements to enhance security 
and facilitate legitimate travel, we will proceed with prudence 
and deliberation considering the civil liberties effects of 
government's use of these technologies and ensuring that we 
fortify our privacy protections so that no personal data can be 
misused or abused. And we are engaging continually with our EU 
counterparts to discuss, coordinate, and cooperate on these 
measures.
    Clearly, in terms of our overall cooperation, the path 
forward is through careful and coordinated efforts. As a step 
to formalizing contact with our counterparts in Europe, Under 
Secretary Hutchinson traveled to Brussels in April to lead a 
U.S. delegation to the inaugural meeting of the new Policy 
Dialog on Border and Transport Security. Through this 
formalized dialog and our other cooperative efforts, we are 
seeking to identify and communicate problems or initiatives 
that are on the horizon.
    Also, we are trying to mutually recognize the key goal of 
security programs is to preserve and enhance the robust travel 
between our shores, whether for tourism, business, education, 
or family. Over time our investments in security and travel 
facilitation will ensure that transatlantic passengers feel 
that travel is both safe and convenient and allow that robust 
travel to flourish.
    We find our coordinated efforts and continuous dialog are 
certainly the key elements to a successful transatlantic 
strategy and again I am honored to share the podium with 
Director General Faull who has been a true ally to the United 
States. I am certain we both agree that the key to staying the 
path and meeting the great challenges ahead is continuing not 
only to build and develop technical connections and enhanced 
methods of exchanging information, but also to strengthen the 
personal relations and communications between our leaders on 
both sides of the Atlantic.
    I thank you for the opportunity to be here today. I look 
forward to your questions on these and some other key issues on 
the agenda that you outlined in your opening statement. Thank 
you.
    [The prepared statement of Mr. Verdery follows:]

           Prepared Statement of Hon. C. Stewart Verdery, Jr.

    Chairman Allen, Ranking Member Biden, and Members of the Committee, 
thank you for the invitation to address the Subcommittee on European 
Affairs about current DHS-European Union initiatives. I also want to 
thank Director-General of Justice and Home Affairs Jonathan Faull from 
the European Commission who has come a great distance to join me here 
today. I am very pleased with the progress that DHS and the European 
Commission are making in addressing many issues of mutual concern 
related to combating terrorist threats, transportation security and 
border enforcement.
    As you know, the U.S. has an especially close partnership with the 
European Union, and, since its formation, DHS has been a key player in 
establishing many transatlantic initiatives and agreements. The 
challenges of the post 9/11 environment can only be tackled and 
surmounted with the cooperation and assistance of our European partners 
and other foreign counterparts.
    The challenge before us is to secure the Homeland from another 
terrorist attack while preserving our most cherished values and 
maintaining a free, safe and open society. DHS is diligently working to 
improve its ability to identify terrorists and criminals without 
impeding legitimate trade and travel. While we are enhancing security 
by reexamining how we produce and examine documents, bolstering 
security at our ports of entry, and improving and expanding watchlists, 
we are committed to protecting and respecting the civil liberties and 
individual privacy of U.S. citizens, residents, and visitors. Our 
efforts to combat terrorism threats and protect our borders require the 
assistance, counsel and partnership of our allies, especially our 
transatlantic neighbors in Europe.
    The recent bombings in Madrid, Spain caution us that terrorism is 
an international threat that cannot be conquered alone. Moreover, the 
recent events demonstrate that Al-Qaida-influenced regional extremist 
networks have increased in visibility and may pose a growing threat to 
the U.S. and the rest of the world. As such, we must engage in a global 
effort with our colleagues in the European Union and elsewhere on a 
daily and even hourly basis to make sure that our lifesaving work is 
thorough, sound and coordinated.
    As part of this effort, we are working well with our partners on 
improving standards for travel documents, aviation safety, and the 
exchange of watchlist information. In an effort to scrutinize travelers 
more effectively and more equitably, we are moving toward 
individualized review. Appropriate and secure use of biometric 
identifiers will significantly aid this process. Biometrics will also 
assist our efforts to authenticate the identity of travelers. By 
individualizing the process through biometrics, we can be more 
confident and secure about our admissions and screening decisions. To 
get there, we are working closely with our European counterparts in the 
International Civil Aviation Organization (ICAO) and other fora to 
discuss how to advance biometric methodologies, both in chip technology 
and electronic readers. International discussions on these issues are 
vital, specifically in regard to how we can best address privacy 
concerns.
    In addition, we are building a layered approach for aviation 
security. DHS recognizes that there is no single solution to prevent 
airplanes from being used as weapons of mass destruction. The layered 
approach includes enhancements to visas, appropriate use of airline 
passenger data, vetting travelers through US-VISIT, boosting airline 
security utilizing air marshals on international flights of concern, 
and offering voluntary programs for arming pilots on the passenger and 
cargo planes for domestic flights. DHS fully recognizes that imposing 
unnecessary inconveniences will discourage travel to the U.S. and is 
committed to avoiding unnecessary procedures that would harm the United 
States' ability to welcome students, tourists, and business travelers. 
Our investments and efforts within the transatlantic and international 
context aim to minimize burdens on our citizens' and visitors' 
livelihoods while we pursue our main mission of protecting their lives.
    We are working closely with EU Director General for Justice and 
Home Affairs, Jonathan Faull, and other officials and agencies of the 
European Union to ensure that developments and initiatives in aviation 
security are discussed, coordinated, and explained before they are 
implemented. Through on-going communication and dialogue with the EU we 
are seeking to avoid transatlantic surprises and diplomatic 
differences. As we move further into the 21st century and adopt 
biometric technology and other advancements, we will proceed with 
prudence and deliberation, considering the civil liberties effects of 
governments' use of these technologies and ensuring that we fortify our 
privacy protections so that no personal data can be misused or abused.
    We are taking such steps every day. Let me briefly touch on some of 
the ongoing discussions we are having with our European partners that 
can be viewed as true achievements and positive, practical steps to 
tackle the security challenges we face together.

                       LOST AND STOLEN PASSPORTS

    Together with our colleagues in the Department of State, who are 
responsible for the U.S. passport system, and our foreign counterparts, 
DHS is addressing security challenges posed by lost and stolen 
passports. We share this effort with our partners in Europe and around 
the world. Across the globe, international border control authorities 
continue to seek timely and accurate information concerning the 
validity of travel documents presented at their borders. In most cases, 
countries are able to identify the misuse of their own lost or stolen 
travel documents when presented at their own borders; however, without 
a system for international sharing of this data, to date it has not 
been possible to access this data from other countries. Finding the 
best solution to this security challenge is the topic of discussion in 
many international fora. In addition, this is an important discussion 
that DHS has with most every foreign delegation that it hosts and that 
it visits.
    Additionally, DHS is following efforts made by the ICAO New 
Technologies Working Group which has undertaken preliminary research 
into using Interpol's electronic global data base to exchange 
information on lost and stolen passports, so that a query of country 
and passport number can be submitted to a central database of lost and 
stolen passports. The long-term goal is to develop a system in which a 
yes-no response can be generated in real-time. We support these efforts 
and see these advancements in the exchange of information as key to 
securing our borders.
    Recently, the Department of State announced a new a program through 
which the U.S. will provide current information on issued passports 
that have been reported lost or stolen to the Interpol's lost and 
stolen document database, which is available to border authorities 
worldwide. The Department of State has just transferred to Interpol 
data on 330,000 lost or stolen U.S. passports. Only the passport 
number, country of issuance and document type will be provided to 
Interpol. We believe that this action will encourage other governments 
to join in this international data-sharing initiative.

                  CONTAINER SECURITY INITIATIVE (CSI)

    On April 22, 2004, the United States and the European Community 
signed an agreement to intensify and broaden cooperation on customs 
matters. The objectives of the agreement include, among other things, 
the prompt expansion of Customs and Border Protection's (CBP) Container 
Security Initiative (CSI) to more ports in the European Community.
    The Container Security Initiative addresses the threat to border 
security and global trade posed terrorist misuse of a maritime 
container. The purpose of CSI is to ensure that all containers that 
pose a potential risk for terrorism are identified as early as possible 
in the international trade supply chain and before they are laden on 
board vessels destined for the United States. CBP is now stationing 
multidisciplinary teams of U.S. officers from both CBP and U.S. 
Immigration and Customs Enforcement (ICE) to work together with their 
host government counterparts. Their mission is to work with local law 
enforcement officials to develop additional information related to the 
terrorist threat to cargo destined to the United States.
    Through CSI, U.S. officers work with host country customs 
administrations to establish security criteria for identifying high-
risk containers. Those administrations use non-intrusive technology to 
quickly inspect the high-risk containers before they are shipped to 
U.S. ports. Additional steps are taken to enhance the physical 
integrity of inspected containers while en route to the U.S. CSI ports 
are points of passage for approximately two-thirds of containers 
shipped to the United States.
    The CSI agreement signed last month with the EU sets the stage for 
enhanced cooperation between the United States and the Europe on CSI 
and related matters. It will lead to enhancements in our mutual efforts 
to prevent terrorists from exploiting the international trading system. 
The agreement will intensify and broaden cooperation and mutual 
assistance in customs matters between the European Community and the 
United States. The objectives of the broadened cooperation called for 
under the agreement include expanding the Container Security 
Initiative, establishing minimum standards for risk-management 
techniques, and improving public-private partnerships to secure and 
facilitate international trade.
    CSI is a fully reciprocal program. Japanese and Canadian officers 
are currently stationed and working in key U.S. ports to screen 
containers destined for their respective countries. We expect others to 
do so in the future.
    While the first twenty largest ports (which include many in Europe) 
were the starting point, CSI is not limiting participation to those 
locations. Sweden, Malaysia, South Africa, and Sri Lanka have signed on 
to CSI: ports in the first three countries are already operational. 
Discussions are currently being held with additional expansion ports in 
South and Central America, Southeast Asia, and the Middle East.
    International organizations like the World Customs Organization has 
provided a multi-lateral forum for discussion of appropriate security 
measures and encouraged the further development of CSI-type initiatives 
throughout their 162-country membership.

                    PASSENGER NAME RECORD (PNR) DATA

    In addition to expanding cooperation on container screening, the 
U.S. and the European Commission (Commission) have been able to move 
forward with a negotiated arrangement for screening passengers. During 
my tenure with Border and Transportation Security (BTS), I have been 
the lead negotiator for the U.S. with the Commission in our efforts to 
establish a legal framework to allow CBP, a component of BTS, to access 
passenger name record (PNR) data from the airlines that carry 
passengers between Europe and the U.S. In 1995, the European Parliament 
and Council issued a ``Data Protection Directive'' which sets forth 
detailed requirements for the utilization and sharing of personal data. 
The purpose of our negotiations with the European Commission is to 
obtain an adequacy finding, under the European privacy directive, which 
would allow CBP to receive PNR data from those airlines affected by the 
Directive. Without resolution of these issues with the Commission, 
airlines would be put in a position where they would be subject to 
fines from EU member states if they provide PNR data to the U.S.
    PNR data is just one of many tools used by CBP to fulfill its 
mission. PNR data is an essential tool in allowing CBP to accomplish 
its key goals: (1) PNR data helps us make a determination of whether a 
passenger may pose a significant risk to the safety and security of the 
United States and to fellow passengers on a plane; (2) PNR data 
submitted prior to a flight's arrival enables CBP to facilitate and 
expedite the entry of the vast majority of visitors to the U.S. by 
providing CBP with an advance and electronic means to collect 
information that CBP would otherwise be forced to collect upon arrival; 
and (3) PNR data is essential to terrorism and criminal investigations 
by allowing us to link information about known terrorists and serious 
criminals to co-conspirators and others involved in their plots, 
including potential victims. Sometimes these links may be developed 
before a person's travel but other times these leads only become 
available days or weeks or months later. In short, PNR enables CBP to 
fulfill its anti-terrorism and law enforcement missions more 
effectively and allows for more efficient and timely facilitation of 
travel for the vast majority of legitimate travelers to and through the 
United States.
    Through these negotiations (which have been going on for more than 
a year), we are grateful for the cooperation of the European 
Commission. Last December, the European Commission agreed to adopt an 
adequacy finding and just this week, the 25 member states accepted the 
finding in the Article 31 Committee vote. Over the course of our 
negotiations, both sides worked together to reach a workable solution 
that outlines the type of data that may be transferred, the period of 
time it can be retained, and the purpose for which it may be used. 
Additionally, the arrangement includes requirements for aggressive and 
important passenger redress mechanisms including a channel for direct 
access by European Data Protection Authorities to the Chief Privacy 
Officer at the Department of Homeland Security on behalf of European 
citizens.
    While implementation is pending a final review by the European 
Council, we are encouraged by the Commission's efforts, especially the 
support we have received from European Commissioner of Internal Market, 
Frits Bolkestein; Commissioner for External Relations, Chris Patten; 
Commissioner for Justice and Home Affairs, Antonio Vitorino and 
Director General Faull. While our arrangement and the adequacy finding 
may face legal challenges, we are confident that they are legally 
sufficient and will improve the safety of air passengers. When the 
arrangement is finalized, it will be a historic achievement that will 
protect both the privacy of travelers and the borders of the United 
States and the European Union.
    Moreover, DHS is also very pleased to learn through the March 25 EU 
Summit Statement on Combating Terrorism that the EU is itself 
considering setting up its own PNR system that will further strengthen 
the ability of the international community to identify the handful of 
violent criminals and terrorist hiding among the throngs of legitimate 
travelers.

                    VISA WAIVER PROGRAM AND US-VISIT

    I now turn to the issues surrounding the Visa Waiver Program and 
US-VISIT. As you know, in September 2004, DHS will expand US-VISIT 
checks to Visa Waiver Program travelers.
    The US-VISIT system was initiated on January 5, 2004, and as of 
late April, the US-VISIT program had processed over 3.5 million 
travelers without negatively effecting wait times. During that same 
period, US-VISIT has identified 180 known or suspected criminals and 
more than 100 immigration violators, including rapists, drug 
traffickers, credit card and visa fraud criminals, manslaughter 
suspects, and an armed robber. In most cases, biographic information 
alone would not have led to the identification of these criminals.
    Although the US-VISIT Program was initially designed for travelers 
from non-Visa Waiver countries, its successful deployment demonstrates 
that it can be effectively expanded to travelers from Visa Waiver 
Program (VWP) countries who enter the United States at air and sea 
ports. This expansion will increase security by ensuring that biometric 
information on VWP travelers is collected even if the deadline for 
biometric passports is extended.
    The biometric passport deadline was established by the Enhanced 
Border Security Act (EBSA), which requires VWP countries to certify by 
October 26, 2004, that they have a program to issue biometrically 
enhanced passports that comply with International Civil Aviation 
Organization (ICAO) standard. If they cannot make such a certification, 
they will be unable to continue to participate in the VWP. 
Additionally, beginning on October 26, 2004, VWP applicants with non-
biometric passports issued on or after October 26, 2004, will not be 
eligible to apply for admission under the VWP. While most VWP countries 
will be able to certify that they have a program in place, due to 
technological limitations, they will be unable to actually produce 
biometric passports by that date. Limiting VWP participation could lead 
to serious disruptions to travel and tourism because millions of VWP 
travelers may choose not to travel to the U.S. resulting in billions of 
lost revenue to the U.S. economy. It may also cause friction with some 
of our closest allies in war on terror.
    The EBSA also requires DHS to deploy passport readers to 
authenticate these passports. Acknowledging the limits of the current 
state of technology, Secretary Ridge, on April 21st, testified before 
the House Committee on the Judiciary that DHS, ``. . . is not currently 
in a position to acquire and deploy equipment and software to 
biometrically compare and authenticate these documents. DHS cannot 
today acquire one reader that will be able to read all chips utilized 
in the ICAO compliant biometrics passports. However we believe that by 
the fall of 2006, the technology required to implement successfully a 
security system based on the ICAO standards will be much more settled 
and allow DHS to derive benefits envisioned when the original EBSA was 
enacted.'' Accordingly, DHS and DOS jointly requested that the October 
26, 2004, deadline be extended to November 30, 2006 for the production 
of ICAO-compliant biometric passports and the deployment of equipment 
and software to read them.
    The VWP governments are deeply concerned about their nationals 
losing the ability to travel to the United States visa-free and support 
the Administration's request for an extension. Additionally, the VWP 
countries understand that in the short-term enrolling VWP applicants in 
US-VISIT would alleviate some of the security concerns associated with 
that extension and in the long-term will improve document and border 
security.

                            U.S.-EU DIALOGUE

    On April 26, Under Secretary Asa Hutchinson traveled to Brussels to 
lead a U.S. delegation to the inaugural meeting of the new Policy 
Dialogue on Border and Transport Security. The EU delegation was led by 
Director General Faull. The purpose of this new group was to establish 
a forum where the issues of transport and border security could be 
addressed at a policy level. This first semi-annual meeting 
successfully discussed a wide range of issues and included experts from 
Homeland Security, Justice, and State on the U.S. side and the European 
Commission Directorates of Transport, Internal Market, Justice and Home 
Affairs and External Relations, demonstrating an effort by both sides 
to bring all concerned parties to the table and avoid 
compartmentalizing. This on-going formal dialogue is to provide a 
mechanism to communicate problems or initiatives on the horizon.
    Delegates at the inaugural meeting took the opportunity to address 
many of the issues I have already discussed, including biometrics, the 
US-VISIT and Visa Waiver Programs, joint initiatives on lost and stolen 
passports, ``flights of concern'' and air marshals. With the US-EU 
Summit approaching in June, parties are already working collaboratively 
toward making that event a success.
    Coordinated efforts and continuous dialogue are certainly the key 
elements to a successful transatlantic strategy. I am honored to have 
this opportunity to share the podium with Director General Jonathan 
Faull, who has been a true ally to the U.S. Specifically, his support 
and cooperation have been invaluable to DHS as we carry out our daily 
mission and meet formidable challenges. I am certain that we both agree 
that the key to staying the course and meeting the great challenges 
ahead is continuing not only to build and develop technical connections 
and enhanced methods of appropriately exchanging information but, more 
importantly, to strengthen relations and communications between leaders 
on both sides of the Atlantic.

    Senator Allen. Thank you, Mr. Verdery. I will have some 
questions of you.
    Now we would like to hear--do you go by General Faull, 
Director Faull?
    Mr. Faull. I will settle for ``Mr.''
    Senator Allen. Mr. Faull, we would love to hear from you. 
Thank you for being with us.

STATEMENT OF JONATHAN FAULL, DIRECTOR GENERAL, JUSTICE AND HOME 
        AFFAIRS, EUROPEAN COMMISSION, BRUSSELS, BELGIUM

    Mr. Faull. Thank you very much, indeed, Mr. Chairman. It is 
indeed a great honor for me to be here to address this 
subcommittee this afternoon. I welcome the opportunity to say a 
few words about what has become a very close and constructive 
relationship between the European Commission and the U.S. 
Government in this area, and it is, if I may say so, 
particularly fitting that I do so in the company of Stewart 
Verdery who has played a very important role in building 
cooperation with us across the Atlantic.
    The European Union now has 25 member states. The European 
Commission's role is to develop policy, propose legislation, 
enforce rules once adopted, and represent the European Union 
internationally.
    My job is to run the department known as the Directorate-
General for Justice and Home Affairs, and my political boss, 
Commissioner Antonio Vitorino, has been in Washington this week 
to attend the G-8 Justice and Home Affairs Ministerial meeting 
and to meet his counterparts in the U.S. administration.
    The issues just referred to by Stewart Verdery in his 
remarks are certainly at the top of our agenda too. We are 
building an integrated system across the whole of the European 
Union with secure external borders, allowing bona fide 
travelers access to our territory, while keeping others out. We 
are developing laws and networks to deter, prevent, and punish 
serious crime, including terrorism.
    As Ambassador J. Cofer Black said before this committee a 
little over a month ago, ``neither the United States nor Europe 
can fight the war against terrorism alone.'' This is a message 
that we have also received from many American friends this week 
and it is one we share fully. Building on what was already a 
sound relationship, we have developed close and unprecedented 
cooperation with the United States in the fight against 
terrorism since the tragic events in this city and in New York 
on the 11th of September 2001. And the awful attacks in Madrid 
on the 11th of March this year have made it even more 
abundantly clear to us all that the fight against terrorism is 
both global and far from over.
    In the area of border and transport security, we have 
established a high level policy dialog between the EU and the 
USA. The U.S. is represented by the Departments of State, 
Homeland Security and Justice. The group met first on the 26th 
of April this year and Under Secretary in the Department of 
Homeland Security, Asa Hutchinson, led the U.S. delegation 
while I had the honor of chairing the meeting on the European 
side. It was a very good, constructive, business-like meeting 
covering some of the issues that we have already heard about 
today, biometrics, sky marshals, visa policies, and the issue 
of information sharing. We intend to meet at least twice a year 
and hope to make this group a lasting vehicle for cooperation 
between the European Union and the United States in these 
important policy areas.
    I would like to say a few words now about biometrics. One 
of our most important common endeavors is to make travel safer. 
We want to improve the security of travel documents by using 
the best means available to us of modern technology. Biometric 
identifiers, therefore, are of the utmost importance.
    Nearly all travelers nearly all the time go about their 
business as law-abiding citizens. The transatlantic relations, 
business and personal, are of great importance to us all 
economically, socially, and in many other respects. Our aim 
should be to make travel safe and to prevent criminals and 
terrorists from abusing our open societies.
    By the end of this year, we intend to adopt laws and 
technical rules to introduce biometric data into EU visas and 
residence permits issued to foreigners and into the passports 
issued to ourselves, EU citizens, by our member states, in a 
harmonized, coherent and interoperable way.
    We are grateful to the U.S. administration for its proposal 
to extend by 2 years the deadline by which foreign travel 
documents, passports in particular, should feature biometric 
identifiers. We hope that the U.S. Congress will enact the 
necessary legislation to give effect to this extension.
    We understand also the reasons for the extension of the US-
VISIT program to all travelers arriving in the United States 
and we hope that the visa waiver program will be maintained and 
eventually extended to all 25 member states of the European 
Union.
    Meanwhile, we are very busy in Europe enhancing the control 
and surveillance of our now expanded external borders. We are 
resolute in fighting against illegal immigration, trafficking 
of all kinds, and of course, international terrorism. But at 
the same time, the new, enlarged European Union is open for 
business and we welcome friendly visitors.
    We are in the process of setting up a ``European Agency for 
the Management of Operational Cooperation at the External 
Borders of the Member States of the European Union,'' a rather 
long name. It will, no doubt, be called for short the Borders 
Agency or something like that. It will coordinate the 
operational activities of our national border guard services at 
our common external border, helping them in their work by 
providing common training and risk analysis, as well as help on 
procurement of equipment and on research matters. It will, of 
course, also cooperate with international organizations and 
foreign countries, including the United States, on matters 
relating to its tasks. It will not have a law enforcement role, 
but is expected to become a key player in our border management 
system.
    We share the determination of the United States to 
strengthen border and aviation security, while facilitating the 
free movement of legitimate travelers. I expect that decisions 
will be taken in the next few days whereby the European 
Commission will make an adequacy finding under our data 
protection rules and the Council of Ministers of the European 
Union will adopt the international agreement on the transfer of 
PNR data to the United States' authorities. This will end a 
period of legal uncertainty for European airlines and will, I 
think, reflect our very clear determination to take data 
protection very seriously. We believe that we have struck the 
right balance after somewhat arduous negotiations with our 
counterparts in the United States. As you know, the European 
Parliament has not shared this view and litigation before the 
European Court of Justice is still a real prospect.
    We agree that the advance scrutiny of air passengers is a 
key element in border security. We have adopted common rules on 
an advanced passenger information system, known as APIS, 
requiring airlines to provide border authorities with passenger 
data prior to the arrival of aircraft. This system will enable 
national authorities to keep bona fide travelers moving 
smoothly while boosting law enforcement efforts.
    These shared objectives require constant exchanges of 
information and effective shared risk analysis. We are 
preparing legislation for the use of passenger manifest data 
for internal security purposes, creating an obligation for air 
carriers to transmit these data to law enforcement authorities. 
This will provide a sound legal basis to enhance information 
sharing with the United States for law enforcement purposes.
    We share the view that special security measures have to be 
taken when a flight seems to be under terrorist threat. Who 
could possibly think otherwise?
    Some of our member states use sky marshals already; others 
do not and lack the facilities for training them. We have, 
therefore, agreed with our American friends that other special 
security measures could be appropriate and satisfactory in 
these circumstances and we hope that the movement toward a 
resolution of the PNR issue will be considered a helpful 
measure in this respect.
    We have proposed to our own member states guidelines on sky 
marshals and other related measures, which will be discussed 
soon with our ministers. Those discussions will take account of 
the G-8 SAFTI discussions and the very valuable work being done 
by the International Civil Aviation Organization, ICAO.
    Finally, on exchanges of data on lost and stolen travel 
documents, we suggested to our American friends only some 
months ago that we agree to feed our data on lost and stolen 
passports into a data base in Interpol. And I am very pleased 
to see that this week the United States forwarded 330,000 
entries from its consular lost and stolen passport system, 
known as CLASP, to Interpol. We will follow suit shortly. We 
intend to visit Interpol in Lyon in the next few weeks and have 
invited American colleagues to join us to look at Interpol's 
operations in this area.
    These, Mr. Chairman, are just some of the areas we are 
working on closely with our American colleagues. We do not 
always agree on everything immediately, but there should be no 
doubt about our common determination and resolve. We are open 
societies, united by common democratic values. We will continue 
to promote movement of people across the Atlantic while uniting 
in our common fight against terrorism and, indeed, against 
crime of all sorts.
    I am very grateful to have had the opportunity to address 
you this afternoon, and I thank you.
    [The prepared statement of Mr. Faull follows:]

                  Prepared Statement of Jonathan Faull

                              INTRODUCTION

    Chairman Allen, Ranking Member Biden, members of the committee,
    Thank you for inviting me here today. I welcome the opportunity to 
say a few words about our very close cooperation with the U.S. 
Government.
    It is fitting that I do so in the company of Stewart Verdery, who 
has played an important role in building cooperation with us across the 
Atlantic.
    The European Union now has 25 Member States. The European 
Commission's role is to develop policy, propose legislation, enforce 
rules once adopted and represent the EU internationally.
    My job is to run the department known as the Directorate-General 
for Justice and Home Affairs. My boss, Commissioner Antonio Vitorino, 
has been in Washington this week to attend the G8 Justice and Home 
Affairs Ministerial meeting and to meet his counterparts in the U.S. 
Administration.
    The issues addressed by Mr. Verdery in his remarks are certainly at 
the top of our agenda too.
    We are building an integrated system across the whole of the EU 
with secure external borders, allowing bona fide travellers access to 
our territory, while keeping others out. We are developing laws and 
networks to deter, prevent and punish serious crime, including 
terrorism.
    As Ambassador J. Cofer Black stated before the Senate Foreign 
Relations Subcommittee on Europe little over a month ago, ``neither the 
U.S. nor Europe can fight the war against terrorism alone.'' This is a 
message we have also received from many American friends this week. It 
is one we share fully. Building on what was already a sound 
relationship, we have developed close and unprecedented cooperation 
with the U.S. in the fight against terrorism since the tragic events of 
11 September 2001. The awful attacks in Madrid on 11 March this year 
made it abundantly clear to us all that the fight against terrorism is 
global and far from over.
    In the area of border and transport security we have established a 
high level policy dialogue between the EU and the U.S. The U.S. is 
represented in this forum by the Departments of State, Homeland 
Security and Justice. The group first met on 26 April 2004. Under 
Secretary Asa Hutchinson led the U.S. delegation, while I had the 
honour to chair the meeting on the EU side. We had a very good meeting, 
discussing issues such as biometrics, sky marshals, visa policies and 
information sharing. We intend to meet at least twice a year and to 
make the group a lasting vehicle for cooperation between the EU and 
U.S. in these areas.

                               BIOMETRICS

    One of our most important common endeavours is to make travel 
safer. We want to improve the security of documents by integrating 
biometric identifiers.
    Nearly all travellers nearly all the time are going about their 
business as law-abiding citizens. Transatlantic relations, business and 
personal, are of great importance to us all. Our aim should be to make 
travel safe and prevent criminals and terrorists from abusing our open 
societies.
    By the end of this year, we intend to adopt laws and technical 
rules to introduce biometric data into EU visas and residence permits 
issued to foreigners and into our own passports in a harmonised, 
coherent and interoperable way.
    We understand the reasons for the extension of the U.S. Visit 
program to all travellers arriving in the U.S. We hope that the Visa 
Waiver program will be maintained and eventually extended to all 25 EU 
countries.

                             BORDER CONTROL

    We are busy enhancing the control and surveillance of our now 
expanded external borders. We are resolute in fighting against illegal 
immigration, trafficking of all kinds and of course international 
terrorism. But at the same time the new, enlarged EU is open for 
business and we welcome friendly visitors.
    We are setting up a ``European Agency for the Management of 
Operational Co-operation at the External Borders of the Member States 
of the European Union.'' This Agency will coordinate operational 
activities at our external borders, assisting national border guards by 
providing common training and risk analysis, as well help on 
procurement of equipment and research matters. The Agency will also 
cooperate with international organisations and foreign countries, 
including of course the United States, on matters relating to its 
tasks. The Agency will not have a law enforcement role, but is expected 
to be a key player in our border management system.

                                  PNR

    We share the U.S.'s determination to strengthen border and aviation 
security, while facilitating the free movement of legitimate 
travellers. I expect decisions to be taken in the next few days whereby 
the Commission will make an adequacy finding under our data protection 
rules and the Council of Ministers will adopt the International 
Agreement on the transfer of PNR data to the U.S. authorities. This 
will end a period of legal uncertainty for European air carriers. We 
take data protection very seriously and believe that we have struck the 
right balance after arduous negotiations with our U.S. counterparts. As 
you know, the European Parliament has not shared this view and 
litigation before the European Court is still a real prospect.
    We agree that the advance scrutiny of air passengers is a key 
element in border security. We have adopted common rules on an advanced 
passenger information system (APIS), requiring airlines to provide 
border authorities with passenger data prior to the arrival of 
aircraft. This system will enable national authorities to keep bona 
fide travellers moving smoothly, while boosting law enforcement 
efforts.
    These shared objectives require constant exchanges of information 
and effective shared risk analysis. We are preparing legislation for 
the use of passenger manifest data for internal security purposes, 
creating an obligation for air carriers to transmit these data to law 
enforcement authorities. This will provide a sound legal basis to 
enhance information sharing with the U.S. for law enforcement purposes.

                              SKY MARSHALS

    We share the view that special security measures have to be taken 
when a flight is under terrorist threat. Who could possibly think 
otherwise?
    Some of our Member States use sky marshals, others do not and lack 
the facilities for training them. We have agreed with our U.S. friends 
that other special security measures could be used. Exchange of PNR can 
be considered as one of these measures.
    The Commission has proposed guidelines for this purpose, which will 
be discussed soon with Ministers. They have taken account of 
discussions in the G8 SAFTI group. Valuable work is also being done by 
ICAO.

   EXCHANGE OF DATA ON LOST AND STOLEN TRAVEL DOCUMENTS VIA INTERPOL

    We suggested to the U.S. that we feed our data on lost and stolen 
passports into an Interpol data base.
    This week the U.S. forwarded 330,000 entries from its Consular Lost 
and Stolen Passport (CLASP) system to Interpol. We will follow suit 
shortly. We will visit Interpol in Lyon, France soon and have invited 
the U.S. to join us there.
    These are just some of the areas we are working on together. Of 
course we do not always agree on everything immediately, but there 
should be no doubt about our common determination and resolve. We are 
open societies united by common democratic values. We will continue to 
promote movement of people across the Atlantic while uniting in the 
fight against terrorism and crime of all sorts.

    Senator Allen. Thank you, Mr. Faull.
    Let me ask both of you some questions here. First, just an 
observation. It is great to have both of you here because we 
are going to have to cooperate. The final paragraph of your 
remarks about we are both open societies with democratic values 
should make this easier. It really should make it much easier 
insofar as a variety of issues, particularly in privacy.
    Mr. Verdery, I am going to put your full statement in the 
record. I know you paraphrased it, which is fine, for brevity.
    Dealing with the issue on the biometric passport deadline 
that is October 26 of this year, Mr. Faull mentioned extending 
it. Just for the oral record, the administration is in favor of 
extending this deadline for another 2 years. Is that correct?
    Mr. Verdery. That is correct and Secretary Powell and 
Secretary Ridge testified in the House Judiciary Committee 
about this issue about 3 weeks ago. If you like, I can go into 
the reasons why we are supporting this.
    Senator Allen. Supporting the biometrics or the extension?
    Mr. Verdery. The legislative extension.
    Senator Allen. Yes. I think it would be good to elaborate 
on it.
    Mr. Verdery. Sure. It basically falls into two camps. On 
the first side, the countries that would be affected, the visa 
waiver countries, almost all of them, if not all of them, are 
going to be unable to meet the October 2004 deadline for 
reasons that are outside of their control. It is not a lack of 
will. It is a technical challenge. The international standards 
that need to be set to facilitate the construction of and 
program development for biometric passports is not sufficiently 
in place to allow them to build the systems and issue the 
passports that would meet the deadline. It is a question of a 
technical problem. So we do think, though, that the 2-year 
delay would allow those standards to be put in place that would 
allow the countries to meet the deadline. Depending on their 
progress, we think they would fall somewhere in the mid-2005 to 
mid-2006 range and by extending 2 years that we would be fine.
    From the security side, it is very important, when we have 
to deploy the readers at ports of entry to read the biometric 
passports, that we have a single reader that we can deploy that 
can handle all 27. We do not want a situation where the 
standard is so loose that Germany has one standard and that UK 
has one and Australia has another and we have a series of boxes 
sitting on these ports of entry that then have to be wired up 
together. It would be a wiring and systems nightmare. The 2-
year delay gives us the ability to make sure it is complete and 
effective.
    Now, we understand that we need to enhance the security of 
the visa waiver travelers and therefore we have announced that 
we will begin enrolling the visa waiver travelers in US-VISIT 
at airports and seaports in September and at land ports at the 
end of this year. So we are going to, in some ways, fill the 
gap by using the enrollment, and I can get into that a little 
bit more if you would like.
    But yes, we are strongly in favor of the extension and hope 
that the Congress will move expeditiously.
    Senator Allen. Well, I am a sponsor of that legislation and 
we expect it to pass. I know that Mr. Faull brought that up in 
his testimony. It is good to hear both sides recognizing that 
action needs to be taken, also recognizing the practicality. It 
is good to have deadlines because otherwise, without a deadline 
or without a goal, things will get sloughed off and nothing 
will happen or will move slowly.
    But one also has to be practical, and it is good to hear 
both sides understanding, recognizing that 2 years will be 
sufficient. I know Mr. Verdery says that 2 years is more than 
adequate to get this done. Mr. Faull, do you believe that the 
European Union countries will be able to all comply by then?
    Mr. Faull. Yes, I do, sir. I think that the legislation 
that we are putting in place will ensure that for all of our 25 
countries, which is a considerable proportion of the visa 
waiver group, that our passports will meet the necessary 
requirements in time, yes.
    Senator Allen. Thank you, Mr. Faull.
    Mr. Verdery, could you expand on what we will be doing for 
enhanced security for those who are on the visa waiver program, 
which is very important, particularly important for tourism, 
but also for businesses. Much transatlantic business is 
concerned. I consider the visa waiver program absolutely 
essential. We cannot have folks queuing up around embassies and 
consulates. They will simply not come over. There is enough of 
an aggravation taking commercial aviation as it is without that 
agony. So in the interim period before the biometrics are 
available, how do you all envision enhancing the security while 
keeping the visa waiver program?
    Mr. Verdery. Well, as you mentioned, the program is 
absolutely essential for our transatlantic commerce. The amount 
of traffic is astounding--people who are used to visa-free 
travel, and so we have to continue that.
    In addition, I did not mention in my prior remarks, the 
State Department does not have the capability to issue the 
visas that would be required. Were they begin to have to issue 
visas, it would quickly create backlogs of extraordinary 
proportions with our most popular trading partners.
    So in terms of the security enhancements we are going to 
do, as I mentioned, the US-VISIT enrollment will begin 
approximately September 30 for people entering at airports and 
seaports, which is the overwhelming majority of visa waiver 
travelers. We will deploy that also at land borders at the end 
of this year at the biggest 50 land ports of entry and smaller 
ones the following year. So that is the main enhancement, that 
we will have the biographic and biometric check of people when 
they arrive at the port of entry to find out if a visa waiver 
traveler is a match against a terrorist or criminal data base. 
The biometric hit for US-VISIT we can get into perhaps a little 
later.
    But the amounts of hits we have had so far on the visa 
travelers is quite remarkable, over 300 people who were caught 
solely by the biometric. That is again in addition to the 
people we catch due to the biographic information, but the 
biometric hits are people whose papers are in order or appear 
to be in order and have fake ones, and we find them solely 
based on the finger scan. So that is the first step, the 
expansion of the enrollment for US-VISIT.
    The second part is the advance passenger information. The 
ability to have the critical information, both the PNR, which 
is essentially what is in your travel file and your APIS 
information, which is on your passport, ahead of the time the 
plane takes off is critical for deciding if there is a person 
who should not be boarded. That is essentially in lieu of the 
visa check.
    So we are doing these checks at the National Targeting 
Center of Customs and Border Protection on travelers and that 
is an enhancement that is being developed as we speak. We are 
vetting all flights of interest now and all others are vetted 
as the plane is in the air. We are working on enhancing that 
both with PNR and APIS information throughout this enhanced 
threat period this year.
    Senator Allen. You mentioned 300 that were intercepted or 
caught. Could you give some examples of those with the current 
system and additional scrutiny and screening, what type of 
individuals, what kind of criminals you all have been able to 
intercept?
    Mr. Verdery. All kinds. There have been convicted 
murderers, rapists, money launderers, drug traffickers, many 
people who have been removed previously from the country and 
are inadmissible. There have been some entertaining stories of 
people who had come back and forth to the country literally 
dozens of times with phony documents and they were caught only 
due to the biometric. So they had a false name, a false 
passport, false documents, but the fingerprint gave them away 
the first time they tried to come back in after January 5 when 
US-VISIT came into play. So we had people who had come under 10 
different names, who had come back and forth 60 times, having 
escaped from Federal prison. So basically you have your laundry 
list of criminals and immigration violators. In fact, it 
happens so often now, it is almost not even remarkable. Every 
single day there are people who are caught due to the 
biometric.
    Senator Allen. Well, it doesn't hurt as a matter of 
deterrence for criminals or those who may wish us ill or for 
the peace of mind for the American people and our European 
friends to know that even though it is not implemented yet 
presently, these are the improvements that are being made.
    One thing that arises with the records and the names of 
travelers is the question of privacy. We care about it as 
Americans. The people in European countries care as well.
    Mr. Faull, with the traditions--and I can tell from your 
accent you may be from Britain. There are some relations we had 
years ago before we seceded from you all.
    At any rate, regardless of whether you are under English 
common law or the Code Napoleon, the issue of privacy does 
matter. How would you suggest we handle this issue, the concern 
of privacy? It is one thing to check names off and be able to 
do that criminal records check or that background check very 
quickly, but do you have any suggestions as to what we can do, 
you can do, us together, as well as for other countries? This 
does not apply just to the United States and European Union. It 
applies to people coming from Japan or Korea or Taiwan or India 
and Pakistan. Now, granted, not every one of those is on the 
visa waiver program. However, checking those passenger lists 
and making sure that it is not being misused in any way 
whatsoever, invading privacy, what suggestions would you have 
to protect that concern of privacy, which I think is a very 
legitimate concern?
    Mr. Faull. It is indeed a legitimate concern and one which 
I have no doubt we share. We have different rules. As you said, 
there are different legal systems on either side of the 
Atlantic. We have not only our different national legal 
traditions among our member states of the European Union, but 
we have now developed common rules together as well. They are 
different from yours, although I am quite sure that we are all 
pursuing the same goals and reflecting the same fundamental 
democratic values.
    There is a balance to be struck and the way we strike it 
relates to the precise data which are provided to the 
authorities, to which authorities they are provided, for how 
long they are kept and for what purposes those authorities may 
use them. Now, I believe on both sides of the Atlantic, air 
travelers understand very well that there is an important 
security policy purpose behind providing information to the 
authorities about the identity of those about to get on a plane 
before the plane is taking off. That I think is fully 
understood.
    In our negotiations, which Stewart was leading on the 
American side, on PNR, the debate was very largely about the 
issues I just referred to, what information, for what purpose, 
for what authority, for how long should the data be kept. I 
think we have arrived at a very sensible and commendable 
result. I hope, as I said, in the next few days that on the 
European side the European Commission and the Council of 
Ministers will take the necessary steps to authorize the 
conclusion of the agreement we reached.
    But in each and every issue which arises in what you call 
the Homeland Security field and Justice and Home Affairs for 
us, there is a detailed analysis to be carried out of the 
privacy data protection concerns raised. It is not an issue, it 
seems to me, which can be resolved by an application of one 
all-encompassing general principle except at the most abstract 
level of values. It is one which requires careful attention and 
weighing of the balance between the various policy purposes 
being pursued in each and every case.
    Mr. Verdery. Chairman Allen, if I could just take a minute 
on that because I think it is a very appropriate question. We 
understand that the acquisition of this personal data does 
raise privacy concerns and we both inherited and have put in 
place strong privacy protections. Customs and Border 
Protection, the former Customs and INS being merged together, 
has a very robust privacy program, disciplinary procedures in 
place for any type of misuse of data. The US-VISIT program 
similarly has a privacy program that has been widely praised 
within the privacy community. And in the Department at large, 
we have the first statutory privacy officer, Newla O'Connor 
Kelly, and her team is implementing privacy policies throughout 
the Department, is very involved in our decisionmaking and very 
important and is a close advisor to Secretary Ridge.
    As was mentioned, the PNR deal itself with the Europeans is 
very elaborate in minutiae on redress mechanisms for passengers 
on how European data protection authorities have ability to be 
involved in this process, a review period for the arrangement.
    So it was these types of privacy enhancements which I think 
led to the soon to be successful conclusion of this 
negotiation. But it is a very appropriate question and it is 
something we are keeping a close eye on.
    Senator Allen. I would hope that those of us in the United 
States, as well as our counterparts in the European Union, as 
this moves forward--and it looks like a positive movement in 
this regard, but we always can improve. And if we find that 
there are any abuses or any concerns on it, if there are ways, 
whether--our courts or our prosecutors can handle data, make 
sure the data is being handled properly, but if there are other 
ways of doing it that is less intrusive but, of course, still 
meeting the same level of security, I am sure you, on behalf of 
the people of both continents, will want to get that done.
    Now, let me switch to something that has just come up and 
it is this 52-page report of the Office of the Inspector 
General, Mr. Verdery. One of the problems that was outlined in 
this report from the Inspector General--and it may be, Mr. 
Faull, that you will want to maybe make a comment. I am first 
going to go to Mr. Verdery--is that some European countries 
have what you might call lenient or easily attained or acquired 
citizenship or naturalization laws that would allow a third 
country national to come in and in some countries, in as little 
as 3 years, enable them to become a citizen of that country. 
That is not the United States, but there are some European 
nations where that is allowed. So somebody wishing to do harm, 
whether to a European country or to the United States, could 
wash their background in only 3 years.
    And you would say, well, gosh, somebody is going to spend 3 
years. That seems like a long time. When you look at some of 
the methods of operation of these terrorists, there is this 
very long-term planning, and 3 years in a country, 4 years in a 
country, that is just part of their planning for some of these 
terrorist cells.
    So what is the Department of Homeland Security and the EU's 
plan to address this problem? If you would like, in the midst 
of addressing that, if you wish to address the Inspector 
General's report, it would be appreciated.
    Mr. Verdery. Well, if I could take the first crack at this.
    We received the IG's report earlier this week, as you did. 
In many ways the conclusions reached therein have been overcome 
by events. They were reached months ago and events since that 
time have overtaken the conclusions in them. Not all the 
recommendations, but certain important ones. For example, the 
IG recommends that we plan to enroll visa waiver travelers in 
US-VISIT. Of course, we have announced that that is going to 
happen about a month ago, and the Secretary has testified to 
that effect.
    Also, importantly, the report indicates that we have no 
plan in place to handle the required country reviews which are 
statutorily required by Congress to review each of the visa 
waiver countries every 2 years, and we do indeed have a plan in 
place to do those 22 remaining country reviews. In fact, our 
first team of inspectors are going on their onsite visits 
starting next week. So the plan is in place. It is being 
executed and we will have the reviews completed by the deadline 
in the fall, again as Secretary Ridge has publicly testified 
to.
    These reviews are not perfunctory. When our predecessor 
organizations did reviews prior to our Department being 
developed, three of the six countries that were reviewed did 
not pass their review essentially. Belgium was put on probation 
and two additional countries lost their status in visa waiver. 
Now, I do not want to make any predictions on what the reviews 
are going to come up with for the remaining countries, but they 
are serious reviews and we are going to treat them that way 
throughout this year.
    The questionnaire to these countries has already gone out 
to solicit information to decide whether or not they are 
meeting the criteria. They are set for participation in the 
visa waiver program which relate to things like reporting of 
lost and stolen passports, overstay rates, whether or not 
terrorism is present in the country, and the like.
    More specifically about your question of somebody washing 
their identity by moving into a visa waiver country, again once 
you arrive at a port of entry, you have the same check, once 
US-VISIT is fully enrolled, whether or not you are a visa 
waiver traveler or not. So there is no difference whether or 
not you moved into a visa waiver country or whether you are 
coming from a non-visa waiver country. There is no difference 
in the port of entry procedure.
    Currently, until US-VISIT is employed, we are doing the 
biographical check. So that is a difference right now, but that 
is in the process of being ameliorated, as I mentioned.
    Second, our watch lists do not differentiate based on 
nationality. We do not have some kind of lesser standard for 
showing up on a terrorist watch list because you happen to come 
from a visa waiver country. They are based on name or 
fingerprint or other identifiers, not nationality.
    The last thing I mentioned, which is relevant here again, 
is the PNR and APIS information. That is the advance passenger 
scrub that we need to have of visa waiver travelers before they 
come to this country that will help us find people, again, 
before they get to the country. Once they get here, we are 
going to have the same check. It is that advance check that 
really helps.
    So, again, we are going to respond to the IG's report. We 
welcome the chance to do that, but again some of the key 
conclusions really have been overcome by events.
    Senator Allen. Thank you.
    Well, Mr. Faull, would you like to comment? I am not going 
to ask you to comment on the Inspector General's report that 
came 48 hours ago. I will get a followup conclusion, but I want 
to hear your views on the security issue of somebody coming 
into a European country that has a very lenient naturalization 
policy and why we should or should not be concerned about that.
    Mr. Faull. Well, thank you very much. I have to say that I 
have not had an opportunity to read the Inspector General's 
report, so I could not possibly comment on it.
    I would also say just by way of information that issues of 
citizenship and acquisition of citizenship are a matter within 
the jurisdiction of each of our member states solely and there 
is no coordinated European policy or law on that matter.
    I would be very happy to have a look at a copy of the 
Inspector General's report and to consider it in any way I can 
and pass it on to people who may have something to offer by way 
of explanation, but I cannot say much more than that at this 
point.
    Senator Allen. Let me ask you all this question. I think, 
Mr. Verdery, you brought this up, and you may have answered. I 
just want to make it clear or clearly understand your answer to 
this concern.
    You mentioned Belgium. Belgium is one of the countries 
where you just have to live there for 3 years and become a 
citizen. In this country, by the way, Mr. Faull, states all 
have different laws as far as residency. Some you can become a 
resident in a few days. Some take months and months. So the 
fact that there are different views or prerogatives of people 
in states is perfectly understandable here.
    But were you saying as a practical matter--I am 
paraphrasing, Mr. Verdery--that whether one is in a visa waiver 
country or not, that the scrutiny of that person coming into 
this country would be the same because of the biometrics and 
because of the records and the cross-checking of criminal 
records, terrorist lists, and so forth? If one comes from a 
visa waiver country--say they are one of our European states, 
or they come from one who is not a visa waiver country, the 
scrutiny is exactly the same?
    Mr. Verdery. It will be exactly the same at a port of entry 
on September 30 when we begin applying US-VISIT to that 
expanded visa waiver traveler. Currently visa waiver travelers 
are checked biographically but not biometrically. So if we have 
indicia in our terrorist data bases or criminal data bases by 
name or a date of birth, there is no difference. But if we only 
had a fingerprint and no biographic information, there would be 
a difference in this interim period between now and September 
30 at airports. That is the difference at a port of entry.
    Senator Allen. Right now we have what? I want to get this 
clear. Right now we are having biographical?
    Mr. Verdery. Everybody is checked biographically and has 
been for quite a while.
    Senator Allen. Which is their place of birth, where they 
have lived throughout their life?
    Mr. Verdery. Right. It is the machine-readable part of 
their passport, so name----
    Senator Allen. Place of birth and present residence. That 
is it.
    Mr. Verdery. The biographic information, yes.
    Senator Allen. That biographic information does not 
necessarily say, all right, they are born in one country, go to 
another country for a period of years, then to another for a 
period of years, and then become a resident of another. If you 
have place of birth and present residence, does it include 
where they have been since the day they were born?
    Mr. Verdery. It will not be in their travel documents 
itself, of course. It is limited data. But again, if we know of 
a person based on a biographic piece of information, that would 
be resident in our screening systems.
    Senator Allen. Biographic. That is what I am trying to 
figure out. What is biographic other than where they presently 
reside and where they were born?
    Mr. Verdery. Name and date of birth are principally the 
indicia. Essentially if you show up on a terrorist watch list, 
it is going to be a name-based system like a phone book, but 
there might be backup information. We might very well have 
information about where they have been, their associates, their 
travel record, their criminal history, all kinds of things. But 
it is based on a name or a date of birth. The difference is the 
person that we do not have anything on biographically but 
happen to have just the fingerprints.
    Senator Allen. Well, matching them together will certainly 
help.
    Mr. Verdery. Yes.
    Senator Allen. But just saying, yes, this person is who he 
says he is without knowing what the danger is is one thing.
    Are you presently able to cross-check these persons--I just 
want to make sure we are getting your testimony accurately--
cross-checking for any terrorist list and any criminal lists?
    Mr. Verdery. Yes. Customs and Border Protection at a port 
of entry has access to all of our terrorist watch lists and all 
the criminal data bases with serious crimes, excerpts of IAFIS, 
the FBI's data base, our immigration data bases, a whole slew 
of them. That has been in place for years. US-VISIT is the 
biometric expansion of that.
    Senator Allen. To prove that they are who they say they are 
because otherwise you could have somebody with a false name, 
and of course none of his records or danger will ever be known.
    Mr. Verdery. Exactly. Again, the principal difference is if 
you have to get a visa, you have to go have a short interview 
at a consular office overseas in Pakistan or any of the 
countries that is not a visa waiver, and you are checked at 
that time. If it is visa waiver, you do not have that. We have 
made a decision that certain countries, due to the bulk of 
travel, the importance of travel, their low risk, do not 
require interviews, and that is where we collect the biometrics 
at the time of the interview. So there has been a decision made 
for certain countries not to do that.
    We are enhancing the security, though, of those travelers 
by the use of advance passenger information before and while 
they are on the plane and then by the US-VISIT expansion when 
they show up at the port of entry.
    Senator Allen. Yes, Mr. Faull.
    Mr. Faull. Perhaps if I could just add, by way of 
information, that this is reciprocal of course. Our countries 
do not require visas from U.S. travelers on the basis that you 
do not require visas from our travelers.
    Senator Allen. That is important to note.
    The bottom line, though, is whether one is coming from a 
visa waiver country or not to the United States, the key 
information that we would want to know, insofar as an 
individual's background or propensity to commit crimes or 
terrorism, by this fall--you said September 30--that 
information will be there. So either way, that visitor will 
have the same sort of scrutiny and the same information 
available to our authorities to make a judgment as to whether 
or not that person ought to board that airplane, for example.
    Mr. Verdery. Essentially. I am trying to make sure the 
record is accurate. Again, I do not want to leave the 
impression that visa waiver travelers are not checked now 
because they are checked extensively at the time of arrival 
through all their machine-readable travel documents and the 
like and, in certain cases, by their advance passenger 
information and APIS information before or while the plane is 
in the air. The VISIT expands that to somebody who essentially 
is an imposter, somebody who is not who their documents say 
they are or had somehow otherwise fooled the system. That is 
what it is designed to find, is the bogus travel document or 
the stolen document.
    Senator Allen. All right. I am being a lawyer on this. Just 
to get the bottom line summary for the security of the people 
of this country. I understand on the biometrics. And 
understand, I am for the visa waiver program, as you well know. 
The concern is if it is going to be easy--and just looking at 
the way some of these terrorist cells hibernate for a while and 
embed in certain areas and become citizens and staying here for 
a long time sometimes as well, the point, though, is whether 
one comes from Saudi Arabia or Pakistan or India or any 
countries that are not visa waiver countries or they come from 
a European visa waiver country or, for that matter, Japan, the 
information and the background information on these individuals 
would be the same. Granted, they do not have to go to a 
consulate and go through some cross examination, but you will 
still have the same amount of information to make a judgment as 
to whether or not this person should come into this country or 
not. Is that correct?
    Mr. Verdery. At the port of entry, yes.
    Senator Allen. All right. So the whole thing you are 
talking about, whether you are doing it before they get on the 
airplane or in flight or whatever.
    Mr. Verdery. There are essentially three different 
screening points.
    Senator Allen. Right, understood.
    Mr. Verdery. There is the visa process. There is the 
boarding process for an airplane, and there is the port of 
entry process. The visa waiver countries do not have the first 
part. The second part is the same for everybody. In fact, it is 
probably more intense for most of the European travelers just 
because we have better connectivity to their airlines. And at 
the port of entry, as of September, it will be identical. There 
is that difference for those few months on the biometric 
application of US-VISIT.
    Senator Allen. Got it. Thank you. Thank you, Mr. Verdery.
    Mr. Faull, unless you have something more you would like to 
add, I want to thank both of you all for your leadership, for 
your testimony here, but most importantly for your very 
cooperative will to get this done. Our countries, whether in 
Europe or here in the United States, are very fortunate to have 
both of you with your principled expert leadership. Thank you 
both so much.
    Mr. Verdery. Thank you very much.
    Mr. Faull. Thank you very much.
    Senator Allen. I would like to have our second panel come 
forward. Thank you, gentlemen. I would now like to introduce 
our second panel here before we hear their testimony.
    First, Mr. Bill Connors has had more than 17 years of 
experience in the travel and tourism industry. He currently 
serves as executive director and chief operating officer for 
the National Business Travel Association. Mr. Connors joined 
the staff of the National Business Travel Association in 2003, 
having previously served as senior vice president of Meetings, 
Education, and Member Services at the American Society of 
Travel Agents [ASTA]. Prior to joining ASTA, he was vice 
president of Marketing and Relationship Management for the 
Travel Institute and now sits on its board of trustees.
    Mr. Connors got a start in the travel business as a 
steamship captain for the Lake George & New Orleans Steamboat 
Company. He still holds his masters license as a cruise ship 
captain.
    In addition to his extensive association and travel agency 
experience, Mr. Connors has held several leadership positions 
in academics and serves on numerous industry boards and 
councils. I am happy to say that Captain Connors now lives in 
the Commonwealth of Virginia.
    Our second panelist will be Chris Koch who, prior to 
joining the World Shipping Council, served as senior vice 
president and general counsel for Sea-Land Service Incorporated 
where he was responsible for legal, regulatory, and government 
affairs. While at Sea-Land, Chris worked with the maritime 
industry in the development, enactment, and implementation of 
numerous maritime policy initiatives, as well as assisting Sea-
Land develop and implement its business plan and commercial 
strategy.
    Prior to Chris' involvement with Sea-Land and CSX, he 
served as Chairman of the Federal Maritime Commission from 1990 
to 1993 as an appointee of President George H.W. Bush. He came 
to the Federal Maritime Commission after a decade on Capitol 
Hill where he served as counsel to the Senate Committee on 
Commerce, Science, and Transportation, and Chief of Staff to 
Senator Slade Gorton and Senator John McCain.
    Gentlemen, welcome to you both, and it is great to have 
you. We would first like to hear from you, Captain Connors, if 
I can call you Captain.

STATEMENT OF BILL CONNORS, EXECUTIVE DIRECTOR AND COO, NATIONAL 
                  BUSINESS TRAVEL ASSOCIATION

    Mr. Connors. Thank you, Mr. Chairman. I am a proud resident 
of the Commonwealth of Virginia.
    Chairman Allen, I am honored to be here today to testify 
before this subcommittee on behalf of the National Business 
Travel Association. You have our submitted testimony there and 
I will refrain from reading it to you, but I would like to make 
some brief remarks and I welcome your comments or questions.
    NBTA is the world's largest association of corporate travel 
managers and a majority of our Nation's Fortune 1000 companies 
are represented within our membership. Our members purchase 
some $150 billion in travel services annually. The fact that 
you have asked NBTA to be here today shows that this 
subcommittee values the input from our corporate travel 
managers and millions of business travelers that they 
represent.
    NBTA is also a charter member of the Paragon Alliance of 
Business Travel Associations, which includes sister 
organizations in the UK, Germany, Finland, and other nations 
around the globe.
    NBTA would like to address three areas of concern 
pertaining to today's discussion.
    First, NBTA supports the CAPPS II initiative but wants to 
be sure that certain concerns are addressed. Specifically, we 
would want to make sure that the eight operational and privacy 
issues identified by the U.S. Congress are addressed. These 
eight are detailed in the written testimony that we have 
submitted, but let me emphasize three areas of particular 
concern to our members.
    The determination and verification of the accuracy of the 
data base to be used by the CAPPS II system is an important 
priority.
    The identification and addressing all privacy concerns is 
an important priority.
    The development of a process whereby passengers impacted by 
CAPPS II can appeal those decisions and correct erroneous data 
is also an important priority.
    Furthermore, NBTA would like to see a study addressing the 
possible cost implications to the private sector induced by 
CAPPS II.
    Our second issue. NBTA joins with others in requesting the 
October 26, 2004 biometric passport deadline for visa waiver 
countries be extended immediately. We have outlined the 
negative economic and political implications that an October 
2004 deadline would have on this Nation, and we urge Congress 
to take action to extend this deadline as soon as possible.
    Additionally, NBTA has been supportive of the DHS and the 
TSA in their remarkable efforts in making US-VISIT a 
nonintrusive and rapid screening procedure for visitors to the 
United States. We want to be sure, however, that as the summer 
travel season approaches, our borders are fully staffed and 
wait times do not increase. Anything that slows the healthy 
exchange of commerce between the United States and our trading 
partners may jeopardize our current economic recovery.
    Finally, we are delighted to see that this committee 
understands the importance of the travel industry and the role 
it plays for the United States, for Europe and for the world 
economies. Here in the United States, one in seven employees 
works in our industry. We are the third largest taxpayer sector 
in America, and the old saying ``what's good for GM is good for 
the country'' I think has been replaced in this service economy 
with ``what's good for the travel industry is good for this 
country.''
    And our industry now overshadows in size and scope many of 
the traditional key economic sectors like agriculture and 
manufacturing and others. Yet, it has no official home in the 
Federal Government. NBTA and numerous other travel industry 
organizations would love to see a high level, permanent 
advisory type board for the travel industry to be able to offer 
input on issues like the ones that you are discussing today, as 
well as hundreds of other important economic and political 
questions that affect our industry. We would especially like to 
see a place for the business travel community within such a 
body, as business travel represents one of the largest players 
in the travel industry.
    In conclusion, we again thank you, Senator Allen, and the 
subcommittee for this opportunity. We are honored to be here 
with our friends from Europe that preceded us and with the DHS, 
and to talk about how to keep the global economic recovery 
continuing while still making the traveling public safe and 
secure.
    [The prepared statement of Mr. Connors follows:]

                   Prepared Statement of Bill Connors

    Mr. Chairman and other distinguished Members; I am honored to 
testify before the committee today. Thank you for allowing me to 
present the views and concerns of the customer at today's very 
important hearing. My name is Bill Connors, and I am the Executive 
Director & COO of the National Business Travel Association (NBTA). NBTA 
represents over 1,900 corporate travel managers for the Fortune 1000 
companies, and over 8 million domestic and international business 
travelers.

                          CURRENT ENVIRONMENT

    Prior to September 11th, 2001, international business travelers 
were becoming an integral part of our economy. Even today, 
multinational corporations like Microsoft, General Motors, IBM and AT&T 
provide consistent services and support to the United States from 
offices across the globe. While the national security ``hassle factor'' 
seems to be decreasing and the U.S. economy seems headed for a rebound, 
there are still remnants of the fallout of September 11th that are 
threatening the resumption of international travel and the restoration 
of a solid economy.
    NBTA has strongly supported the various efforts of the government 
to enhance aviation and transportation security, and it will continue 
to do so. Whether it has been the federalization of airport screeners, 
the Transportation Security Administration's efforts to move towards 
100% baggage and cargo screening, or the Department of Homeland 
Security's efforts as lead agency for protecting our cities, borders 
and skies, NBTA has fully supported the government's strategies in both 
domestic regulation and in international agreements.
    Enhancing international transportation security, while maintaining 
the efficient flow of commerce, is a very large, complex and multi-
faceted task, and this Committee's oversight of that effort is very 
appropriate. In my remarks this morning, I would like to address three 
issues that will have a huge impact on the efficient flow of commerce: 
CAPPS II; new Visa and Passport Rules; and greater private and public 
cooperation in the area of travel and tourism.

                 PASSENGER DATA TRANSFERS AND CAPPS II

    NBTA is very concerned about the recent international data transfer 
agreement between the United States and Europe and the implementation 
of the Computer Assisted Passenger Prescreening System (CAPPS II). 
Under its current form, CAPPS II clearly could deter the gains that we 
have experienced over the last eight months. While we recognize the 
need to fortify our international borders, no one would wish to give up 
all the benefits--openness and efficiency--of our modern international 
travel system. In fact, the prosperity that the market economies of the 
world enjoyed prior to September 11th was dependent on open and 
efficient travel facilitation systems.
    NBTA is very concerned that the recent changes to enhance the 
security of our passenger prescreening system could damage open and 
efficient travel facilitation and slow our economic recovery. NBTA is 
presently partnered with the business travel associations of 
Australasia, Brazil, Canada, Europe, Finland, Germany, and the United 
Kingdom. NBTA observes with concern the recent developments in travel 
regulations. We welcome all sincere efforts to establish better 
security measures but also see the need to implement policies, programs 
and practices which are in accordance with protection of civil 
liberties and do not burden business travelers and their companies with 
unnecessary costs. It would be totally intolerable if new trade 
obstacles were introduced camouflaged as travel security measures.
    In order to continue the process of economic recovery, NBTA urges 
for satisfactory solutions to the major questions concerning CAPPS II. 
We recommend that:

1. The U.S. Department of Homeland Security address the eight 
        operational and privacy issues identified by the U.S. Congress
          (a) Determine and verify the accuracy of the database to be 
        used by CAPPS II

          (b) Stress-test and demonstrate the accuracy and 
        effectiveness of all search tools to be used by CAPS II

          (c) Develop sufficient operational safeguards to reduce the 
        opportunities for abuse

          (d) Establish substantial security measures to protect CAPPS 
        II from unauthorized access by hackers and other injuries

          (e) Adopt policies to establish effective oversight of the 
        use and operation of the system

          (f) Identify and address all privacy concerns, and

          (g) Develop and document a process under which passengers 
        impacted by CAPPS II can appeal decisions and correct erroneous 
        data.

    NBTA is also recommending that a study is commissioned to look into 
the costs to the private sector induced by CAPPS II. NBTA understands 
that ultimately CAPPS II will allow the U.S. Government to focus more 
on the real threats and less on the millions of frequent travelers who 
are going about the nation's business. However, NBTA believes that 
there is a need for a clear and stable regulatory framework to 
guarantee free movement of personal and corporate data. More 
importantly, this framework must be designed so that the private sector 
is not required to assume additional administrative and security costs.
                        visa and passport issues
    NBTA advocates that Congress extends the October 26, 2004 biometric 
passport deadline for Visa Waiver Program (VWP) countries by at least 
one year and ensure that the US-VISIT program is properly funded and 
staffed.
    According to new policies of the State (DOS) and Homeland Security 
(DHS) departments, all citizens of countries participating in the Visa 
Waiver Program (VWP) who wish to enter the country visa-free must 
present a machine-readable passport beginning October 1, 2004. 
Travelers from these countries who do not hold such passports must 
obtain a U.S. non-immigrant visa, and the process involves undergoing a 
visa interview. In addition to the new passport format requirements, 
the State Department and DHS are requiring Visa Waiver countries to 
utilize the new US-VISIT immigration tracking program.
    According to the Department of Commerce, twenty-eight percent of 
all international visitors come to the United States for business. The 
same survey shows that international business visitors spend an average 
of over $1,700 per person on each visit. However, due to the nature of 
the business world, business travelers finalize their plans for 
international travel closer to the departure date than leisure 
travelers. In 2002, on average, international business travelers coming 
to the United States made their airline reservations less than 20 days 
before their departure date. Clearly, the implementation of a complex 
visa process would cause the delay or cancellation of thousands of 
international business trips to the Untied States each year, costing 
American businesses across the country hundreds of millions of dollars.
    The United States must continue to provide a welcoming environment 
for our international visitors. While the early reports from the US-
VISIT program show no significant delays, the upcoming summer travel 
season and the incorporation of an additional 13 million annual 
visitors from VWP countries into US-VISIT will provide the first real 
stress to the system. A properly funded and staffed US-VISIT program 
will increase the chances a positive experience for our foreign 
visitors. It will also allow the State Department to take a more 
proactive stance in educating the citizens of VWP countries--our most 
frequent visitors and best trading partners--of what they can expect 
when they visit the United States.

                             ADVISORY BOARD

    Although travel and tourism is one of very few industries that 
creates a multi-billion dollar trade surplus for our country, the 
United States continues to lose market share making us the third most 
visited destination in the world behind France and Spain. NBTA and its 
members would like to work in partnership with the Bush Administration 
and members of Congress to help revitalize the travel and tourism 
industry and to send an important message to the world that we want 
them to come and visit. In the past, NBTA has supported mediums that 
would seek to provide guidance to the Federal Government on matters 
involving national tourism development.
    NBTA believes that it is crucial for Congress and the 
Administration to create formal external advisory groups that would 
provide expert advice and recommendations to the DHS, State Department, 
Department of Commerce and other agencies that stroke travel and 
tourism issues. These groups would draw upon their expertise in 
creating, implementing and evaluating performance measurement standards 
and will make recommendations regarding the types of measures and 
benchmarking systems that agencies can employ most effectively to track 
travel and transportation programs performance.
    Specifically, NBTA believes there needs to be a Presidential 
Advisory Council on Travel and Tourism, which would call upon the 
expertise of the corporate and leisure travel industries in the areas 
of transportation security, destination marketing and travel 
facilitation. Only through a public and private partnership will we be 
able to alleviate the barriers of international commerce and trade and 
restore the United States as the gateway for international travel.

                               CONCLUSION

    While travel continues its rebound from the post-September 11 
fallout, additional barriers to travel, and especially business travel 
and international commerce, would only serve to slow the current 
recovery. International business travel helps facilitate trade of goods 
and services from all over the United States to every corner of the 
globe. We must ensure that the lanes of business travel with our most 
important trading partners and allies remain free and clear. Therefore, 
we urge Congress to carefully review CAPPS II; extend the October 26, 
2004 biometric passport deadline for VWP countries; continue to monitor 
the US-VISIT program; and create an advisory board for travel and 
tourism issues.
    From 2001 to 2002, international travelers to the United States 
dropped 44.9 million to 41.9 million. International visitor spending in 
the United States over that time decreased from $71.9 billion to $66.5 
billion. And our travel trade surplus of $26 billion in 1996 plummeted 
to $5.5 billion in 2002. We must make sure that government-imposed 
homeland security changes do not result in direct costs to the U.S. 
economy.
    NBTA understands that ultimately the Federal Government and the 
private sector must work together to strengthen security while ensuring 
that travel is safe, efficient and cost-effective. I, again, thank the 
committee for the opportunity to testify on this vital subject and I 
look forward to your comments and questions.

    Senator Allen. Thank you, Captain Connors. I may have some 
questions for you, but now I would like to hear from Mr. Koch.

  STATEMENT OF CHRISTOPHER L. KOCH, PRESIDENT AND CEO, WORLD 
                        SHIPPING COUNCIL

    Mr. Koch. Thank you, Mr. Chairman. Not to be outdone by the 
Captain, I would like to have the record reflect I too am from 
the great State of Virginia.
    Senator Allen. Well, I figured you must be because of Sea-
Land and you had that wonderful facility down in Portsmouth and 
then they sold it to Maersk, a wonderful company that is 
expanding that port.
    Mr. Koch. And Maersk has been able to invest quite a bit 
more money than we were able to.
    Senator Allen. I know, but it was a good partnership and I 
consider CSX and Sea-Land to have great Virginia bloodlines.
    Mr. Koch. They do indeed.
    Thank you, Mr. Chairman, for inviting us here today. The 
World Shipping Council's members are those shipping lines that 
run regularly scheduled service between the U.S. and foreign 
countries with liner service, most of that being containerized 
cargo.
    Today the value of the waterborne commerce of the United 
States is over $800 billion per year. Now, two-thirds of the 
value of that commerce is carried in containers, or close to 
that two-thirds number. That approximates into a little over 
$1.3 billion of goods each day going through U.S. ports.
    Since 9/11, the industry's highest priority has been to 
work with the U.S. Government and other governments to deal 
with the security challenge because this system clearly was not 
built with that in mind. It was built for the efficient and 
prompt transportation of cargo throughout the world.
    In terms of dealing with the security initiatives, there 
are really several different factors. One is to deal with ship 
security. One, as you well know because of Norfolk and 
Portsmouth, is to deal with port security, the security of the 
facilities themselves. Another aspect of it is people security, 
which has been touched on a little bit by the prior witnesses. 
Finally, there is the fourth area of cargo security. That is 
one of the more daunting and difficult challenges we face and 
is the issue that you have asked me to testify today on, the 
Container Security Initiative itself.
    In the last several weeks, we have seen a welcomed step 
forward in the Container Security Initiative with the European 
Union and the Department of Homeland Security formalizing a CSI 
agreement. That is a welcomed step forward. When CSI was first 
rolled out with several individual European nations, in fact 
the European Commission brought infringement actions against 
those nations for entering into bilateral agreements with the 
United States. The great story here is we have made enough 
progress where now the European Commission is an active partner 
to help make this a more coherent and more effective 
infrastructure that will serve the trade of both sides of the 
Atlantic.
    What we are dealing with is building a security regime 
really, as I said earlier, where there was not one before. No 
single country can do this by itself. We are doing it through 
unilateral measures, through bilateral measures, and through 
multilateral measures, trying to get the World Customs 
Organization to step up and become effective here as well.
    As Stewart Verdery said, the purpose of the CSI program is 
to ensure that all containers that pose a potential risk for 
terrorism are identified as early as possible in the 
international trade supply chain and before they are ladened on 
board vessels destined for the United States. That is a 
strategy and a program that our industry strongly supports. The 
strategy of screening cargo before vessel loading in the 
foreign port is the right strategy.
    Today we implement that by giving U.S. Customs--24 hours 
before loading in a foreign port--all the information that the 
carrier has about a container. Customs screens 100 percent of 
all those shipments. What CSI does is it provides a bilateral, 
cooperative mechanism to address resulting issues. When you 
have a question about a container of cargo, what do you do with 
it? If you are going to inspect it in a foreign port, you have 
to have relationships with those foreign customs authorities 
that allow you to do that. That is what CSI is all about.
    Today there are 38 ports that are covered by signed CSI 
agreements, but it is important to recognize that this is a 
program that is in its beginning evolutionary stages. Eighteen 
of those 38 ports are currently operational. More will come on 
line in the course of this year. And it is essential that 
people recognize that this is an ongoing effort and that CSI 
will continue to have to evolve.
    What we need are common criteria amongst the U.S. and our 
trading partners for screening. We need trust and cooperation 
amongst the customs authorities. We need adequate equipment and 
systems to perform the inspections when necessary, and 
hopefully this will also lead to agreed and cooperative 
contingency planning for how is it that we would keep trade 
flowing, this huge volume of trade, in the event we had an 
incident that required us to do so.
    Overall, Mr. Chairman, I think that the European Union, the 
United States, and many of our trading partners are doing what 
they can to cooperate and the CSI initiative is an important 
part of this effort. The industry is trying to support them in 
any way we can, and we think they are going in the right 
direction but there is still a lot of work to be done.
    Senator Allen. Thank you, Mr. Koch. Let me ask you some 
followup questions on the CSI. Is this all the European ports 
or just Rotterdam and Marseilles? At all the European ports, 
you said 100 percent of the containers are being inspected?
    Mr. Koch. There are two parts of your question that I would 
like to address.
    The first is U.S. Customs screens 100 percent of all 
containers in all ports before they are loaded on vessels 
coming to the United States.
    Senator Allen. All right. Describe what screening entails.
    Mr. Koch. What that means is that the carrier provides all 
of its bill of lading information to Customs and Border 
Protection electronically 24 hours before it loads its vessel, 
whether it is Rotterdam or Colombo, Sri Lanka, or Yokohama or 
Shanghai. Every single port that a vessel destined for the 
United States loads cargo at, 24 hours before that loading, the 
carrier will provide this advance information to Customs.
    Customs then will screen that information. If they have a 
serious concern about a container, they will issue the carrier 
a ``do not load'' message. If we receive a ``do not load'' 
message, we will not load that container.
    Now, the CSI agreements are where U.S. Customs has 
stationed its personnel in foreign ports, and we have a 
formalized agreement with those other customs authorities. As I 
mentioned, 38 ports presently have agreements; 18 are 
operational. I believe nine European ports are presently 
operational. Rotterdam is certainly one of them.
    Senator Allen. So the screening is not one of a physical 
screening, a sensoring sort of approach. It is looking at what 
the manifest says or what is supposedly in the container and 
who is supposedly shipping it or loading it.
    What percentage, when they get screened, do you get one of 
those ``do not load'' orders?
    Mr. Koch. The most recent data I have seen is that Customs 
physically inspects today 5.4 percent of all the containers, 
which is probably getting close to 500,000 a year. The number 
that are inspected in a foreign port before loading would be a 
small percentage of that number, but I do not know exactly what 
it is.
    Senator Allen. Well, rather than the physical sensoring or 
visual inspection, do you get many ``do not load'' orders? This 
is just based on information.
    Mr. Koch. We do not get many, no.
    Senator Allen. And then when those occur, nonetheless, then 
there is a physical inspection of it or further questioning 
because of whatever seems problematic.
    Mr. Koch. Correct. And the carrier will not load until they 
then get a green light from U.S. Customs.
    Senator Allen. Let me ask another question from you since 
Captain Connors was in New Orleans and you know our Virginia 
ports. Every port is different in this country. Of course the 
European combined terminal in Rotterdam may still be--it 
certainly was when I saw it--the most technologically advanced 
port I have ever seen. It is just very, very efficient and high 
tech. But every port is different.
    And you are right. As far as the steamship lines, their 
main concern is get those containers there and get the cranes, 
get them off, and get them on the trains and get those trains 
or trucks out of port, off the docks as quickly as possible.
    There are those who say that every port ought to meet a 
standard, which is fine, but every port is different. The port 
of New Orleans is a completely different type of port than what 
we have in Norfolk or what they have in Charleston or Long 
Beach or Seattle. The key in all of this, in my view, is to 
find the technologies, the sensoring technologies. Looking at 
the manifest, looking at what is supposedly and verifiably 
loaded into those containers is important. That is fine and can 
be done simply. The question is whether there is falsification 
of that, and there is a biological agent or there are some 
radioactive agents, whatever may be on there. But the key to 
all of this, in trying to secure these ports, is to do it in 
whatever way will not slow down the movement of cargo or 
containers.
    Does your organization, which is obviously international, 
see promising technologies that can get the movement of these 
containers off the ships and out of the ports that are more 
promising than others? And if you could share that with us as 
evidence. I know this is a Foreign Relations Committee. I am 
also on Commerce and port security is a big issue. I have you 
all here and I would like to glean that insight from you all as 
well.
    Mr. Koch. I would be happy to try to take a stab at that. 
There are different pieces of inspection and technology. One 
piece is the nonintrusive inspection technology, commonly 
called VACIS machines, which are deployed at ports where they, 
in essence, give an x-ray or a gamma ray image of what is 
inside this steel container. Those are at all major U.S. 
seaports now. They are also deployed at many foreign seaports. 
Those are what are used when you have a question about a box. 
In Norfolk, for example, they are used quite frequently and 
even talking to some of our customers, they are used so 
frequently that it can cause a week's delay to get your box out 
of the port if you have to go through a VACIS machine.
    Senator Allen. So to go through this machine, they are not 
examining every container. It is just those that are 
suspicioned.
    Mr. Koch. For the VACIS, that is correct.
    For radiation screening----
    Senator Allen. Hold it. Before we go to the radiation. 
VACIS is like an x-ray.
    Mr. Koch. Correct.
    Senator Allen. And the containers that are x-rayed are 
those that for some reason there is some suspicion or some 
biometric, so to speak, or some reason you feel that those 
containers ought to be--somehow the port thinks that you ought 
to x-ray them.
    Mr. Koch. That is correct with the caveat that I believe 
Customs does use some random sampling as well so that some will 
be pulled in for that that are just done on a random basis.
    Senator Allen. And then in the event that that is done, it 
is held up for a week?
    Mr. Koch. In some ports it is longer than others. For 
Charleston and Norfolk, we have heard some of our customers say 
it can take a week. Other ports it is not so long.
    Senator Allen. Well, that is unacceptable.
    Then get on to the radiation.
    Mr. Koch. The radiation portals, what Commissioner Bonner 
has announced, is a program that hopefully by the end of this 
year Customs hopes to have 100 percent of all containers 
screened for radiation. Those devices are being put at the 
gates at the terminals so that when it passes through, it will 
be screened at the gate, which should be a very efficient way 
to deal with it. It should not slow down commerce significantly 
at all.
    The challenge there, as you point out, is for on-dock rail 
facilities, there is no gate that the box goes through, so 
Customs will have to work with the terminal operator to figure 
out for the rail cargo that goes straight on to a rail car how 
that would be screened. But the objective is within the next 
several months to be able to have radiation screening of 100 
percent of all the containers.
    Senator Allen. Not just those that are under suspicion.
    Mr. Koch. Right.
    Senator Allen. I have seen ideas of putting it on the 
cranes themselves as they are offloading them from the ship, 
but for some reason or another, that technology----
    Mr. Koch. It has not proven to be workable up to this 
point.
    And then the third cluster of technology issues is what is 
it that might be developed that would be the creation of a 
``smart'' box, what would be a ``smart'' container. The 
Department of Homeland Security is standing up, starting 
tomorrow, an advisory committee with industry, shippers and 
carriers, to try to deal with that issue and bring greater 
definition to it. Technology is clearly coming in that regard. 
There are many different aspects of this issue, however, and we 
really need to get some definition of what is it we are talking 
about, how it would be implemented, and what the technology 
would be. So that is probably more a mid- to longer-term 
solution than it is a short-term solution.
    Senator Allen. Is there a technology or some scanning, 
screening device to handle that that is on the horizon?
    Mr. Koch. There are different kinds of sensors which have 
gone through some levels of operational testing. Operation Safe 
Commerce is one program set up that is being funded now to try 
to test some of these devices and see how do they actually 
perform in operation.
    One of the challenges is to define what is it you want 
sensed because you can build various different kinds of 
sensors. Is it for radiological sensing? Is it temperature? Is 
it humidity? Is it shock? Is it entry into the container? I 
think the core issues they are trying right now to deal with is 
making sure radiation scanning is done on boxes, and the most 
important sensor on a container is likely to be an entry 
sensor. Has the box been intruded into by any of the six sides 
of the container? And there are different technologies as to 
how you might get there, but that is I think the clearest 
objective at this point.
    Senator Allen. Yes, it would be an interesting one. At some 
of the ports, as you were talking about, how this is going to 
be effectuated, if you have an agreement with a port, say, with 
Rotterdam or Marseilles or, for that matter, those that might 
come into Halifax first and the way that the rotations work 
from Europe and then New York, then say, Virginia or 
Charleston. If it is to be loaded onto, say, a train--and 
usually they know which way it is going to be conveyed. They do 
not just have the ship come, offload the container, and well, 
gosh, let us see how are we going to get this to Chicago. They 
know it is going to be going on a train.
    You are saying if there is radiation, how are you going to 
do it on a train versus a truck leaving the actual port. If you 
could do a sensing before it leaves. Now, of course, that would 
be a bilateral port agreement or some sort of agreement. In 
Rotterdam they do it. It seems to me they could. And it is 
going to go on a train. You do not have to worry about it. 
However, then you bring up, well, what if something happened to 
it somehow in transit and then you would have to make a 
determination has that box been breached or violated, so to 
speak.
    Well, it is a concern to me. I am hopeful the technology 
can be implemented in ways that do not slow down commerce 
because it is one of the biggest challenges of our ports. It 
does not matter how long it takes them to offload one of those 
containers and get it on a train or a truck, it is still way 
too long as far as the steamship lines are concerned. These are 
key security areas for which we have a great deal of concern in 
this country. To the extent that we can implement technologies, 
deploy them, the better.
    Thank you for your comments.
    Now, Captain Connors, you heard Mr. Verdery and Mr. Faull 
before you. They have left. It seems like there is a great deal 
of cooperation and understanding of all the sentiments that you 
express for a very important part of our economy and many, many 
businesses. Are you confident that all of this will be 
implemented in a way that is satisfactory so far as the 
leadership of our administration, as well as leadership from 
Europe?
    Mr. Connors. Well, again, Senator, I did listen to those 
witnesses and felt very strongly and felt very favorably. I 
sensed some cooperation that perhaps that you hear in the rumor 
mills that you do not hear. But it was good to see the real 
players are indeed cooperating and we hope that that continues.
    Nevertheless, in my testimony we have suggested the 
opportunity for more private sector folks like ourselves to be 
involved and have some input over regulations before they come 
out. NBTA stands ready to be one of those players. Within our 
membership, we represent millions and millions of business 
travelers through our corporate travel managers. Therefore, we 
have access to all sorts of information about road warriors out 
there and what they are going through.
    Senator Allen. Let me give this opportunity to you. I will 
tell you my general view of it, but I want to hear from you. 
What is the current condition of business travel and how is 
what I call the stress factor, aggravation factor, hassle 
factor? How is that impacting the resumption of business travel 
from your perspective?
    Mr. Connors. Well, we are very optimistic about what has 
been going on this year as far as a return of business travel.
    As far as the hassle factor goes, most of our folks are 
road warriors. They know the drill. They have been through it. 
They understand it. They understand when they are going to the 
airport early in the morning, they are going to be waiting. 
When they are there in the afternoon, they are going to be 
waiting. I think the frustration that they have is that often 
they are in the same line with the infrequent traveler who does 
not know the drill yet.
    To that end, NBTA is very much in favor of the registered 
traveler program which we know is being pilot tested, and we 
are very supportive of that. We stand ready again to offer 
volunteers around that program and would be very happy to be a 
part of any kind of input regarding the registered traveler 
program.
    Senator Allen. I think that is absolutely essential. You 
mentioned it. You understand this, Captain. Business travel is 
absolutely key to the airlines. That is how they can have the 
lower fares for folks that are traveling on some of their 
better deals, let us say. To the extent business travel is now 
taking commercial airlines, that affects all the jobs in the 
airline industry unless they are one like Jet Blue or Southwest 
that seem to be doing just fine, regardless of all this.
    The registered travel I think is absolutely essential. They 
are improving, as far as I can see, but boy, there is still a 
long way to go with who has to go through certain things. It is 
a shame.
    You mentioned getting input from the private sector on some 
of these different ideas that are coming forward. Do you feel 
presently as different ideas are being put forward and 
regulations being put in that you do not have an opportunity to 
share, in making those decisions, your comments?
    Mr. Connors. We have had a very warm relationship with TSA 
and DHS. Let me say that at the outset. However, I think we 
would enjoy having some sort of official body that we could be 
a part of and that other associations like ourselves could be a 
part of for regular input prior to regulations coming out.
    Senator Allen. I understand that. Well, let me say I agree 
with you, and it is not just me saying this. I was once 
Governor of the Commonwealth of Virginia and we had our Travel 
and Tourism Advisory Board. It was a formal board of 
individuals. The tourism industry is a very diverse industry. 
It is everyone from the big airline companies to those that run 
places like Bush Gardens and Kings Dominion and Luray Caverns 
and a variety of other small businesses.
    I made it a priority and my wife, as First Lady of 
Virginia, really made it a priority. We would go on trade 
missions. While I would go to the ports and talk to the 
steamship lines, the K lines and the Maersks and all of them, 
my wife would be talking to all the travel and tourism folks to 
have people from Japan or from France or Britain or Germany 
come and visit Virginia for heritage tourism. So it was an 
important part of our economic development in the Commonwealth 
of Virginia.
    This whole 2007 400th anniversary of Jamestown. I will say 
today was the day in 1607 Jamestown was founded. All of that 
heritage tourism that we wanted to make on the 400th is 
tourism, it is history, it is education. It is great for jobs 
and a lot of small businesses.
    As a U.S. Senator, you cannot do the same things as you can 
as an executive. Suffice it to say I am with you and I do think 
that any executive, whether it is at the State or the Federal 
level, would benefit a great deal from having an advisory 
board. People would be proud to serve on it. And I think 
decisions being made in the area of commerce would be improved 
by having that formalized relationship. I am a U.S. Senator. I 
just listen to you. I agree with you. We in our office have all 
the brochures from all the facilities and places in Virginia 
and try to assist folks going to all regions of our 
commonwealth.
    This at least gave you an opportunity to say it here. I 
hope some day in the future, very soon, that the executive 
branch will put together such an advisory board. I think it 
would be very beneficial. I have seen it myself for my cabinet 
secretaries as well as myself.
    So I want to thank both of you all for being here. Thank 
you for your comments, for your insight. I know, Mr. Koch, you 
had short notice to be here, and I very much appreciate your 
being a quick fireman to get here for this. But thank you both 
so much.
    Also, always feel free to contact me. This is an issue of 
great concern to me and it also gets into just not the foreign 
relations and bilateral European issues, these are 
international issues. So consider me an ally on the Commerce 
Committee as well, particularly on the port security.
    Both gentlemen, again thank you all so very much.
    The hearing is adjourned.
    [Whereupon, at 4:05 p.m., the subcommittee adjourned, to 
reconvene subject to the call of the Chair.]