[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




                FOREIGN OPERATION OF U.S. PORT FACILITIES

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

                                (109-55)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 9, 2006

                               __________


                       Printed for the use of the
             Committee on Transportation and Infrastructure


















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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                      DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-    JAMES L. OBERSTAR, Minnesota
Chair                                NICK J. RAHALL, II, West Virginia
SHERWOOD L. BOEHLERT, New York       PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee       ELEANOR HOLMES NORTON, District of 
WAYNE T. GILCHREST, Maryland         Columbia
JOHN L. MICA, Florida                JERROLD NADLER, New York
PETER HOEKSTRA, Michigan             CORRINE BROWN, Florida
VERNON J. EHLERS, Michigan           BOB FILNER, California
SPENCER BACHUS, Alabama              EDDIE BERNICE JOHNSON, Texas
STEVEN C. LaTOURETTE, Ohio           GENE TAYLOR, Mississippi
SUE W. KELLY, New York               JUANITA MILLENDER-McDONALD, 
RICHARD H. BAKER, Louisiana          California
ROBERT W. NEY, Ohio                  ELIJAH E. CUMMINGS, Maryland
FRANK A. LoBIONDO, New Jersey        EARL BLUMENAUER, Oregon
JERRY MORAN, Kansas                  ELLEN O. TAUSCHER, California
GARY G. MILLER, California           BILL PASCRELL, Jr., New Jersey
ROBIN HAYES, North Carolina          LEONARD L. BOSWELL, Iowa
ROB SIMMONS, Connecticut             TIM HOLDEN, Pennsylvania
HENRY E. BROWN, Jr., South Carolina  BRIAN BAIRD, Washington
TIMOTHY V. JOHNSON, Illinois         SHELLEY BERKLEY, Nevada
TODD RUSSELL PLATTS, Pennsylvania    JIM MATHESON, Utah
SAM GRAVES, Missouri                 MICHAEL M. HONDA, California
MARK R. KENNEDY, Minnesota           RICK LARSEN, Washington
BILL SHUSTER, Pennsylvania           MICHAEL E. CAPUANO, Massachusetts
JOHN BOOZMAN, Arkansas               ANTHONY D. WEINER, New York
JIM GERLACH, Pennsylvania            JULIA CARSON, Indiana
MARIO DIAZ-BALART, Florida           TIMOTHY H. BISHOP, New York
JON C. PORTER, Nevada                MICHAEL H. MICHAUD, Maine
TOM OSBORNE, Nebraska                LINCOLN DAVIS, Tennessee
KENNY MARCHANT, Texas                BEN CHANDLER, Kentucky
MICHAEL E. SODREL, Indiana           BRIAN HIGGINS, New York
CHARLES W. DENT, Pennsylvania        RUSS CARNAHAN, Missouri
TED POE, Texas                       ALLYSON Y. SCHWARTZ, Pennsylvania
DAVID G. REICHERT, Washington        JOHN T. SALAZAR, Colorado
CONNIE MACK, Florida                 JOHN BARROW, Georgia
JOHN R. `RANDY' KUHL, Jr., New York
LUIS G. FORTUNO, Puerto Rico
LYNN A. WESTMORELAND, Georgia
CHARLES W. BOUSTANY, Jr., Louisiana
JEAN SCHMIDT, Ohio

                                  (ii)


















        SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

                FRANK A. LOBIONDO, New Jersey, Chairman

HOWARD COBLE, North Carolina         BOB FILNER, California, Ranking 
WAYNE T. GILCHREST, Maryland         Democrat
PETER HOEKSTRA, Michigan             CORRINE BROWN, Florida
ROB SIMMONS, Connecticut             GENE TAYLOR, Mississippi
MARIO DIAZ-BALART, Florida           JUANITA MILLENDER-McDONALD, 
DAVID G. REICHERT, Washington,Vice-  California
Chair                                MICHAEL M. HONDA, California
CONNIE MACK, Florida                 ANTHONY D. WEINER, New York
LUIS G. FORTUNO, Puerto Rico         BRIAN HIGGINS, New York
CHARLES W. BOUSTANY, Jr., Louisiana  BRIAN BAIRD, Washington
DON YOUNG, Alaska                    JAMES L. OBERSTAR, Minnesota
  (Ex Officio)                         (Ex Officio)

                                 (iii)



























                                CONTENTS

                               TESTIMONY

                                                                   Page
 Ahern, Jay, Assistant Commissioner for Field Operations, Customs 
  and Border Patrol..............................................     3
 Baker, Stewart A., Assistant Secretary for Policy, U.S. 
  Department of Homeland Security, accompanied by Rdml Craig E. 
  Bone, Director, Inspections and Compliance Directorate, U.S. 
  Coast Guard....................................................     3
 Brown, Gary L., Union Security Liaison, International Longshore 
  and Warehouse Union............................................    38
 Carafano, Dr. James Jay, Ph.D, Senior Research Fellow for 
  Defense and Homeland Security, the Heritage Foundation.........    38
 Flynn, Dr. Stephen E., Jeane J. Kirkpatrick Senior Fellow for 
  National Security Studies, Council on Foreign Relations........    38
 Nagle, Kurt J., President, American Association of Port 
  Authorities....................................................    38
 Scavone, Robert, Executive Vice President, Strategic Planning & 
  Development, P&O Ports North America, Inc......................    38

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Filner, Hon. Bob. of California..................................    98
Johnson, Hon. Eddie Bernice, of Texas............................   109
Kennedy, Hon. Mark, of Minnesota.................................   113
Oberstar, Hon. James L., of Minnesota............................   121
Young, Hon. Don, of Alaska.......................................   179

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

 Baker, Stewart A................................................    70
 Brown, Gary L...................................................    84
 Carafano, Dr. James Jay.........................................    91
 Flynn, Dr. Stephen E............................................   100
 Nagle, Kurt J...................................................   114
 Scavone, Robert.................................................   125

                         ADDITION TO THE RECORD

Yoshitani, Tay, Senior Policy Advisor, National Association of 
  Waterfront Employees (NAWE), statement.........................   183































 
                FOREIGN OPERATION OF U.S. PORT FACILITIES

                              ----------                              


                        Thursday, March 9, 2006

        House of Representatives, Committee on 
            Transportation and Infrastructure, Subcommittee 
            on Coast Guard and Maritime Transportation, 
            Washington, D.C.
    The subcommittee met, pursuant to call, at 9:30 a.m., in 
room 2167, Rayburn House Office Building, Hon. Frank A. 
LoBiondo [chairman of the committee] presiding.
    Mr. LoBiondo. Good morning. The Subcommittee will come to 
order. Before starting, I would like to ask unanimous consent 
that members of the Committee who are not on the Coast Guard 
Subcommittee may participate in the hearing today. We want to 
open this up. Do we hear any objection to that?
    [No response.]
    Mr. LoBiondo. I don't think so. OK.
    We welcome members of the full Committee.
    Mr. Filner and Mr. Oberstar are on their way. On both of 
our panels, we have folks who have critical schedules, and I 
know the most important part of this will be coming to the 
questions. We talked to Mr. Filner's office, and I am going to 
start with my opening statement and ask Mr. Filner and Mr. 
Oberstar and Mr. Young, if they are here, for their statements; 
ask the other members to please forego opening statements. We 
will get into the testimony of the panel members and then get 
right into questions.
    So, without further ado, the Subcommittee is meeting this 
morning to review foreign operation of terminal facilities at 
U.S. ports and to review the Federal Government's process in 
implementing effective port security measures.
    Given the high level of foreign operations at U.S. ports, 
the complete implementation of the Maritime Transportation 
Security Act is vital to protect our security without dampening 
the international trade that is the lynchpin of our economy.
    I still remain very concerned and opposed to the pending 
transfer of operational control over several U.S. port 
facilities to Dubai Ports World. A number of us still have many 
questions about this proposed deal, and hope that the 
witnesses' testimony will be able to address these complex 
issues.
    Specifically, I am interested in learning to what level was 
the Coast Guard, Customs, and Department of Homeland Security 
involved with the initial review of the proposed sale and what 
level of participation each will have in the more stringent 
second review.
    Secondly, what are the concerns that were raised by the 
Coast Guard and the Department, and how were those concerns 
addressed?
    Also, does the fact that DP World is a foreign state-owned 
entity affect the Coast Guard's ability to share sensitive 
information with security officers who, by nature of their 
employment, could be considered agents of a foreign government?
    I believe that these questions clearly demonstrate that we 
need to do a great deal more, and we have to give very serious 
thought and investigation before this sale is approved.
    Along with my opposition to this specific transaction, I am 
extremely concerned with the Administration's lack of progress 
in implementing the broader port security measures this 
Congress passed as part of the Maritime Transportation Security 
Act of 2002 and successive legislation. It is now more than 
three years after the passage of the Maritime Transportation 
Security Act, and I am very frustrated to hear that many of 
these programs have not been implemented and, in fact, on some 
of them we have no idea when they might be.
    Under MTSA, the Department of Homeland Security is required 
to develop the Transportation Worker Identification 
Credentials, known as the TWIC program, that will issue 
biometrically embedded security cards to maritime workers that 
can be used interchangeably at any U.S. port. To this date, we 
have not progressed beyond the prototype stage for this 
critical program, and without any creditable explanation.
    The Department has not developed a format for the card or 
the readers that will be used to restrict access to secure 
areas in our ports. They have not developed a procedure to 
carry out the background checks for individuals who are 
applying for the card, or for the statutorily required 
biometric information that will be required on this card.
    I find it totally unacceptable that the Department has 
allowed this program to be delayed for this long, clearly not 
giving it any priority. The TWIC card will be one of the 
primary means of keeping unauthorized personnel out of our 
ports, and I hope that the witnesses will be able to take back 
with them the very strong message that we expect this program 
to be moving forward and that we are tired of the delays that 
have incurred.
    Likewise, MTSA requires the Coast Guard to develop and 
implement a system to track vessels up to 2,000 nautical miles 
from shore that will complement the near-shore tracking 
capabilities under the Automatic Identification System. The 
Coast Guard has previously testified that they are working 
through the International Maritime Organization to develop the 
components of a global system, rather than implementing a long-
range vessel tracking system domestically.
    While I guess I understand and somewhat agree that we 
should work with our international partners to develop a 
standardized system, again, I am very concerned and very 
frustrated by the Administration's apparent decision to delay 
the implementation of this system here at home. Excuses and 
delays for critical maritime security measures such as the TWIC 
card and the tracking system are unacceptable.
    Finally, the Department is required to establish a secure 
systems of transportation program. That is protecting our 
supply chain to establish standards and procedures to secure 
the maritime cargo supply chain from the point of loading to 
arrival in the U.S. And of all the things that we are doing, 
making sure that these containers are protected before they get 
here is one of the most important.
    This program will include standards for screening of cargo 
in foreign ports, standards for locks and seals to maintain 
security while in transit, and procedures for the Federal 
Government to ensure and validate compliance with this program. 
It is imperative that we develop robust measures to assure that 
this and other maritime security programs are being complied 
with. And I do not understand why the Department has absolutely 
disregarded this statutory requirement.
    Integrity of our containers is essential and crucial if we 
are able to affect any measure of maritime antiterrorism and 
port security. We have taken steps to enhance security at our 
ports, but I believe we must do much more. The proposed 
transfer of the port terminal facilities to a foreign state-
owned entity only highlights the need for the Administration to 
fully implement the full extent of the maritime security 
programs required under the Maritime Transportation Security 
Act and other laws to work with Congress to develop any further 
requirements. The American people expect us to take the 
necessary actions to secure our ports, and this Subcommittee 
will continue to work with the entire Congress to develop 
legislation to enhance our maritime homeland security.
    I thank the witnesses for appearing today.
    OK, we will break from the witnesses' testimony when Mr. 
Filner and Mr. Oberstar come in to see if they still wish to 
make any opening statements, but I would first like now to 
welcome our first panel: Mr. Stewart Baker, Assistant Secretary 
for Policy for U.S. Department of Homeland Security, 
accompanied by Rear Admiral Craig E. Bone, who is the Director 
of Inspections and Compliance Directorate with the United 
States Coast Guard, and Mr. Jay Ahern, Assistant Commissioner 
of Field Operations for Customs and Border Patrol.
    Mr. Baker, please proceed.

TESTIMONY OF STEWART A. BAKER, ASSISTANT SECRETARY FOR POLICY, 
U.S. DEPARTMENT OF HOMELAND SECURITY; ACCOMPANIED BY RDML CRAIG 
  E. BONE, DIRECTOR, INSPECTIONS AND COMPLIANCE DIRECTORATE, 
      UNITED STATES COAST GUARD; AND JAY AHERN, ASSISTANT 
  COMMISSIONER FOR FIELD OPERATIONS, CUSTOMS AND BORDER PATROL

    Mr. Baker. Thank you, Chairman LoBiondo and members of the 
Subcommittee and the Committee. I will be brief. You have our 
prepared testimony. I will not be discussing port security, 
which Admiral Bone will discuss, or cargo security, which Mr. 
Ahern will discuss.
    What I thought I would do is simply address some of the 
questions about the CFIUS process that may have arisen in 
connection with this transaction.
    First, as the Chairman asked, what was the involvement of 
Coast Guard and CBP and the Department of Homeland Security in 
the process? The short answer is that both Coast Guard and CBP 
were closely consulted about this transaction, and DHS, 
actually within the Department, took the lead in addressing 
some of the security concerns that we in fact had raised.
    As a result of DHS's efforts, rather than simply approving 
this transaction, it was approved only with a letter of 
assurances from the company, from both companies. That letter 
of assurances had two principal safeguards. First, it took 
several programs that are voluntary for other companies and 
made them mandatory, a best security practices program called 
the Customs-Trade Partnership Against Terrorism.
    For every other company that is a voluntary program; you 
enter it in order to get certain benefits in processing. For 
P&O, Ports North America, and for DPW, those programs are not 
voluntary, they are mandatory. That requires a lot of 
recordkeeping and a lot of specific best security practices 
across the board.
    They also assured us that we could have access to any data 
about their U.S. operations without a subpoena, without a 
warrant, we simply have to give them a written request for that 
data. That will allow us, among other things, to do background 
to obtain a list of all their current employees and to do 
background checks, run them against security watch lists and 
the like. And we will be exercising that authority as soon as 
the letter takes effect.
    So we do have substantial protections that were at the 
instance [sic] of DHS and run to the benefit of both CBP and 
the Coast Guard.
    That is a very brief overview of the process. We will be 
glad to take questions. I do want to emphasize that we 
certainly agree that the focus on port security and the many 
measures that the Chairman mentioned are appropriate areas of 
concern. We will be glad to work with the members of the 
Subcommittee and the Committee with respect to how to improve 
port security, and we look forward to discussing those ideas in 
the course of this hearing.
    Thank you.
    Mr. LoBiondo. OK, thank you, Mr. Baker.
    Admiral Bone?
    Admiral Bone. Good morning, Chairman LoBiondo, Congressman 
Filner, and distinguished members of the Committee. I am Rear 
Admiral Craig Bone, Director of Inspection and Compliance for 
the Coast Guard, with responsibility for maritime ports, 
vessels, facilities, both their safety and security operations.
    As Assistant Secretary Baker stated, I will be responsible 
for the security portion of this hearing, and we have 
undertaken and completed numerous improvements in our port, 
vessel, and facility security since Congress enacted the Marine 
Transportation Security Act and IMO established the 
International Ship and Port Security Code, which parallels 
MTSA.
    Key to our efforts has been the Federal interagency 
cooperation, coupled with the engagement of the maritime 
industry and State and local officials, as well as law 
enforcement agencies. This was accomplished not just at the 
national level and through the regulatory process, but also 
carried out in our daily operation through establishment of 
area maritime security committees with full interagency 
maritime stakeholders and State and local agency involvement.
    All U.S. 3200 MTSA facilities in over 11,000 U.S. flag 
commercial vessel security plans have been completed by the 
operators and reviewed satisfactorily by the Coast Guard. 
Annual compliance examinations are conducted, as well as 
unscheduled targeted vessel boardings of U.S. and foreign flag 
vessels. Sixteen hundred boardings since July 2004 have 
resulted in 143 major control actions, including, in some 
cases, actually expelling the vessel from the port or not 
allowing it to come to the U.S. at all.
    Annual compliance examination and random assessments of 
port facilities have been conducted, with 700 violations and 44 
major control actions taken since July 2004. Those 44 would 
either stop cargo operations or even shut down the facility.
    We truly appreciate the Congressional support which has 
provided additional assets in the way of MSSTs, small boats and 
crews, armed helicopters, increased inspectors, escorts and sea 
marshals to protect high-risk vessels, command center 
improvements to integrate operations, AIS receivers, improved 
traffic management system, intelligence personnel, and many 
more.
    We have also conducted national level exercise, as well as 
local area exercises to test our response capability to threats 
or to an actual incident occurring to make sure there is better 
coordination.
    Now, as I have said that, we know that there is much more 
to do. Some examples include implementing home port, which is a 
web-based system to improve communications within the ports and 
the stakeholders within the maritime community and the law 
enforcement agencies. We are conducting studies on the use of 
barrier booms to improve high-risk vessels and critical 
infrastructure; developing a marine security response team 
deployable 24/7 as a counterterrorism capability.
    We are working to improve screening technologies and 
training for our passenger screening at both ferry and large 
passenger facilities; expanding AIS and LRIT, as you mentioned, 
through IMO; and improving our maritime domain awareness, as 
well as continuing replacement of our deep water assets, our 
aircraft, our command centers and systems in order to support 
offshore operations so we don't wait until the threat arrives 
here, but we address it as far offshore as possible; and, 
finally, working with TSA to implement the TWIC card, which you 
mentioned, which is a critical element to port security in our 
environment.
    And while much has been done, I don't want in any way for 
the members here to think that we are complacent or feel that 
we have closed the vulnerabilities in our ports and our 
waterways or our maritime commerce that it supports. We look 
forward to working within DHS and across all the Federal, 
State, and local agencies and with the members of Congress as 
we continue to pursue security in the maritime environment.
    Thank you, sir.
    Mr. LoBiondo. Thank you, Admiral Bone.
    Mr. Ahern?
    Mr. Ahern. Yes. Good morning, Chairman and members of the 
Committee and the Subcommittee this morning. My name is Jay 
Ahern, and I am the Assistant Commissioner for United States 
Customs and Border Protection, and my responsibility is for our 
field operations, to include our ports here within the United 
States.
    It is important, I believe, today for us to have the 
opportunity to discuss what role that we are playing in not 
only the CFIUS process, but also in securing the United States, 
particularly at our ports of entry. I think it is also 
important to have this Committee and Subcommittee have a full 
understanding of what our roles and responsibilities are, and I 
hope to outline some of those for you with our layered defense 
and our mechanisms that we have in place for protecting 
containers coming into this Country.
    Our priority mission within CBP is homeland security, and 
we don't take that lightly at all, and we believe we are 
America's front line at our ports of entry for protecting 
against the entry of terrorist, terrorist weapons, weapons of 
mass destruction or effect from coming into this Country. And 
certainly I think it is also important to realize that 
America's seaports, the trading system is a global one, and it 
is important to continue to understand that process.
    And as we secure our seaports, we take that into 
consideration, and it is certainly a work in progress as we 
craft an efficient system for providing security that is 
necessary for that supply chain, but also making sure at the 
same time we don't stifle legitimate trade coming into this 
Country that our economy and the global economy so much counts 
on.
    I will tell you also that I believe very strongly that our 
322 ports of entry in the United States are far safer today 
than they were previous to 9/11. And I believe since 9/11 our 
Country, as well as our organization, has made great strides in 
protecting supply chain and promoting trade and travel into 
this Country, while, again, maintaining the vitality of our 
economy, but never once taking our eye off our security 
responsibility.
    Our Government responsibility and our private sector 
partners have instituted unprecedented programs to secure our 
seaports and the cargo moving through those seaports, and I 
think it is important that I state that none of these programs 
existed previous to 9/11. Before 9/11, also, we had four 
different agencies responsible, in three different Departments 
of Government, for protecting our borders at ports of entry, 
and today we have one unified border agency for that 
responsibility under the creation of the Department of Homeland 
Security and Customs and Border Protection that responsibility 
rests within this Department and this organization.
    After 9/11, Customs, now Customs and Border Protection, 
developed a layered defense to secure the movement of cargo 
and, particularly for this discussion, containerized cargo 
coming into this Country, again, beginning security of the 
supply chain as deeply as we can in that supply chain, taking 
our officers and our strategies overseas to employ a defense 
and depth strategy, not making our ports of entry here in the 
United States the first opportunity to intervene or interdict, 
but to focus on prevention and getting as deep as we can in the 
support chain.
    The first part of that five interrelated strategies I would 
like to briefly talk about is the 24-hour rule in the Trade 
Act. It required advanced electronic information on 100 percent 
of the cargo coming to the United States. One hundred percent 
of the cargo is sent electronically under the Trade Act 24 
hours prior to lading in a foreign environment to the National 
Targeting Center here in Northern Virginia. The National 
Targeting Center then deploys a risk-based system called the 
Automated Targeting System, which is based on intelligence 
information, as well as a rule-based algorithm set of rules to 
target containers for risk coming into this Country. So it is 
important to know that that did not exist prior to 9/11.
    At the National Targeting Center, we have representatives 
from the Coast Guard linking to the Intelligence Coordination 
Center, as well as to the FBI, Immigration and Customs 
Enforcement, Joint Terrorism Task Force. Many other agencies 
have representatives at this Center as well.
    The third component is the cutting technology, cutting-edge 
technology we have deployed as well. At our seaports and also 
overseas we are deploying radiation portal monitors and large 
x-ray systems to have the ability to look inside the containers 
and also scan for radiation. Before 9/11, there were no 
radiation portal monitors deployed in our Country; today we 
have 181 at seaports around the Country, and we continue to 
deploy in a very rapid pattern.
    Those 181 radiation portal monitors have the ability to 
screen 37 percent of the 11 million containers that come into 
this Country as they are departing terminals and ports within 
this Country to enter into the commerce of the United States. 
By the end of this calendar year, we will have 65 percent of 
the containers, throughout continued deployment of the 
radiation portal monitors. That is a very key link and a key 
component of our strategy as we go forward.
    A fourth initiative that is very critical in pushing our 
borders out is the container security initiative. Again, this 
did not exist before 9/11. Currently, we have 43 ports. And 
that has changed from testimony in the last week and the week 
before from 42, because just yesterday we opened up in the Port 
of Salalah, Oman. So we now have 43 ports, accounting for about 
75 percent of the containers coming into this Country originate 
in ports where we have United States Customs or Border 
Protection officers working with host country counterparts 
using large-scale imaging technology, as well as radiation 
detection capabilities to look at those containers that have 
scored for risk that we receive 24 hours prior to lading. 
Again, we did not have officers overseas before 9/11. As we 
move forward through the rest of this year, we will be at 50 
ports and account for about 85 percent of the cargo coming 
through those ports.
    The fifth initiative is the Customs-Trade Partnership 
Against Terrorism, and as the Assistant Secretary mentioned, it 
is a key component, it is one of the things that we did put 
forward as one of the assurances process. Fifty-eight hundred 
certified members are part of this program. These are some of 
the largest importers in the United States that are joined in 
partnership. I believe it is one of the largest and most 
successful public and private sector partnerships since 9/11 
working together to ensure supply chain security.
    Together, when you take each one of these five components 
and aggregate them together, I believe there is a very good 
layered strategy that is in place. Certainly every one of those 
programs is under a path of continuous improvement, and our 
goal is to continue to do that. But when you aggregate these 
five initiatives together, I believe it provides a greater 
protection against the introduction of the threat of terrorist 
attacks in this Country through the maritime supply chain.
    I will conclude there, Mr. Chairman, and look forward to 
taking any questions on any of the layered defenses I have 
spoken about.
    Mr. LoBiondo. Thank you, Mr. Ahern.
    I am now going to thank the Ranking Member, Mr. Oberstar, 
for joining us and ask Mr. Oberstar for his opening thoughts.
    Mr. Oberstar. Thank you very much, Mr. Chairman, for moving 
out so vigorously and so forthright manner on this legislation, 
and for your quick response on the aviation NPRM that involves 
a similar issue of national security with our commercial 
airlines and the civil reserve air fleet issues that are 
associated with a proposed regulation change that would subject 
our airlines to foreign ownership and endanger our national 
security with the commercial air lift that was critical to Gulf 
War I and Gulf War II, moving personnel and equipment to the 
front lines aboard U.S. carriers.
    For the past four years, since we enacted the port security 
legislation from this Committee--and it was this Committee that 
was the driving force in the House-Senate conference on that 
legislation, we have been trying to get the rest of the 
Congress and the Administration to pay attention to port 
security. It has taken this Dubai ports issue, rather badly 
understood by the public and not so well presented by the news 
media, to mobilize the Country into an outrage over the 
proposed sale of terminals at critical U.S. ports to a foreign 
interest which apparently a great body of the American public 
do not trust.
    I would separate the issue that is before us today, Mr. 
Chairman, into two parts: the ownership issue and the capital 
flows associated with it, and the underlying but more 
important, far more overshadowing, port security issue. The 
question of capital flows is one that we have to think about as 
we look to ways of financing our ports, and to understand that, 
you have to put it in some context, that 20 percent of the 
world trade tonnage comes to the United States. Ninety-five 
percent of non-land trade, that is, from Canada or from Mexico, 
95 percent comes by ship into the United States. Seventy-five 
percent of the value comes by ship into the United States.
    We have 95,000 miles of shore line, 361 U.S. ports. Eighty 
percent of our port terminals are operated by foreign 
companies. Ninety-eight percent of the cargo that we import or 
export goes on foreign flag vessels. And that is an issue that 
has been going in the wrong direction for the last 32 years, 
since I have served in Congress, despite all of our efforts to 
build a U.S. flag maritime fleet.
    So now we have in the range of 13 million containers coming 
into the United States, and the question is, where should they 
be screened. Our Port Security Act had the basic principle of 
pushing the border out. The further you go out with that 
border, the more secure, the safer the United States is. While 
a witness just said that we are going to have radiation portal 
monitors soon checking 65 percent of cargo, once it is here, it 
is too late.
    We need--and the point of the Port Security Act was to 
screen those containers and that cargo oversees, before it gets 
into our zone, our 200 mile economic zone. And that is the 
really significant failure of the last four years, a failure to 
enforce and carry out the provisions of the law, the key five 
provisions.
    Our port security grants, the Coast Guard said that we need 
$5.4 billion to address the security needs at home and abroad. 
Congress has appropriated $883 million; the Administration has 
invested $700 and some million. We are short by any yardstick 
of measurement.
    Background checks. The law requires that the Department of 
Homeland Security set standards for background checks for 
persons who have access to the secure area of ports. No 
background checks are required; no standards set for background 
checks.
    Foreign flag security plans. The Coast Guard went to the 
international negotiations two years ago and settled on a plan 
that stops the Coast Guard from hands-on investigation of, an 
assessment of the security plans in ports and of vessels and 
vessel owners, and satisfies itself with the overall scheme of 
the country that says we have a security plan; they look at the 
plans and say, OK, that is good enough for us. That is wrong. 
That is wrong. And we, in 2004, tried to set the record 
straight and give the Coast Guard greater authority to go into 
those plans.
    Foreign port security plans. The law requires the Coast 
Guard to conduct foreign port assessments on screening of 
cargo, access controls, authorized personnel, security 
management of those ports. Those assessments have not been 
completed for our largest trading partners.
    Container seals, fifth point of the Security Act. We, in 
the law, require Department of Homeland Security to establish 
standards and procedures to secure cargo and monitoring the 
security while in transit, including standards for tamper-
resistant seals. None of that has been done.
    If those provisions had been put in place, Mr. Chairman, 
they would have greatly mitigated the concerns and fears of 
some foreign country or foreign company taking over management 
of the terminals at major U.S. ports. It still raises the 
question of whether the security review under the Florio Act 
has been carried out property, and there has been a 45-day 
extension.
    But the President said, my position hasn't changed. If 
there was any doubt in mind or the people in my Administration 
that our ports would be less secure and the American people 
endangered, this deal wouldn't go forward, he said. Well, he is 
giving another review. It seems he has made up his mind.
    Well, we are going to, in this hearing, get to the bottom 
of some of those issues and questions, and I appreciate very 
much that you have called this hearing, and I expect that we 
will have a good, in-depth look at the issue. Thank you, Mr. 
Chairman.
    Mr. LoBiondo. I thank Mr. Oberstar for his leadership on 
these issues and, again, one of the things Mr. Oberstar 
referred to which is disturbing for a number of us is that this 
proposal comes on the heels of what we found out sort of 
through the back door in November, I guess, that for the first 
time in our history we are proposing to allow foreign ownership 
of U.S. airlines. And there are many of us who feel that any 
foreign ownership of critical infrastructure is wrong.
    That having been said, Mr. Baker, can you tell us--we 
understand that Secretary Chertoff was not made aware of the 
review that as ongoing in this process. Is that your 
understanding, that he was not made aware?
    Mr. Baker. That is correct.
    Mr. LoBiondo. Can you tell us why not?
    Mr. Baker. Yes. This process is run at the policy level, 
ordinarily, by the Treasury Department. The Treasury Department 
has a set of escalating committees so that disputes can be 
resolved, as they ordinarily are in the interagency process. 
The usual process is that if a transaction can be agreed on at 
the assistant secretary or staff level, then it is not raised 
to higher levels for discussion by the deputy secretaries or 
the secretaries.
    In this case, the transaction received considerable 
scrutiny at DHS, from my office, from the Coast Guard, from 
CBP, and from other offices. We decided that we wanted to get 
more assurances from the company than had been provided; we 
negotiated those assurances. When we got the assurances that we 
wanted, since we were the last of the agencies with questions 
and concerns about the transaction, we reported back to CFIUS 
that our concerns had been satisfied. The CFIUS process then 
determined it wasn't necessary for deputy secretaries or 
secretaries to meet on the transaction, and it went forward.
    For DHS purposes, the buck stops with me. I decided that we 
had sufficient assurances and did not brief the deputy 
secretary or the Secretary because they were not going to be 
asked to opine on the transaction in the interagency process.
    Mr. LoBiondo. Well, that is somewhat troubling to a number 
of us. I want to use my additional time initially here to talk 
about the overall maritime security measures. We had a 
discussion last week, when you appeared before the Armed 
Services Committee, about the Transportation Worker 
Identification Card. After that hearing there was an ABC News 
report that indicated a major security breach at the ports of 
New York and New Jersey. They went on to talk about the two 
ports handling millions of tons of cargo, scores of cruise 
ships that pass through each year, and that truckers who 
transport much of the cargo are issued ID cards which give them 
access to all areas of the port.
    And ABC News learned that the cards given to thousands of 
truckers by the Port Authority of New York and New Jersey were 
issued with virtually no background checks and that an 
investigation at these two ports found stunning gaps in 
security; that the DHS report which was obtained by ABC News 
shows that of the 9,000 truckers checked, nearly half had 
evidence of criminal records, more than 500 held bogus 
licenses, and that officials were unsure of who the real 
identities were of these people. The intelligence report found 
that truckers that were in the category of not being checked 
had been convicted of homicide, assault, weapons charges, sex 
offenses, arson, drug dealing, identity theft, and cargo theft, 
and that some of those involved were identified with a gang 
called MS-13, which has been described as one of the most 
dangerous gangs in the United States.
    Now, my question is if this is going on at the second 
busiest cargo port in the United States, why and how can DHS 
explain that we have not put into place the identification card 
system and as of last week you could not tell us when we might 
expect it? Can we know anything about where we are going with 
this project?
    Mr. Baker. Yes, sir. First, I am aware of the study, and, 
of course, that was done by--the responsibility for those cards 
and the background checks was the responsibility of the Port 
Authority of New York and New Jersey; they made the 
determination not to carry out the background checks for a 
variety of reasons, I am sure. It is a subject of considerable 
controversy what kinds of background checks and what kinds of 
criminal behavior ought to exclude people from working in the 
ports.
    There are not a lot of former choir boys who sign up to be 
longshoremen and the longshoremen are concerned that irrelevant 
criminal behavior far in the past might be considered 
disqualifying. So there are some reasons on the other side of 
those background checks why the Port Authority might not have 
determined that certain crimes were disqualifying for entry 
into the port.
    Nonetheless, we agree with your basic point, which is that 
we do need to do background checks on the people who have 
access to our ports. That is why we have decided that, with 
respect to this transaction, we will exercise our authority 
under the assurances letter to gain access to the names of all 
the persons who work for the terminals that are being acquired 
so that we can do background checks on all of them.
    More broadly, you have asked about the Transportation 
Worker Identification Card, and I have taken back the concerns 
that you raised at the last hearing in quite urgent terms, and 
I think it is fair to say that the Department understands the 
urgency of beginning this process. We finished the pilots last 
year, about the middle of the year, and I think in August 
received an evaluation of it.
    We have been planning on what we will do to roll out a 
Transportation Worker Identification Card. Those efforts have 
been substantially accelerated and I think that we will be 
making an announcement within a matter of weeks to get that 
program up and running.
    Mr. LoBiondo. I certainly hope that is the case, Mr. Baker. 
We have such a high degree of frustration in not knowing how we 
can convey any more strongly than we have the unacceptability 
of the delays, and all the rhetoric doesn't account for 
anything. It has been pointed out over and over again if we 
have a terrorist incident at one of our ports, it is likely to 
shut down all of them. And all of these measures, including the 
Secure Systems Transportation program, securing the supply 
chain, which Mr. Flynn has been so eloquent about explaining. 
We have got to do something before these containers get here.
    Unless the Department takes the cue from Congress with the 
laws that we pass and put some emphasis on this, we will be 
here a year, two, three years from now talking about the same 
thing, of why there were delays. I can't say it strongly 
enough.
    Mr. Baker. I fully appreciate the concern here, and we 
share it. I will defer to Mr. Ahern with respect to the details 
of some of the cargo programs, but we certainly don't believe 
that we are anywhere close to done with improving the security 
of the supply chain or the ports.
    Mr. LoBiondo. Mr. Filner.
    Mr. Filner. Thank you, Mr. Chairman. Thank you for holding 
the hearing.
    Thank you for being here. I apologize for missing your 
opening statement, but from the tone of your answers, Mr. 
Baker, I don't see any sense from the Administration that you 
have changed your tone deafness on this issue, of the Dubai 
ports in specific or the port security in general. In answer to 
Chairman LoBiondo, you said, well, the buck stops with you, and 
Chertoff didn't hear this and the President didn't hear this. I 
mean, there was no sense of any mistake made. Do you think you 
made any mistake or do you regret second-guessing? Would you do 
it differently this time around, the next time around?
    Mr. Baker. Absolutely I would.
    Mr. Filner. Well, thank you. It took a revolution from the 
Country to say something.
    But I just don't understand the lack of seeming concern. 
The Administration says it is still backing this deal, the 45 
days doesn't mean anything. In your opening statement you 
didn't say anything about that. The House Appropriations 
Committee, as you know, voted 62 to 2--I don't know if there is 
any vote on that committee like that on anything--to overturn 
the sale. Are you still going to recommend a veto of this when 
the Congress does pass to stop on this?
    Mr. Baker. There is a certain constraint given that we are 
in a 45-day period in which we are carrying out our 
deliberations, but I can assure you that this is a full review 
without preconceptions of how it will come out. We are 
conducting additional fact-gathering with respect to the 
security practices of Dubai Ports World, with respect to P&O 
Ports North America, with respect to the Port of Dubai. Other 
parts of the Government are looking very closely at the record 
of Dubai and the UAE with respect to proliferation and trade. 
So I think we are conducting without preconceptions a------
    Mr. Filner. I hope you will tell the President what your 
results were, because he seems to have a preconception. He has 
continually, since this supposed review started, said he still 
backs the original agreement, and Dubai, I think, this morning 
announced that if we retaliate in this way, they would keep 
ships out of American ports. And it just seems that your 
initial unconcern about it from the point of view of security 
is leading us into a bigger crisis.
    Mr. Baker. I would beg to differ with respect to the notion 
that we weren't concerned about security. The assurances that 
we received in this case were unprecedented. For the first time 
ever we asked for special assurances in the context of a 
transaction involving U.S. ports.
    Mr. Filner. But the record that this Administration has on 
port security, which this Committee has raised since 9/11, Mr. 
Oberstar outlined them to begin with. You have not implemented 
the MTSA, the Maritime Transit Security Act, I guess it is 
called, in almost any of its demands on you. For example, we 
don't have security standards for containers; we don't have a 
way--we are not scanning the containers before they get into 
the United States; we don't have background checks, as has just 
been noticed; we don't have secure entry to the marine 
terminals; we don't have closed-circuit TVs. I mean, we have 
more closed-circuit TVs, but we don't know what is in those 
containers when we learn here. And on and on.
    So we are not convinced that the concern was fully taken, 
because there is all this other evidence. This has just sort of 
brought to the surface the problems that this Administration 
has been having.
    And I represent San Diego, California, as you know. We were 
told by your agency that we did not qualify as a threat in your 
UASI--I don't know how you pronounce it--the Urban Area 
Strategic Initiative grants. And when I pointed out to 
Secretary Chertoff or some of your staff that I don't know of 
any port in America that has three nuclear carriers, a dozen 
nuclear subs, we have a nuclear power plant right nearby, we 
have the biggest Navy base in the world, and we are not a 
threat. And the reason we are not a threat, according to your 
staff, is that the Department of Defense assets are invisible 
to our calculations when dealing with threats. That is, because 
the--that is what they said--because we have the Navy there, we 
are defended.
    I mean, with that kind of reasoning, we are a sleepy 
fishing village in the eyes of the Department of Homeland 
Security. And with that kind of thinking and that kind of 
blindness, of course we are not convinced that you took this 
seriously with the Dubai thing, because you haven't taken 
anything else seriously.
    If you can't take six nuclear reactors sitting in the 
harbor of San Diego as a serious potential threat to 
terrorists--and we know that two of the hijackers were casing 
us out for six months, very much openly there--then something 
is wrong with your Department. And I said I didn't know the 
President's nickname for Secretary Chertoff, but I would say 
he's doing a heck of a job, Chertie, for all this. And I say 
that to you, based on your answers here.
    It doesn't seem you are taking all this stuff with any 
seriousness. And why isn't San Diego a threat because we are 
the biggest Navy base in the world? Why wouldn't that be a 
potential threat to the Department of Homeland Security?
    Mr. Baker. We actually certainly appreciate the leadership 
this Committee has shown on both sides of the aisle in 
addressing these security issues, so I------
    Mr. Filner. All right, we are not going to get an answer 
here. I will just move on, Mr. Chairman. I have used my time.
    Mr. LoBiondo. Mr. Coble.
    Mr. Coble. Thank you, Mr. Chairman.
    Gentlemen, good to have you all with us. When I view the 
operation of a port, I see a four-legged stool: you have 
Customs and Borders, you have United States Coast Guard, you 
have the terminal operator, and the port authority. Am I 
reading that correctly? Do you all see the same stool that I 
see?
    Now, I met with a group of our colleagues and business 
leaders about three years ago from Denmark, Norway, Finland, 
and America, and many expressed concern there that port 
security must be enforced to the letter. But they were 
concerned that perhaps some of this enforcement may result in 
compromising the free flow of commerce. Do you have any comment 
on that?
    Admiral Bone. Congressman, there is always a tradeoff any 
time you decide you are going to provide prescriptive measures 
or checks and balances in a system, because you are going to 
take the time to review, screen, examine, stop the flow or 
delay the flow. So there is always that tradeoff.
    And it is a matter of risk management always in that 
process, and making sure and finding ways to target that 
through intelligence. Not just through intelligence, but also 
through history of working with those entities or those 
organizational entities, as well as randomly we are able to do 
that.
    Now, do you operate a system with zero risk? No. Do we live 
in a world of zero threat? No. And I think the challenge for 
us--and with the guidance of Congress--is identifying what is 
that acceptable level, what are those measures. And we usually 
work that through our regulatory process to help define that, 
and then we prescribe it and put it into place.
    Mr. Coble. I got you.
    Now, Mr. Hayes and I represent a State that has two ports, 
Morehead City and Wilmington. But these ports do not reach the 
volume of ports in, say, New York, Miami, et cetera. Are ports 
such as Morehead City and Wilmington receiving adequate 
resources to address the threats that are there?
    Admiral Bone. Again, from the Coast Guard's aspect, we put 
into place the resources that Congress has provided based on 
risk, and we best placed those in those ports, working, again, 
with State and local entities. This isn't--I would have added a 
couple more things on your stool legs, which would have 
included the State and local authority which provide security 
and assist us as well.
    Mr. Coble. Good point.
    Admiral Bone. And also looking at the industry segment and 
their capabilities to provide security as well.
    Mr. Coble. Mr. Baker, I am by no means a financial planner, 
but I know we are trying to come to some sort of conclusion 
that will assuage any of the discomfort that some of us have 
about Dubai. Has anyone thought about the possibility of a 
passive ownership that would perhaps remove them from the day 
to day operation of moving cargo offloading cargo? Has that 
been raised to any threshold?
    Mr. Baker. That is certainly an approach that has been used 
in other CFIUS cases, usually in the context of defense 
contracts involving very sensitive technology, where it is 
important for every piece of information that the defense 
contractor is dealing with to be shielded from the foreign 
owner. So because we are carrying out this review without 
preconceptions, that is certainly one possibility that we are 
going to look at.
    Mr. Coble. Mr. Ahern, I have ignored you, but not 
intentionally. Do you want to weigh into this before my red 
light illuminates?
    Mr. Ahern. I would like to make a couple of comments back 
to your question of the impact of security in the Port of 
Wilmington. By our assessment, Wilmington and Morehead City are 
considered one and the same port, and only 37,000 containers 
out of the 11.3 million that come into this Country come 
through those ports. So we appropriately deploy the resources 
and the technology there to meet that threat.
    I would also like to go back to your other question, too, 
about taking into consideration the impact on global trade and 
movement of trade as we move forward with security measures, 
and I think it also addresses a couple of the points that were 
brought up by Congressman Filner and also Congressman Oberstar, 
challenging the Department to move quicker; and certainly we 
want to move quicker and we are.
    But I think it also needs to be restated factually again 
that we have taken our efforts overseas; we have begun defense 
in depth. We did not have anybody overseas pre-9/11. Today, in 
43 ports throughout the world we have United States Customs and 
Border Protection officers there doing the screening and doing 
the examinations with the host country counterparts of those 
containers that pose a risk.
    And also to, again, factually restate, as far as the 
radiation portal monitors are the tail end of our layered 
process, as once they are clearing at a port in the United 
States and leaving to go into the commerce of the United 
States. That is not the first or the only opportunity we have 
for intervention, that is the last end. So that is the end of 
our multilayered systems as we go forward.
    So I just wanted to restate those facts, sir, also.
    Mr. Coble. Thank you. I see my time has expired.
    Thank you, Mr. Chairman. Thank you, gentlemen, for being 
with us.
    Mr. LoBiondo. OK, thank you, Mr. Coble.
    It is greatly appreciated that members tried to be 
considerate of all the folks who are here that we try to 
accommodate with staying within the time line. We have been 
alerted that we expect the first vote of the day probably in 
about a half hour. It is expected to be one vote, and then we 
should be uninterrupted for a while.
    With that, I will turn to Mr. Oberstar.
    Mr. Oberstar. Thank you, Mr. Chairman.
    The additional review that is underway has brought this 
response from Dubai Ports World. They jointly request CFIUS to 
conduct a full 45-day review: ``DP World and P&O Ports of North 
America will abide by the outcome of the review, but nothing 
herein shall constitute a waiver of any rights of DP World or 
POPNA that have arisen from the original notification.''
    You are familiar with that, Mr. Baker?
    Mr. Baker. Yes, I am.
    Mr. Oberstar. What is the meaning of the statement that 
they are not waiving their rights from the original 
notification? Does that original notification, after the 30-day 
review, give them the right to complete the deal, that is, go 
to closing?
    Mr. Baker. Our view is that they have submitted themselves 
to CFIUS review, that that gives us the authority, the 
President the authority to say this transaction will not go 
forward or this transaction will go forward only when certain 
conditions are met, and that they are in no different condition 
than anyone else who------
    Mr. Oberstar. So their statement that this further review 
does not constitute a waiver of any of their rights, that is 
vitiated by the review?
    Mr. Baker. In our view, that does not prevent us from 
issuing whatever order we would like to issue.
    Mr. Oberstar. And in the course of that 45-day review, they 
cannot go to--they cannot close the deals themselves, cannot 
state that the original notification constitutes an authority 
to close?
    Mr. Baker. The Exxon-Florio Act doesn't distinguish between 
closed deals and open deals. The transaction is subject to 
review, and if the deal has closed, then the President has the 
authority to order divestment; if it hasn't closed, he has the 
authority to prohibit------
    Mr. Oberstar. You can give this Committee an ironclad 
assurance that notwithstanding the statement by Dubai Ports 
World, that if the further 45-day review concludes that this is 
a security threat, that that can be terminated or modified in 
some way to protect the security interests of the United 
States?
    Mr. Baker. That is our view, and we think we have the--it 
is our interpretation of the statute that will govern. This is 
America; anybody can sue over anything, so I can't guarantee 
you there wouldn't be a lawsuit over that.
    Mr. Oberstar. But a $6.8 billion deal will stay on hold.
    Mr. Baker. Most of the deal, of course, has nothing to do 
with the U.S. ports; the U.S. ports are about 10 percent of 
this deal.
    Mr. Oberstar. Or it could go to closing and you could order 
divestiture.
    Mr. Baker. That is correct.
    Mr. Oberstar. All right.
    On the Container Security Initiative, Mr. Ahern, that is 
managed by your agency, Customs and Border Patrol. The proposal 
is to establish a regime to ensure that all containers that 
pose a security potential will be identified and inspected at 
foreign ports. However, not all foreign governments allow our 
Customs and Border Patrol to see a scan that has been 
requested; you only get notification that the scan was 
completed. And if it has passed, they will tell you it has 
passed, but that is all. What are you going to do about that?
    Mr. Ahern. Well, I think first off, that is not the case, 
with the exception of possibly one country, where we have some 
concerns with certain privacy and authorities within one 
particular country. But in most circumstances we have our 
officers there with the host country counterpart as the scans 
are being conducted, and it has to be done to our satisfaction 
or we will issue a do not laid order for that container not to 
be put on a vessel for the United States------
    Mr. Oberstar. Can you list for us------
    Mr. Ahern.--if it is not reached to our satisfaction.
    Mr. Oberstar. Would you list for the Committee, in a 
separate document, those countries where you have such presence 
and such screening?
    Mr. Ahern. The 43 countries we have?
    Mr. Oberstar. Yes.
    Mr. Ahern. I would be happy to produce all of them for the 
43 countries we have.
    Mr. Oberstar. In a review that I conducted of the principal 
points of export to the United States, that was certainly not 
the case. Less than 5 percent of containers coming to the 
United States are screened.
    Mr. Ahern. Five percent of the universe of 11.3 million is 
actually scanned.
    Mr. Oberstar. Yes.
    Mr. Ahern. One hundred percent of the containers coming to 
the United States are reviewed for intelligence and 
informational concerns through our National Targeting Center to 
score them for risk. One hundred percent of those that pose a 
risk through our scoring gets examined. If it is in a location 
where we have our officers as part of the Container Security 
Initiative, that scanning is done, that scanning is done 
overseas.
    Mr. Oberstar. Well, I want to see the document that you 
have. We have had difficulty getting accurate data.
    Mr. Ahern. I have them right in front of me, sir.
    Mr. Oberstar. and I would like to have that.
    Mr. Ahern. OK, we would be happy to provide that.
    Mr. Oberstar. Thank you.
    Mr. LoBiondo. Thank you, Mr. Oberstar.
    Mr. Diaz-Balart?
    Mr. Diaz-Balart. Thank you, Mr. Chairman.
    Let me just make sure I understood this, because there is 
now this additional review, this further review. Was that also 
done--are there other facilities that have the same type of 
arrangement with foreign companies like the one from Dubai now 
is trying to get?
    Mr. Baker. The generally accepted figure is that about 80 
percent of U.S. terminals are owned by foreign companies. So 
there are lots of foreign companies and some foreign 
government-owned companies that own or lease terminals.
    I should stress that it is not necessary to go through 
CFIUS to acquire or even to acquire a company to obtain those 
interests; a foreign company could come into a port authority 
anywhere in the United States and ask to sign a lease, and if 
they met the port authority's requirements, they could simply 
sign a lease; and that transaction would never been seen at the 
Federal level, at least as far as CFIUS is concerned, we 
wouldn't have the authority to------
    Mr. Diaz-Balart. And it has been like that historically, 
correct?
    Mr. Baker. That is correct.
    Mr. Diaz-Balart. Are there, for an example, does Communist 
China have that sort of arrangement on any of our ports?
    Mr. Baker. There is a company in, I believe, the Port of 
Long Beach that is affiliated with the Chinese communist 
government that has at least stevedoring arrangements. I am not 
sure that they have a terminal.
    Mr. Diaz-Balart. This would be the same Communist China 
that held a U.S. military plane hostage and that who executes 
its own civilians pretty much at will. Was there a second 
review done there? By the way, I am not saying there shouldn't 
be a second or third or fourth review. My question is why was 
that not done with an entity such as this group from Communist 
China or other governments or other such countries?
    Mr. Baker. My understanding is that those transactions were 
carried out before this Administration took office, and I don't 
have details on it based on my experience.
    Mr. Diaz-Balart. But as far as you know, this kind of 
review didn't take place, including with such an organization 
that has close ties or may even be owned by the communist 
Chinese government, the same communist Chinese government that 
held a U.S. plane hostage. As far as you know, there is no 
review like this?
    Mr. Baker. This review is the first review in which we 
were--the Department of Homeland Security was a member of 
CFIUS, was in a position to raise concerns. We raised concerns 
and the agreements that we obtained here are without precedent. 
So these issues were not flagged prior to our becoming part of 
the CFIUS process.
    Mr. Diaz-Balart. Thank you, Mr. Chairman.
    Mr. LoBiondo. Thank you, Mr. Diaz-Balart.
    Ms. Brown?
    Ms. Brown. Thank you, Mr. Chairman.
    Mr. Baker, I have a question, and I need some 
understanding, the Committee and the Country. The law is very 
clear in plain language, it says that the Department of 
Homeland Security's rationale for deciding not to proceed with 
the mandatory investigation as required by the plain language 
in the statute that the President shall--it doesn't say may--
shall make an investigation in any instance in which an entity 
controlled by a foreign government should seek to engage in any 
acquisition that shall affect the national security of the 
United States.
    Mr. Baker. The interpretation of that language, which is 
that if there is no agency that believes that national security 
is at risk in the transaction------
    Ms. Brown. Put a period right there. In December the Coast 
Guard--the Coast Guard expressed serious concerns about the 
deal. I have a letter that was sent. Now, is the Coast Guard a 
part of an agency in this Administration?
    Mr. Baker. It is, but I don't think the Coast Guard 
expressed those concerns to the Department. Those concerns--I 
believe you are talking about an excerpt taken somewhat out of 
context, saying that there were certain intelligence gaps with 
respect to that.
    Ms. Brown. Excuse me. What is an intelligence gap?
    Mr. Baker. There were certain things that the Coast Guard 
did not know when it put together that report. In that report, 
despite the lack of that information------
    Ms. Brown. Sir, maybe the Coast Guard knew something that 
Homeland Security didn't know.
    Mr. Baker. The Coast Guard concluded that this transaction 
could go forward, notwithstanding that memorandum, which--and 
that memorandum itself concluded that there was not a risk to 
the national security from the transaction.
    Ms. Brown. You know, I have never seen an Administration 
that had such a contempt for the Congress in my entire life. 
The Coast Guard estimated that we need $5.4 billion for 
facility security. What did the Administration request?
    Mr. Baker. The $5.4 billion------
    Ms. Brown. Yes, billion, with a b.
    Mr. Baker.--was an estimate of the costs that would be 
incurred by the private sector in carrying out the Maritime 
Transportation Security Act. Those costs were not intended to 
be appropriated, those costs were incurred by the private 
sector, and have been incurred. The Administration has 
requested approximately------
    Ms. Brown. Forty-six million.
    Mr. Baker. Three------
    Ms. Brown. For all port security.
    Mr. Baker.--$3.4 billion for port security, counting the--
----
    Ms. Brown. This year?
    Mr. Baker. Yes. If you add in the port security operations 
of the Coast Guard, the C-TPAT and Container Security 
Initiative and the port security and security grants, it is 
well over $3 billion.
    Ms. Brown. Sir, listen. Don't play with me. Now, I'm asking 
about------
    Mr. Baker. I am not going to do that.
    Ms. Brown.--port security grants.
    Mr. Baker. Port security grants------
    Ms. Brown. In fact, the Administration requests doing away 
with them. And in answer to Mr. Filner's question, we put 
language saying that we wanted those ports to have high 
consideration with military--with military--because I have 14 
ports in Florida.
    So we had to go back, because we weren't rated properly on 
the scale, when we have all of that military equipment coming 
in. We put language in there that they should get high 
consideration. But now you all have recommended that we do away 
with port security. And who is bearing the brunt of this is not 
the Federal Government, but it is local government and it is 
the State. The Federal Government is not pulling their weight 
on this.
    Mr. Baker. I think we have suggested that the programs be 
consolidated so that they can be used------
    Ms. Brown. Bull. Consolidated. That means that you are 
taking the money, doing something else with it. Consolidation, 
I know exactly what it means, and local government knows what 
it means. With no help from the Administration, Congress has 
provided $883 million for port security. However, that amount 
represents only 16 percent of the Coast Guard estimated need. 
Explain that to me.
    Mr. Baker. The Coast Guard estimated those costs would be 
incurred by the private sector to carry out the facility 
security requirements of the Act. Those costs have actually 
been incurred; that has been done. Those are private sector 
costs, they weren't expected that we were going to be paying 
for them.
    Ms. Brown. Those are private security.
    Can the Coast Guard person respond?
    Admiral Bone. Again, what he has stated is accurate. 
Whenever you put a regulation in place, you have to do an 
economic impact analysis. Part of that analysis, in other 
words, is the cost worth the risk investment. And in the case 
this is what we had to say, was this was going to--these would 
be the costs incurred not just by the industry, but also by the 
other enforcement agencies, State, local, and individuals that 
would be engaged in providing assistance to secure the 
facilities and the vessels. This was both for vessels and 
security around facilities. So it wasn't implied that while 
there is an understanding that Congress put together a grant 
program to try to assist them------
    Ms. Brown. It was my bill, so I know the intent.
    Admiral Bone. Yes.
    Ms. Brown. I know the intent of the bill.
    Admiral Bone. Yes. And I am not questioning the intent. I 
am just trying to make sure the framework of what the estimate 
was based on. And I believe--it appeared to me, from where I 
was sitting, that the bill was to assist them with those costs.
    Ms. Brown. I yield back the balance of my time.
    Mr. LoBiondo. Thank you, Ms. Brown.
    Mr. Reichert?
    Mr. Reichert. Thank you, Mr. Chairman.
    Just a question for the panels regarding Seattle/Tacoma 
port areas. We have some companies owned by Korea, Japan, and 
Sweden, and I understand that there may be, right now, a deal 
on the table, a discussion, negotiations occurring with the 
Chinese government. Are you aware of the Chinese government 
showing some interest in operating port facilities in the 
Tacoma port, the Seattle port?
    Mr. Baker. I am not. I believe that, if there is a change 
of control, that that would trigger a reconsideration of the 
facility security plan so that, if it happens, the Coast Guard 
will get an opportunity to review the security aspects of that.
    Mr. Reichert. Yes, sir.
    Admiral Bone. The only--there is one facility that 
currently is Taiwanese that has operations which has a 
Taiwanese relationship. So there may be--you know, because of 
that already, that linkage already being there, it is possible 
that something like that could be underway.
    Mr. Reichert. Thank you.
    We talked about this four-or five-legged stool. Who has the 
ultimate authority for a particular port, is it the captain of 
the port, for security?
    Admiral Bone. Yes, to allow a vessel to come in for port 
operations within the port itself, any vessel, we can deny any 
vessel to come in; we can close any facility or restrict its 
operation; we can restrict any person from coming to a facility 
or going aboard a vessel; we can expel a vessel from the port; 
we can dictate operations and restrictions within the port and 
the way it is carried out and set requirements around 
operations if we believe there to be a security threat.
    Mr. Reichert. Does the captain of the port also have 
responsibility for training, security training?
    Admiral Bone. For Coast Guard security training, but also 
for standards set, to establish standards for industry as well, 
other than that which might have been by other regulation or 
congressional regulation.
    Mr. Reichert. So the port facilities owned by foreign 
governments or foreign companies would come under the 
jurisdiction of the captain of the port as far as training?
    Admiral Bone. Yes.
    Mr. Reichert. Are those facilities also responsible for 
hiring any security personnel?
    Admiral Bone. Yes. They are responsible for both the 
training program under MTSA and under the regulations that were 
implemented, as well as identification of security personnel 
and the responsibilities in providing security.
    Mr. Reichert. Who does the background investigation on 
those security personnel hired by those foreign governments or 
foreign companies?
    Admiral Bone. The background investigation at this time is 
subject to State and local background checks.
    Mr. Reichert. There is no Federal background investigation 
on these employees?
    Admiral Bone. No, there isn't.
    Mr. Reichert. Who is responsible for the training of the 
longshoremen? Do they participate in security training?
    Admiral Bone. Again, the facilities, normally. Where 
longshoremen are employed, it should be included as part of 
their plan. And I know in New York and New Jersey, by example, 
there is an organization that went about training them 
collectively because they operate between multiple facilities.
    Mr. Reichert. Thank you, Mr. Chairman. I yield the balance 
of my time.
    Mr. LoBiondo. Thank you, Mr. Reichert.
    Mr. Taylor, are you prepared or do you need a minute?
    Mr. Taylor. Thank you, Mr. Chairman.
    Admiral, number one, I want to congratulate the Coast Guard 
on having the courage not to tout the company line. And I am 
sure somewhere somebody's career is probably grinding to a 
halt. But I want to let you know I appreciate the concerns that 
have been expressed on the part of the Coast Guard. And I think 
our democracy is best served when people do speak their minds, 
even if it is not what the folks in the White House and maybe 
even the folks in this building want to hear.
    What troubles me--and I think you articulated it pretty 
well--is rather than a physical or even electronic search of 
the containers, it has been the Coast Guard's policy to more or 
less rely on an honor system, an honor system involving, in 
many instances, a foreign manufacturer, a foreign port, a 
foreign steamship, and then you add to that equation quite 
possibly now a foreign nation-held port on our end. So given 
all of that, you have already got three weak links in the 
chain. Why would it make sense to add a fourth weak link in 
that chain?
    Admiral Bone. Well, first off, post-9/11, we have the 
infrastructure and the laws that we have with regard to 
utilization of ports, who can operate within them, et cetera, 
and MTSA provided certain authorities to execute within that. I 
don't see everything as a weak link.
    In fact, I see much of industry as part of our strength in 
that they have made significant investments in order to provide 
security. They have significant investments in and by 
themselves in the manufacturers themselves to protect their 
cargos and not allow them to be compromised. So------
    Mr. Taylor. If I may, Admiral.
    Admiral Bone. Yes, sir.
    Mr. Taylor. What percentage of these Chinese firms that we 
are counting on to tell us something is wrong would be state-
owned?
    Admiral Bone. I don't have that--I don't have the exact----
--
    Mr. Taylor. Is it fair to say that some of them would be 
state-owned?
    Admiral Bone. Government? Government owned or influenced? 
If they are Chinese, I would imagine so.
    Mr. Taylor. And aren't we at opposite positions over the 
future of Taiwan with the Nation of China?
    Admiral Bone. Yes. But we have also had areas where we 
agree.
    Mr. Taylor. OK. But getting back to the Taiwan issue, which 
apparently is the biggest issue at the moment, so, again, we 
are counting on, I regret to say, a possible foe, not 
necessarily a definite foe, but a possible foe to tell us if 
something in that container could harm Americans.
    Admiral Bone. I would have to defer to Customs on the 
container-specific issue, as they own the container cargo 
portion of the supply chain. But we work closely as they target 
containers for examination, and if we find there is a threat or 
we believe there to be a threat, we will intercept it offshore 
and it won't arrive at our ports, if it is believed to be a 
threat and we are able to vett it.
    I guess what I am not--I don't want to leave an impression 
with any member of Congress or anyone else that if there is a 
viable threat in the supply chain, that we don't vett that out 
collectively with CBP, Coast Guard, and any other agency, 
including DOD, to assist us in removing that threat from the 
U.S. or not allowing it to come here. And it could be a 
container, it could be an individual, it could be some other 
cargo that is not in a container. We know that drugs and 
illegal immigrants come in every day and not in containers. I 
don't void myself of all the other potential threat vectors.
    Mr. Taylor. I am just curious Admiral--and, again, it is to 
make my point on what I think is the weakness of your honor 
system--what is the Coast Guard's policy on drugs for your 
personnel?
    Admiral Bone. There is zero tolerance.
    Mr. Taylor. Do you count on your personnel to come forward 
and say I smoked a joint last weekend, or do you have random 
testing?
    Admiral Bone. No, we have tests. And maybe, I am sorry, you 
might not have been in here earlier, but since July 2004 we 
have boarded 16,000 vessels and turned away 143 of those 
vessels or expelled them from the ports as a result of their 
inability to provide for the security that is necessary. We 
do--we provide protection and escorts around other vessels so 
that they can't be compromised and there couldn't be a small 
boat attack.
    Are we doing everything? Are we examining every vessel that 
comes in? No. But we are using the best intelligence in the 
targeting system in order to address that threat, and we don't 
believe--I don't believe for a minute that a terrorist will 
say, hey, here I am coming, I have got a weapon, and I am going 
to bring it to the United States. We address and we evaluate 
threat and risk every single day on every movement, whether or 
not it is coming foreign or it is moving through our waters 
domestically, and decide how to address it.
    Mr. Taylor. What percentage of the approximately 20 million 
container equivalents that came into the Country last year were 
inspected by the Coast Guard or Customs?
    Mr. Ahern. I can tell you exactly of the 11.3 million 
containers that came into the Country from foreign, 569,250 of 
those containers were examined by United States Customs or 
Border Protection. That is the 5 percent figure that continues 
to be utilized.
    But I think it is important again to go back to the various 
layers in the overall supply chain. We do begin overseas with 
getting manifest information 24 hours in advance. We then run 
that through a very rigorous intelligence system to determine 
which one of those pose for risk. We look at that body, that 
100 percent body that has been scanned and scored for risk, 
then receives our attention upon arrival.
    We need to take into consideration also, as far as whether 
the verification process--we like to call it the validation 
process--of those partners that we have under the Customs-Trade 
Partnership Against Terrorism. We have gone to the foreign 
locations, to the suppliers, vendors, manufacturers, to see 
what kind of security practices they have in place. So it is a 
trust, but it also is a verified process that we have in place 
under that particular undertaking of our layered strategy.
    Mr. Taylor. Thank you, Mr. Chairman.
    Mr. LoBiondo. Thank you.
    I would please ask and remind all the members we have a lot 
that want to ask questions, to try as best they can for the 
five minutes.
    With that, we will go to Mr. Simmons.
    Mr. Simmons. Thank you, Mr. Chairman. I will do my best to 
say within the limit.
    Thank you, gentlemen, for coming in and testifying today. 
This is clearly an important issue. Many of us have ports in 
our districts; many others are concerned about the security 
implications of this proposal.
    Secretary Baker, on page 8 of your testimony you refer to 
the role of terminal operators and you say there has been a lot 
of attention in recent weeks about the threats posed by 
terminal operators. Let me clarify what they do. They do not 
run ports. They certainly don't provide or oversee security for 
the entire port complex. That is the responsibility of the 
government and the local port authority, which is usually a 
government agency, terminal operators do not obtain a 
comprehensive window into the breadth and depth of security 
measures, et cetera.
    I think I understand what you are saying, but when I refer 
to Coast Guard Regulations 33 C.F.R. Chapter 1, Section 105-
265, it states: Security Measures for Handling Cargo. General. 
The facility owner or operator must ensure that security 
measures relating to cargo handling are implemented. As it goes 
on, MARSAC Level 1. At MARSAC Level 1, the facility owner or 
operator must ensure the implementation of security measures. 
MARSAC 2: the facility owner or operator must also ensure the 
implementation of additional security measures. MARSAC Level 3: 
the facility owner or operator must ensure the implementation 
of additional security measures.
    The facility operator is listed in these regulations at 
every level of security, and so I don't understand. As I 
understand your testimony, facility operators or terminal 
operators have no responsibility for security, but under the 
Coast Guard regulations they have responsibilities at every 
level. How are we to understand who is responsible, what those 
responsibilities are, and how are we to understand why there 
shouldn't be concerned, security concerns about foreign 
facility operators when it appears, under the regulations, that 
they are charged with security responsibilities at every level?
    Mr. Baker. I certainly would not suggest that they have no 
responsibility for security. And I think if you read on page 9 
we actually say that the Maritime Transportation Security Act 
requires each terminal operator, because they operate inside 
the port, to file a facilities security plan with the Coast 
Guard that specifically details their compliance with all of 
the security measures required by Federal law, including those 
enforced by the Coast Guard. So there was no effort to say 
there was no security responsibility on the part of a terminal 
operator.
    I think it is fair to say that the early coverage of this 
issue, in particular the first week, suggested that somehow we 
were outsourcing security for eight major ports to a foreign 
company. That was never the case, but it was a mis-impression 
that we were seeking to combat. There is no doubt that everyone 
who has a facility inside a port has security obligations that 
are enforced by the Coast Guard.
    Mr. Simmons. According to these regulations, the facility 
operator is charged with detailed responsibilities at every 
level for security. According to your testimony, they don't run 
ports, they don't provide or oversee security for the complex, 
they do not obtain a comprehensive window into the breadth and 
depth of security measures.
    I just think that if there is confusion on this issue out 
there--and I would say that in my district there is not a lot 
of confusion--they don't want these facility operators to be 
engaged in any great detail with the security operation of the 
port. But the regulations say they are. And that is the crux of 
the problem. If I can't figure it out based on your testimony 
and based on the regulations, how can the American people 
figure it out? And I guess their feeling is, hey, enough 
already; this is a bad deal, vote no.
    Admiral Bone. Congressman, maybe just to explain a little 
bit. Within the confines of the facility itself, again, within 
from basically the pier to their gates, where the trucks come 
in and out of or people enter, and the fences around it, that 
facility, that is the responsibility of that foreign operator 
to provide for the security--in other words, access control 
measures, not to let people through, not to let people have 
access to those cargo, in other words, not unrestricted access 
to those cargos and to vett people as they come through there 
and to protect that facility against an external threat which 
may be by an individual or some other entity.
    Those different MARSAC levels are different threat levels, 
and they correspond then to protective measures. It may be 
increased patrols, it may be increased security around 
particularly restricted areas where high-risk cargos may be 
placed. But that is what that responsibility really entails. It 
is not--in any way do they know what the Coast Guard, Customs, 
or ICE, or other agencies, or even State and local police 
security operations are with regard to other protective 
measures, or even our oversight and review of their operations 
in the conduct of their responsibilities.
    So I guess I don't want to leave kind of a misunderstanding 
of what port security is versus that facility security 
responsibilities of that owner. Hopefully that helps.
    Mr. Simmons. Thank you, Mr. Chairman.
    Mr. LoBiondo. Thank you. We are going to go to Mr. Nadler 
for Mr. Nadler's five minutes, then we are going to break for 
the vote and then go for a short recess for the vote and then 
come back.
    Mr. Nadler.
    Mr. Nadler. Thank you very much, Mr. Chairman.
    Mr. Ahern, I think you stated that in 43 foreign ports all 
high-risk containers are screened electronically. Is that what 
you said?
    Mr. Ahern. When we score the risk on the containers 
overseas at the 43 ports------
    Mr. Nadler. That is what you said.
    Mr. Ahern.--the protocol is for those to be screened before 
lading.
    Mr. Nadler. Yes. The answer is yes. Thank you. What percent 
of all containers in foreign ports are screened electronically?
    Mr. Ahern. Electronically? A hundred percent.
    Mr. Nadler. What percentage of all containers are screened 
by gamma ray technology and by radiation scanners?
    Mr. Ahern. OK, that wasn't your first--you said 
electronically.
    Mr. Nadler. Forget that.
    Mr. Ahern. A hundred percent through our systems are.
    Mr. Nadler. I just asked the second question.
    Mr. Ahern. It would be 1 percent.
    Mr. Nadler. One percent of all containers are screened in a 
way that would assure us that no nuclear materials are aboard.
    Mr. Ahern. That is the correct number today, yes.
    Mr. Nadler. One percent. And when are we going to get to 
100 percent?
    Mr. Ahern. As we continue to deploy additional resources 
and technology to these ports.
    Mr. Nadler. I asked for a date.
    Mr. Ahern. Specific time frame, I don't have that.
    Mr. Nadler. Would it be within a year or two?
    Mr. Ahern. As we move forward for the rest of this calendar 
year------
    Mr. Nadler. You are not answering.
    Mr. Ahern.--43 to 50 ports, and that will get us to 85 
percent of the containers------
    Mr. Nadler. No, no, no. That will get us to 85 percent of 
the risky containers, right?
    Mr. Ahern. That will get us to 85 percent of the entire 
universe of containers.
    Mr. Nadler. Eighty-five percent of the entire universe of 
containers will be screened by gamma ray and------
    Mr. Ahern. No.
    Mr. Nadler. That was my question.
    Mr. Ahern. Well------
    Mr. Nadler. Please answer my question.
    Mr. Ahern. Give me an opportunity to provide it in a full 
context.
    Mr. Nadler. I am not asking for that. You provided it 
before. You are saying basically that eventually it will get to 
85 percent--we will have this equipment in 85 percent of 
foreign ports and we will screen a lot of the containers that 
we determine are high-risk.
    Mr. Ahern. That is correct.
    Mr. Nadler. OK. My point is that I think it is absurd the 
same Department that determined that the Dubai deal is not 
high-risk determines which containers are high-risk. I feel 
very secure with that.
    I believe that since any low-risk container from a reliable 
supplier on the way from the factory to the port somebody can 
substitute an atomic bomb for a television set, there is no 
such thing as a low-risk container. This Country will not be 
safe until every container is scanned by gamma ray and other 
technology to make sure there are no nuclear materials aboard.
    Am I correct in assuming that there is no plan within a 
specific time frame by this Administration to put into place a 
situation which every single container is scanned in the way 
that I was talking about?
    Mr. Ahern. That would be your understanding within our 
organization.
    Mr. Nadler. That every--OK, there is no plan to scan every 
container.
    Let me ask you a different question. Has the DHS mandated 
the use of tamper-proof seals on containers once they are 
scanned?
    Mr. Ahern. We currently, in testing with container security 
devices and advanced container security devices, the initial 
results, we are only seeing about a 94 percent accuracy rate, 
which means 6 percent of that universe of 11 million containers 
need to be resolved because of false alarms or nuisance alarms. 
So we need to get------
    Mr. Nadler. So right now there is zero percent using these 
tamper-proof seals?
    Mr. Ahern. We are in testing with the sum number of those 
containers. Until we actually get a reliable------
    Mr. Nadler. Ninety-four percent isn't reliable enough as an 
improvement over zero percent?
    Mr. Ahern. Well, it means we will have to be resolving 
nuisance alarms or false positive-
    Mr. Nadler. And it is better to risk atomic bombs in 
American ports than to resolve nuisance alarms?
    Mr. Ahern. Of over 600,000 containers that are just 
nuisance or false alarms. That is not a good utilization of our 
resources, sir.
    Mr. Nadler. OK. Now, not all foreign governments allow CBP 
personnel to see the scans, sometimes they only report the 
results of the scan to CBP, is that correct?
    Mr. Ahern. That is correct in------
    Mr. Nadler. And what do we do to those foreign governments 
to get them to change that policy?
    Mr. Ahern. We are continuing to engage to go ahead and 
change that policy------
    Mr. Nadler. We are talking to them, in other words.
    Mr. Ahern.--to see if we are able to go ahead and actually 
have the images remoted to us. We are looking at that 
technology currently. And also please understand, too, that we 
have the ability to issue a do not lade order if it is not 
resolved to our risk prior to putting on board------
    Mr. Nadler. Well, are we prepared to issue a do not load 
order to every single container that we don't see the scan of? 
And if not, why not?
    Mr. Ahern. If that makes sense to us, that is what we will 
do.
    Mr. Nadler. Excuse me. I asked you a question.
    Mr. Ahern. That would not be------
    Mr. Nadler. Are we prepared to do that now? Not if that 
makes sense. Does that make sense?
    Mr. Ahern. We do it now when our risk is not resolved prior 
to lading.
    Mr. Nadler. Well, but you are estimating a risk. I asked a 
different question. Does it make sense, and if not, why not, to 
insist on a do not load order on every container if we haven't 
seen the scan? And if not, why not?
    Mr. Ahern. If the risk is not resolved to our satisfaction 
before it is placed on a vessel, it will be------
    Mr. Nadler. Why should we not------
    Mr. Ahern.--do not load order.
    Mr. Nadler. Excuse me. Why should we not insist that we see 
every single scan? Why does that not increase our security?
    Mr. Ahern. We are in the process of doing that right now 
with the remaining country we have had some challenges with. 
But we are getting------
    Mr. Nadler. You just told me we are not doing that. We are 
not prepared to order a do not load order on every container 
that we don't see the scan of. You just said that.
    Mr. Ahern. Let me put it in full context again, please. If 
the risk is not resolved prior to being put on board a vessel, 
we will give a do not lade order.
    Mr. Nadler. Is there any other--all right. You are saying 
if the risk is not resolved, but that is somebody's estimate of 
the risk. On the assumption that every container has a risk if 
we haven't seen the scan, what are we doing and when we will be 
assured that we will see every single scan? Not every single 
scan of a container that someone decides is a risky container, 
every single container.
    Mr. Ahern. I don't agree with your assumption. I think 
there needs to be risk management employed on------
    Mr. Nadler. OK, so you don't agree with the assumption that 
we should inspect or scan and see the scan of every single 
container, only those containers that, on the basis of some 
outside parameters, are judged to be high-risk.
    Mr. Ahern. No. What I want to state is, as accurately as I 
can, responsive to your question, is not every container poses 
a risk. You have a different view of that.
    Mr. Nadler. Yes, I do. Now, why do some containers not pose 
a risk, because they are reliable suppliers? Why?
    Mr. Ahern. Verification of the supply chain, suppliers, 
vendors, manufacturers, that have had------
    Mr. Nadler. All right, but once you verify the supply 
chain, you have got a reliable supplier, et cetera, how can you 
guarantee that some driver wasn't bribed to take a long lunch 
hour and somebody walked in, especially when you don't have 
tamper-proof seals that communicate with the U.S. Government on 
that container? How do you know someone didn't put something in 
that container, didn't replace a television set with an atomic 
bomb? So how can you always be certain of that?
    Mr. Ahern. You can never be 100 percent certain.
    Mr. Nadler. Ah. So there is always some risk.
    Mr. Ahern. We assume a certain level of risk.
    Mr. Nadler. We assume a certain level of risk and we are 
not willing to follow a policy to zero out risk on potential 
atomic weapons. That is what you are telling me.
    Mr. Ahern. No, I wouldn't say that.
    Mr. Nadler. You are saying minimizing the risk, but you are 
not saying zero it out.
    Mr. Ahern. I am saying we accept a certain level of risk--
----
    Mr. LoBiondo. Excuse me one minute. I apologize for 
interrupting. We are just about at the six minute mark, Mr. 
Nadler.
    Mr. Nadler. Well, just finish that answer.
    Mr. LoBiondo. You are well over five minutes.
    Mr. Nadler. OK, I will conclude by summarizing, then, that 
you want to minimize the risk, but you don't think it feasible 
or proper or desirable to eliminate the risk, and we disagree 
on that. Thank you very much.
    Mr. Ahern. I don't think it is feasible to scan every 
container coming into the United States overseas.
    Mr. Nadler. Why not?
    Mr. Ahern. I don't believe, first, there is a risk present 
to do 100 percent------
    Mr. Nadler. You just said it isn't feasible. Why is it not 
feasible if we wanted to? If we spent enough money, why is it 
not feasible?
    Mr. Ahern. Well, I think certainly if there are no 
limitations to finances, then certainly anything is possible.
    Mr. Nadler. Would it cost billions or hundreds of millions 
or millions?
    Mr. LoBiondo. Let me apologize once again. Some of us don't 
want to miss the vote. I apologize to the panel. We will be in 
a short recess. We will be back as soon as the vote is over.
    [Recess.]
    Mr. LoBiondo. We are going to reconvene. If our panelists 
would please take a seat.
    Mr. Boustany was going to be next, but he is not here, so 
we are going to go with Mr. DeFazio.
    Mr. DeFazio. Thank you, Mr. Chairman. I am in a 
simultaneous markup on aviation security. I appreciate the 
latitude.
    I would like to go to the issue of the containers, Mr. 
Ahern. When I had to leave to go to the other markup, you had 
mentioned that if a container is identified by intelligence as 
a risk, it will be screened overseas if we have persons 
available. Is that correct? And then I understand subsequently 
you said 1 percent is screened overseas, but another 4 percent 
are screened here. So that means a total of 5 percent of all 
containers are identified as being at-risk, is that correct?
    Mr. Ahern. Five percent of the universe is identified for 
risk.
    Mr. DeFazio. OK. Now, let me see if I understand the 
system. There will be a factory somewhere, someplace where they 
load the container. We have inspected some portion of these 
workplaces to see that they have a paper plan and they have a 
security guard, or whatever else. But we don't have an ongoing 
presence at any of the places where these containers are 
packed, is that correct?
    Mr. Ahern. We have done validations------
    Mr. DeFazio. Yes, you have visited the site once at some 
point in time and said, OK. OK, so there is no American 
presence when it is packed. So then we receive an electronic 
transmission or bill of lading for that container which 
purports to tell us what is in the container. And then we crank 
that into our security universe and decide whether it is a 
risk. So we are not there when it is packed.
    Now, when the container comes to the port, 1 percent are 
screened overseas, OK. Now, I understand there was also a 
discussion of the seals while I was gone, and you have 94 
percent confidence that the seals are good enough, but that 
doesn't get into the whole idea of removing an entire panel of 
the container to access the contents and going around to the 
seal, does it? I mean, basically these containers can be opened 
without disturbing the seal, and even then, if you disturb the 
seal, you may be able to fudge that, is that correct?
    Mr. Ahern. The full answer that was provided on the 94 
percent figure I would like to restate for you.
    Mr. DeFazio. OK, well------
    Mr. Ahern. We are currently in testing------
    Mr. DeFazio. The answer would be yes. OK.
    Mr. Ahern. We are currently in testing and we have a 94 
percent accuracy rate of the containers that are currently in 
testing, meaning we have 6 percent------
    Mr. DeFazio. Again, any and all entry, not just the seal.
    Mr. Ahern. The 6 percent false alarm rate on the current 
container security devices that are being tested.
    Mr. DeFazio. But even that false alarm rate doesn't go to 
whether the container was entered somewhere else.
    Mr. Ahern. These are container security devices. We are 
testing actually four or five different------
    Mr. DeFazio. OK, that is good. Well, hopefully we can move 
ahead and we are not, you know, going to delay further.
    Mr. Ahern. We would------
    Mr. DeFazio. So now we have a container--excuse me, sir. So 
we have a container, we didn't observe it being packed; we have 
examined what they have told us is in it; 1 percent of the time 
we validate that; and then we have seals that can fail. Now we 
will get to the Admiral.
    Admiral, we then load these things on ships, is that 
correct? And these ships, do we know who own ships registered 
in Liberia? Can we see through the registry now?
    Admiral Bone. We do have the owner and the operator 
information, as well as the flag state.
    Mr. DeFazio. Well, do we have it really or do we get back 
to a lawyer somewhere?
    Admiral Bone. Well, if you are asking do we know the 
banking transitional, you know, and every layer behind it?
    Mr. DeFazio. Right.
    Admiral Bone. No.
    Mr. DeFazio. OK.
    Admiral Bone. We have someone, an entity that is legally 
liable and responsible.
    Mr. DeFazio. But that doesn't tell us who really owns it, 
whether Osama bin Laden owns a fleet of ships or not, we don't 
know. Now, how about------
    Admiral Bone. Well------
    Mr. DeFazio. If we could, let us go to the crews, and we 
got into this a few years ago. The IMO has certified schools in 
the Phillippines, it has never physically visited them, and 
they have been documented in new reports as selling 
certificates. Now, that is a problem, because you end up with 
incompetent people. But beyond that, can you tell me that 
background checks are being run on the crews of foreign ships 
coming here?
    Admiral Bone. I can tell you that all the crews, every 
individual that comes here, runs through an intelligence 
background.
    Mr. DeFazio. Right. With their fingerprints?
    Admiral Bone. No, there is no biometric------
    Mr. DeFazio. No. We use the name.
    Admiral Bone. There is no------
    Mr. DeFazio. The name that they gave in the Phillippines 
when they bought the phony certificates.
    Admiral Bone. They have a passport or a travel document.
    Mr. DeFazio. Sure. Right. Those can't be forged, though.
    Admiral Bone. And we have that as well.
    Mr. DeFazio. A Belgian passport, do we accept those?
    Admiral Bone. We have people trained to basically find and 
identify those------
    Mr. DeFazio. Right.
    Admiral Bone.--and we have.
    Mr. DeFazio. Sure. But--so we don't know who owns the 
ships, we don't know what is in the containers, and we don't 
know who the crews are.
    Admiral Bone. We do know the crews, sir.
    Mr. DeFazio. Well, you know the names of the crews; they 
aren't fingerprinted, we haven't run thorough background 
checks. They are flying under flags that can be--OK, let us 
give you that. Do we track the ship? Because they have to tell 
us where they have been. How do we know where they have really 
been? Do we track the ships? Do we require transponders on the 
ships?
    Admiral Bone. There is AIS transponders------
    Mr. DeFazio. No.
    Admiral Bone.--but there is not long-range identification 
to where I can place you------
    Mr. DeFazio. Right, 20 miles and it only covers a few 
ports. Is that correct?
    Admiral Bone. Sir?
    Mr. DeFazio. So we don't cover the entire coastline of the 
United States with that system
    Admiral Bone. The AIS transponders are required on all the 
vessels, and the transponders are able to be received by 
aircraft as well as by Coast Guard vessels.
    Mr. DeFazio. OK. But we don't track every ship within 20 
miles of our shore.
    Admiral Bone. We don't have a vessel tracking system------
    Mr. DeFazio. Right.
    Admiral Bone.--that you are referring to, but we have the 
ability.
    Mr. DeFazio. We have the ability. That is good. I 
appreciate it. Hopefully we will actually use that ability. 
Now, there are maritime companies that actually track their 
ships beginning to end, because they are worried--so let us 
give you everything on the containers. That is great, 94 
percent reliability.
    What if the ship stops in the Straits of Malacca and loads 
a nuclear bomb? Do we have any way, other than our intelligence 
people might tell us about it if they know about it, but we are 
not tracking that ship, so we don't know that they made an 
unscheduled stop in the middle of the ocean in the Straits of 
Malacca, because we are not requiring known technology, 
technology that is used commercially, the United States of 
America isn't saying, you know, what, no ship is coming to the 
United States of America unless we know where that was at all 
times and we track it at all times, because we are concerned 
they might stop somewhere and put--do we inspect the hulls of 
the ships?
    I mean, we are worried about containers, but what about 
something that gets loaded on the ship? We are not very good on 
containers; what about loading something on the ship?
    Admiral Bone. Let me answer your first question about 
tracking. We would have to go into a classified environment if 
we are going to talk about all the mechanisms of tracking that 
we have access to.
    Mr. DeFazio. So you are telling me------
    Admiral Bone. We don't have a commercial tracking system--
----
    Mr. DeFazio. Right.
    Admiral Bone. --that we track all ships with.
    Mr. DeFazio. So commercial companies can afford it and some 
of the better ones use it, or they are worried about piracy, 
but we don't require it.
    Admiral Bone. Again, the Coast Guard does not have a 
commercial tracking capability------
    Mr. DeFazio. Right.
    Admiral Bone.--that the Coast Guard owns and operates, 
other than near-shore capability.
    Mr. DeFazio. Right.
    Admiral Bone. And even the long-range identification 
tracking will be run out of some international body, most 
likely, rather than just a U.S.-owned or Coast Guard-owned and 
operated that will allow us to track commercial vessels. In 
fact, we have a group right now at IMO looking at the technical 
requirements at COMSAR and expect a vote this May from the full 
committee at IMO on LRIT, which looks extremely favorable.
    But we are working to get to where you are asking, but we 
are not there yet.
    Mr. DeFazio. Right. But I guess the point is, after 9/11, 
the United States could demand these things. We are the people 
who are buying all this junk from around the world and running 
a huge and growing trade deficit, and people want to ship 
things here; we are not shipping much out, so they couldn't put 
retaliatory demands on us that we couldn't meet.
    So the idea would be why not, if it is commercially viable 
technology, begin to demand that? OK, so we don't know exactly 
what is in the containers, but we might screen them here. We 
don't know if the ship stops somewhere and they loaded. What 
are we doing routinely in terms of ship inspections, given the 
fact that maybe the bomb isn't in the container, maybe it has 
been loaded into the hull of the ship at sea? I am not talking 
about once it gets in the port, because once it gets in the 
port, we kind of have a problem if they decide to detonate.
    Admiral Bone. At sea--in fact, at sea, there are at-sea 
boardings. As I said, there are 16,000 boardings------
    Mr. DeFazio. Out of how many ships?
    Admiral Bone. Out of 7500 foreign flag vessels that make 
approximately 7200 visits------
    Mr. DeFazio. Right.
    Admiral Bone.--in the U.S. a year.
    Mr. DeFazio. So we do a quarter of them, basically, a 
little more, a little less.
    Admiral Bone. But I think, again, and, again, you know, you 
are going to go back to the same issue of targeting based on 
historical information and based on intelligence that we 
basically target vessels for that, both with regard to their 
cargo, their owner, their operator, their background history, 
as well as that of the people onboard, as well as where the 
cargo--the cargo itself and who it may be bound for. Those are 
all determinations of which vessels are boarded.
    Mr. DeFazio. OK, so------
    Mr. LoBiondo. Excuse me, Mr. DeFazio.
    Mr. DeFazio. Thank you, Mr. Chairman. I have got to go back 
to Aviation. Thank you.
    Mr. LoBiondo. OK. Thank you.
    Mr. Boustany.
    Mr. Boustany. Thank you, Mr. Chairman.
    Last week I read the Coast Guard report pertaining to the 
DP World transaction which cited intelligence gaps that would 
make it difficult to determine the actual risk involved with 
this transaction, and the Coast Guard, in general terms, 
reported that these gaps included a potential for foreign 
influence on DP World, unknown backgrounds of DP World 
personnel and general questions about terminal security.
    And it is my understanding that these were resolved before 
the CFIUS approval, but they were resolved merely by obtaining 
assurances, as you had stated, Mr. Baker, that DP World would, 
in the future, provide the Coast Guard with additional 
information about personnel at the terminals and that they 
would enroll in the Customs-Trade Partnership, where they are 
saying that they will tighten security in exchange for the 
privilege of foregoing certain container inspections and so 
forth.
    Has any additional information surfaced that has been 
provided by DP World at this time, as of today? Either of you.
    Mr. Baker. Why don't I let the Coast Guard address the 
intelligence report that they generated, and we can also talk 
about additional information.
    Mr. Boustany. Thank you.
    Admiral Bone. Again, just as you stated, you know, his was 
an internal assessment, as we are a member of DHS and we are a 
full partner actually in review of the CFIUS process. And you 
are correct in that the letter of assurance--this is one of 
those areas where you know what you know and what you don't 
know you don't know.
    The letter of assurances will provide us access to that 
information, and, again, the contract portion hasn't been--at 
which point in time the Department can ask for those names of 
those individuals, employees and other members of DPW or P&O if 
P&O personnel are being kept on to have the background check 
conducted, et cetera. So we don't see anything that limits us 
not only to know that, but also know what other agreements or 
operational agreements they have with other entities.
    We don't have that visibility anywhere else other than, as 
the Secretary indicated, you know, at certain military load-out 
facility areas where those similar type of agreements have been 
reached. So I don't see anything that is going to preclude us 
from obtaining that.
    We also have 30 days before a facility is allowed to 
operate that they are required to amend their facility security 
plan, at which point in time, for example, these letter of 
assurances, we can require that information or any other 
information we believe necessary to provide for the security of 
that facility. That is an amendment process that is currently 
in our regulations that we carried out under MTSA. Now, we 
don't--that doesn't necessarily prescribe a full security plan 
review, but we can identify those areas of risk that we believe 
we need to address.
    Mr. Boustany. What action would you take, under this 
promise of assurances, what actions would you take if you don't 
get forthcoming information within this prescribed period?
    Admiral Bone. We don't allow operations.
    Mr. Boustany. OK.
    Admiral Bone. No vessel could go to the facility. You know, 
you can own something, but nobody can operate it.
    Mr. Boustany. Do you feel like some of the information you 
have requested is starting to flow at this time?
    Admiral Bone. Again, I think that once the transaction 
process goes to some level of completion, I don't know that 
specifically, but as that gets completed, then I fully expect, 
and I know the Secretary and Secretary Baker's intent is to 
pursue that aggressively.
    Mr. Baker. We have talked to the company, indicated that we 
expect to receive the information, and they have been entirely 
cooperative. So as soon as we make the request, we expect to 
get the information. We have done, using the assurance letters 
already, baseline reviews with both the Coast Guard and CBP 
inspecting current operations of the P&O North America 
terminals and have gotten a substantial amount of information 
there. Also, I believethe Coast Guard is doing a foreign port 
inspection of Dubai in this 45-day period.
    Admiral Bone. What I might offer is we have completed 
examination of the P&O ports that they are planning to acquire, 
and we found them to be and remain in compliance, and part of 
the reason for that was literally to be able to say--for DPW to 
be able to not say these were problems that existed currently 
at this facility, before we acquired it, these weren't problems 
that we brought on.
    Our folks just returned from Dubai, visiting all the DPW 
ports in Dubai and conducting port security assessment 
compliance with ISPS and found them in compliance with ISPS 
and, in fact, in many areas exceeding what we have in the 
United States with regard to security measures.
    Mr. Boustany. And you are referring to all the ports owned 
not only by DP Ports, but P&O as well? The entire system that 
would be?
    Admiral Bone. Well, the P&O ports that are being acquired 
by DPW or where even DPW stevedore operations take place.
    Mr. Boustany. Thank you.
    My time has expired. Thank you, Mr. Chairman.
    Mr. LoBiondo. Thank you.
    Mrs. Kelly.
    Mrs. Kelly. Thank you very much, Mr. Chairman.
    There has been a great deal of attention paid to the 
container security, and appropriately so, but too often it is 
forgotten that Dubai Port World would also operate the 
Manhattan cruise terminal, where tens of thousands of 
passengers get on and off of boats; they enter and leave the 
Country every year. We have seen that Al Qaeda operatives have 
targeted cruise lines. The Washington Post reported that just 
three weeks ago. The United States does not let foreign 
countries play any role in security at America's airports, so 
it is concerning that they may play a role in security at 
America's flagship passenger seaport.
    Before you answer--Mr. Baker, this question is directed at 
you--I know that you are going to reiterate the Coast Guard is 
responsible for ship security and terminal operations will 
continue as before, but you and I both know that operating the 
Manhattan terminal would give Dubai Ports detailed information 
about sailing times, passenger lists and locations, 
destinations, crew names and addresses, and other vital 
information that can compromise the safety of the ship and its 
passengers after it leaves the dock. Tell me what specific 
safeguards, if any, the United States Government has demanded 
from Dubai Ports to prevent any of this information from being 
shared with the company and utilized in an adverse way.
    Mr. Baker. I think the assurances we have received to date 
address that to some degree. We have the ability to see any 
information about their U.S. operations. That would include if 
we were concerned that they were gathering or transmitting 
information about sailing times or people involved in cruise 
ship landings, we can------
    Mrs. Kelly. Excuse me, Mr. Baker, but how do you know if 
they are gathering it? We are in an electronic world; there is 
no paper trail.
    Mr. Baker. We have authority to ask for electronic trails 
as well, and it is very difficult, in fact, to hide electronic 
trails, both in transmission and in the systems that you use.
    Mrs. Kelly. What is their obligation to respond if you 
request? Is it merely a request or is there some penalty 
attached?
    Mr. Baker. They have committed to us that they will 
provide, without a subpoena, any information that we ask for 
about any aspect of their U.S. operations. And as I think you 
heard Admiral Bone say, we have all of the authority we need to 
make sure that, if they lose our trust, they are not going to 
be doing business in the United States.
    Mrs. Kelly. Well, if they own the port, sir, it is hard to 
say that they can't do business in the United States. I am 
extremely concerned about the flow of information that could 
jeopardize our cruise terminal in Manhattan. It is an important 
piece of the economics of Manhattan.
    I want to go to another question I have, because I have 
only a few minutes, and I know you are in a hurry because you 
need to leave also.
    The Wall Street Journal recently reported that the UAE 
refused a request from the U.S. Government in 2003 to intercept 
a shipment of nuclear technology facilitated by a man who was 
later convicted by the United States for violating the weapons 
of mass destruction sanctions. Can you discuss how this may 
have been factored into the Government's view of the UAE and 
this specific port deal?
    Mr. Baker. I am aware of the allegation, and we have 
assured members of the Congress that that is going to be 
examined in the course of the 45-day review by the intelligence 
community and by the members of CFIUS. So we are looking at 
that closely. I am not sure whether it was looked at by the 
intelligence community in the first review, and I am not sure 
that the charge has been verified; it appeared on a Web site. I 
don't know whether it is accurate.
    Mrs. Kelly. The charge against whom, sir? The man was 
found, he was found guilty in a U.S. court, as I understand it.
    Mr. Baker. I think the question of whether------
    Mrs. Kelly. In 2003.
    Mr. Baker. I am sorry, I thought you were referring to a 
2003 incident in which Dubai was alleged not to have cooperated 
in an investigation.
    Mrs. Kelly. No, the man was--this instance I am talking 
about, a man was convicted by the United States of America for 
violating the WMD sanctions. And I want to know if this was 
factored in on the UAE with regard to this ports deal.
    Mr. Baker. We did examine, through the intelligence 
community, all of the proliferation and terrorism risks 
associated with Dubai, the owners of the company. We also took 
into account our own experience with the company, with both 
companies, and they have been entirely cooperative and 
professional in their dealings with us.
    Mrs. Kelly. I would like to have you give us more 
information about this, if you could.
    Mr. Baker. I would be glad to.
    Mrs. Kelly. I know you are in a hurry and I am out of time. 
But I would appreciate getting more information about both of 
my questions.
    Mr. Chairman, I hope that is all right with you.
    Mr. LoBiondo. Yes, without objection.
    Mrs. Kelly. Thank you.
    Mr. Baker. Thank you.
    Mr. LoBiondo. Thank you, Mrs. Kelly.
    Mr. Poe.
    Mr. Poe. Thank you, Mr. Chairman.
    I represent Southeast Texas. We border Louisiana, where Mr. 
Boustany represents those good people. Between us is a river. 
We are glad about that. It is the Sabine-Neches Riverway. And 
you travel all the way up the Sabine-Neches Riverway, you show 
up at the Port of Beaumont. The Port of Beaumont ships one-
third of the military cargo that goes to Iraq and Afghanistan. 
We get it from Fort Polk and we get it from Fort Hood. One of 
the terminals and stevedore operations involved in this UAE 
deal is a terminal and a stevedore operation that happens to 
load that cargo to Iraq and Afghanistan.
    Of course, the port is protected by the Coast Guard. And, 
Admiral, I want to tell you that the Coast Guard folks there do 
a tremendous job going up and down that Riverway in those 
rubber boats. About half the people on active duty are 
reservists from all over the United States. They do a good job. 
I wanted to let you know that.
    But this whole thing concerns me about homeland security. 
My background as a judge trying outlaws for 22 years always 
makes me suspect of what I see going on.
    And, Mr. Baker, if I understand your comments correctly, 
you say that the UAE government-owned corporation is going to 
employ the best securities practice. And the more I hear about 
the cooperation of the UAE, this government that happens to own 
a corporation in our Country, it sounds like we are turning 
over security to that country, we are outsourcing homeland 
security to a foreign government. And we can label it something 
else, but that is the way I see it and the way it comes across 
to me.
    A couple of questions. In this CFIUS situation, how many 
proposals have been denied since 9/11?
    Mr. Baker. It is difficult to say that any have been 
denied. A number have been------
    Mr. Poe. Let me understand your question. Have any of them 
been denied?
    Mr. Baker. Formally, no. Several, I am sure------
    Mr. Poe. How many of them have been reviewed?
    Mr. Baker. We do about 65 or 70 a year, so approximately 
450, I think.
    Mr. Poe. And they have all found to pass muster on security 
issues?
    Mr. Baker. No, that is not correct.
    Mr. Poe. But none of them have been denied.
    Mr. Baker. Well, in many cases people have withdrawn them 
because they did not believe that they would get approval.
    Mr. Poe. Because they didn't pass muster on security 
issues.
    Mr. Baker. That is right.
    Mr. Poe. All right.
    We have heard that the Administration is responsible for 
homeland security and basically through Homeland Security 
Department, comments have been made that we are in charge of 
that, so you can "trust us." I don't do ``trust us.'' I want 
results and obvious security measures that are employed.
    Let me ask you a hypothetical. You know, if the war on 
terror takes us to some other country that happens to be an 
ally with the UAE, and here we are shipping cargo from Texas to 
the war on terror all over the world, doesn't common sense say 
that might be a problem, giving that information to a 
government that happens to own a company in a port that ships 
cargo for the war on terror? Doesn't common sense say that that 
is a problem?
    Mr. Baker. Obviously, there is a lot of information that 
you wouldn't want to provide to anyone outside the U.S. 
Government, and we do our best, as does the Defense 
Department------
    Mr. Poe. Let us just talk about the information they have. 
They have the stevedore operation, they have the manifest, they 
know when ships are leaving, they know what is on the ship, 
they know where the ship is going, they know who loaded the 
ship, they know when the ships are coming into port, they know 
where they come from and what is on those ships. That doesn't 
seem like maybe a security risk, letting a country, a foreign 
country have that information?
    Mr. Baker. Depends on the information. The information 
about what is coming in is not necessarily--what is in those 
containers is not necessarily known but to the terminal 
operator or to the stevedoring operation. They know what 
container they are supposed to move, they don't------
    Mr. Poe. So you don't see, in my hypothetical--I am sorry, 
I just have a couple of minutes.
    Mr. Baker. I am sorry.
    Mr. Poe. That hypothetical, you don't see that being a 
problem?
    Mr. Baker. There is risk in every transaction, and I am not 
trying to say that there is no risk in------
    Mr. Poe. Then why would we want to take another risk?
    Mr. Baker. This risk we believe we have taken special steps 
to minimize well beyond the steps that have been taken in the 
context of all the other foreign owners and operators of 
terminals in the United States today.
    Mr. Poe. It just seems like, to me, that this U.S. port 
marriage to the UAE has all the semblances of a bad marriage 
starting out. You know, they say that a failed marriage starts 
out what a deal, then it is an ordeal, then it is no deal. And 
I think this ought to be a no deal before it becomes an ordeal, 
Mr. Baker.
    And I want to thank all of you for your time for being 
here. I have some more questions, but I am going to turn them 
in in writing.
    Thank you, Mr. Chairman.
    Mr. LoBiondo. Thank you, Mr. Poe.
    We are kind of in a dilemma here because we have got more 
questions for the first panel, but, Mr Baker, you have an 
appointment you are late for. Mr. Flynn has a plane to catch. 
We desperately want to hear you. And the other second panel 
members also have challenging time lines. We thought we were 
doing a good thing by opening this up to the full Committee. I 
am having second thoughts about it.
    But to the first panel, gentlemen, thank you very much. We 
will probably want to try to follow up on some things at a 
future date. But thank you.
    And we will do a switch-out to the second panel.
    I thank the second panel for joining us. We have Dr. 
Stephen Flynn, who is the Jeane J. Kirkpatrick Senior Fellow 
for National Security Studies, Council on Foreign Relations. We 
have got Mr. Kurt Nagle, who is President of American 
Association of Port Authorities; we have Dr. James Jay 
Carafano, Senior Research Fellow for Defense and Homeland 
Security at the Heritage Foundation; Mr. Robert Scavone, who is 
Executive Vice President of Strategic Planning and Development 
for P&O, Ports of North America; and Mr. Gary Brown, who is the 
Union Security Liaison for the International Longshore and 
Warehouse Union.
    With your indulgence, gentlemen, I am going to ask that Dr. 
Flynn give his statement, and we will try to allow you, Dr. 
Flynn, to get on your plane.
    And then, Mr. Carafano, we know you have a pretty important 
appointment this afternoon, and we will try to clear you out as 
well.
    Dr. Flynn, please proceed.

TESTIMONY OF DR. STEPHEN E. FLYNN, JEANE J. KIRKPATRICK SENIOR 
   FELLOW FOR NATIONAL SECURITY STUDIES, COUNCIL ON FOREIGN 
 RELATIONS; KURT J. NAGLE, PRESIDENT, AMERICAN ASSOCIATION OF 
PORT AUTHORITIES; DR. JAMES JAY CARAFANO, PH.D, SENIOR RESEARCH 
    FELLOW FOR DEFENSE AND HOMELAND SECURITY, THE HERITAGE 
FOUNDATION; ROBERT SCAVONE, EXECUTIVE VICE PRESIDENT, STRATEGIC 
PLANNING & DEVELOPMENT, P&O PORTS NORTH AMERICA, INC.; AND GARY 
 L. BROWN, UNION SECURITY LIAISON, INTERNATIONAL LONGSHORE AND 
                        WAREHOUSE UNION

    Mr. Flynn. Thank you very much, Mr. Chairman. I am 
delighted to be back with you again to talk about this very 
sobering topic. This morning we are, of course, talking about 
the Federal Government's progress in implementing the maritime 
security measures as required by the Maritime Transportation 
Security Act of 2002, and I would also like to provide some of 
my recommendations on how to advance this critical agenda.
    Certainly, the controversy surrounding the takeover of five 
American container terminals by Dubai Ports World has had the 
salutary benefit of engaging Washington and the American people 
in a national conversation on the state of port security. This 
is long overdue given the enormous national security and 
economic security stakes should the next catastrophic terrorist 
attack on U.S. soil involve the global maritime transportation 
system and America's waterfront. While it has too often been 
lonely work, Chairman LoBiondo, I commend you and your 
Committee for your leadership in advocating that our critical 
maritime infrastructure should not be overlooked in our post-9/
11 efforts to secure the American homeland.
    This is my second opportunity to appear before this 
Committee. On August 25th, 2004, I provided testimony that I 
entitled ``The Ongoing Neglect of Maritime Transportation 
Security.'' At that hearing, I said, ``I believe maritime 
transportation is one of the Nation's most serious 
vulnerabilities, and we are simply not doing enough to respond 
to the terrorist threat to this critical sector.''
    Sadly, I have seen too little progress in the ensuing 18 
months to modify that assessment. Based on my visits to a dozen 
major seaports within the United States and abroad since 9/11, 
my conclusion is that the security measures that are currently 
in place do not provide an effective deterrent for a determined 
terrorist organization intent on exploiting or targeting the 
maritime transportation system to strike at the United States.
    At the Federal level, the primary frontline agencies--the 
Coast Guard and Customs and Border Protection--are just grossly 
underfunded for what has become essentially a brand new mission 
for them, a major mission for them on 9/11. On the local and 
State levels, the size of port authority police forces remains 
tiny, providing often only token police presence within most 
seaports. While the Maritime Transportation Security Act of 
2002 represented a constructive stepping off point for 
advancing security within this sector, we have made little 
meaningful progress since that passage of that Act.
    In my remarks today, I will speak to both the shortfalls of 
our port security efforts within the United States and with our 
efforts to advance port security overseas and provide some 
recommendations on how to proceed. Our domestic and 
international efforts must be complementary because seaports, 
at the end of the day, are simply on-ramps and off-ramps into a 
global transportation network. To focus on just the security of 
U.S. seaports is a bit like hiring a network security manager 
who only puts in place firewalls to the computers in reach of 
his desk. If the whole network is not secure, such an effort 
would be futile.
    To begin with, we must be candid in acknowledging that the 
MTSA is more of a sketch than a security blueprint. That is, it 
sets forth general requirements without establishing minimum 
standards for satisfying those requirements. For instance, the 
MTSA requires vessels and marine facilities have a plan for 
establishing and maintaining physical security, passenger and 
cargo security, and personnel security.
    However, it does not actually define what that security is. 
It requires that there be a system for establishing and 
controlling access to secure areas of vessels or a facility, 
but it doesn't elaborate how that should be done. It mandates 
that there should be procedural security policies, but provides 
no guidance on what those policies should be.
    The MTSA requires that there be a ``qualified individual'' 
to implement security issues, but sets no standards on what it 
takes to be ``qualified.'' There are not even any minimal 
training standards that are required. The Coast Guard has 
worked with the Maritime Administration to create a ``model'' 
training course, but there is no requirement that a facility or 
ship security officers attend a certified course based on that 
model curriculum.
    The International Maritime Organization's International 
Ship and Port Facility Security Code, the ISPS Code, mirrors 
the MTSA in that it provides a framework of requirements 
without stipulating specific standards for satisfying those 
requirements. Ships and port facilities must have security 
plans, security officers, and certain security equipment, but 
the Code leaves it up to each foreign government to provide the 
specifics.
    There are no minimum training standards for becoming a 
``qualified'' security officer. There are no mandatory 
guidelines of what constitutes perimeter security. There are no 
mandated requirements to govern facility access controls. It is 
also important to point out that while most ships are in the 
business of moving cargo, the ISPS Code does not address cargo 
security.
    When it comes to port security, the buck is essentially 
stopped outside of Washington, D.C. Since seaports in the 
United States are locally run operations where port authorities 
typically play the role of landlord, issuing long-term leases 
to private companies, it falls largely to those companies to 
provide for the security of the property they lease.
    Just how far we have to go I think is best illustrated by 
the case of the Port of Los Angeles, our Nation's biggest port 
complex with Long Beach. In the case of Los Angeles, they have 
7500 acres of facilities that run along 49 miles of waterfront, 
and that security is being provided by minimum-wage private 
security guards and a tiny port police force of under 100 
officers.
    The situation in Long Beach is even worse, with only 12 
full-time police officers assigned to its 3,000 acres of 
facilities and a small cadre of private guards provided by the 
port authority and its tenants. I saw more security guards on 
the La Guardia security check on my way down here today than we 
have to patrol the entire Port of Long Beach. The problem of 
how to control what comes into the terminal is compounded by 
the fact that there are 11,000 independent truck operators who 
are authorized access to the port terminals, and yet there is 
no credentialing system in place to confirm the background of 
the drivers.
    Mr. Chairman, you mentioned about the ABC report. At least 
in the case of New York-New Jersey, they actually have a pass 
system for who comes into the port. In L.A.-Long Beach, and 
most of our ports, that doesn't exist. So it would be difficult 
for DHS to go in and do these background checks of whether 
people have criminal records or not, simply because there is no 
pass system in place in most of our seaports.
    The West Coast terminal operators have no way of even 
identifying who is on their facilities at any given moment. In 
the four years since September 11th, the two cities have 
received less than $40 million in Federal grants to improve the 
port's physical security measures. That amount is equivalent to 
what American taxpayers spend in a single day on domestic 
airport security.
    Now, all this is on the on-ramp side of things, or the off-
ramp here in the U.S. The real challenge is that we are facing 
a threat that is likely to emanate beyond our shores. And here 
the problems that I worry about are--I have talked to you about 
frequently before this Committee and others--is focused on the 
issues of the intermodel container, because it goes way into a 
country where we initially put into a factor, load it on local 
trucks that bring it often to multiple weigh stations before it 
gets to a major port, and then is loaded on a major ship 
arriving in the United States.
    There are a lot of places along that trail where there is 
chance for real mischief. And we know there is because we have 
seen lots of crime and smuggling in the same system here. And, 
yet, when we look at the safeguards that we have in place to 
deal with all this, in addition to the limits of what is 
happening on the ports themselves, the challenge of physical 
security, perimeter security, access control and so forth, and 
when we face another piece of this will be the ships coming to 
us, we would like to know where they are--and, again, we have 
this Automated Identification System set by the MTSA, and yet 
the Coast Guard basically has a line-of-sight system where it 
does not have the means to routinely track vessels from long 
distances away. It is an honor system.
    The 96-hour rule that requires that vessels tell us their 
last five border calls, that tell us what cargo they are 
bringing, that tell us who is on the ship is an honor system. 
There is no way to verify they are 96 hours out. There is no 
way to verify those are the five last ports of call they make. 
You can do a lot of detective work, but it is an honor system. 
The Coast Guard isn't routinely out there verifying that the 
vessels are where they say they are. And for most shipping, 
since it is legitimate, that works fine. But it is a problem 
worrying about the illegitimate that we need to be focused on.
    The customs, of course, overseas is relying on Container 
Security Initiative teams. This is a big progress, putting 
agents overseas. However, their targeting over there is the 
same targeting criteria they use here, which is ultimately 
based on reliance on the cargo manifest information. This 
manifest information may not even provide the point of origin 
where the container was first stuffed. That would be an import 
document.
    But that is not routinely provided to Customs 24 hours in 
advance of loading. So the decision about what poses a risk is 
based on essentially second-party information provided to ocean 
carriers who basically tell Customs this is what we think our 
customer says is onboard, and from there we decide what poses a 
risk or not.
    The issue, of course, going back to the supply chain, 
relying on C-TPAT. This is a very positive thing involving the 
private sector in this enterprise, but because Customs does not 
have adequate resources to actually even process the 
applications, never mind routinely verify that in fact 
companies are living up to the security plans they provide 
them--and this is a complicated business--we have a lot of 
free-riders in this system, people who participate in the 
program that, frankly, are not vesting much in security.
    We have, of course, the ISPS Code. We are required by MTSA, 
as requires the Coast Guard confirm that in fact overseas ports 
and terminals are abiding by this agreement. And yet, the Coast 
Guard has a total of 13 international security liaison officers 
to service Europe, Africa, the Middle East, Latin America, and 
the Caribbean. Now, Brazil has 25 ports onto itself, but a 
country visit is often a two-to three-day stop-by, visit one 
port, and the country is good to go.
    What we are building here is a house of cards. What is 
going to happen when we have a maritime incident is virtually 
all these initiatives to manage risk are going to be 
implicated. It will be from a C-TPAT company, it will be going 
through a CSI port on an ISPS-compliant facility, on an ISPS-
compliant vessel, and it will arrive in the United States and 
will have a major maritime terrorist incident.
    And when we want to restart the system as we close down 
afterwards, we are not going to be able to restore public trust 
because the kind of questions that you are asking today are 
going to be asked with a lot more rigor post the next event. 
And if we can't answer satisfactorily that risk can be managed, 
we are going to shut down the system.
    We are putting a lot of money into something called missile 
defense. The technology that is associated with that is a very 
high bar. The expense is quite high. But we are saying in that 
program, basically, a zero tolerance about the risk of weapons 
of mass destruction put on a ballistic missile sent to the 
United States. And, yet, we basically have a trust-but-don't-
verify system for being able to safeguard us in the event that 
a weapon of mass destruction is put in a cargo container and 
shipped into our ports.
    We have a very long way to go. The technology is there. I 
think the will and the capabilities within these agencies are 
largely there; they simply haven't been resourced, it has not 
been made a priority. And if we don't get this right, what we 
are seeing, I think, in these last few weeks is the kind of 
reaction that we would likely get post an event. This is like a 
World Trade Center I scenario we hear.
    We are worried about the potential security risk associated 
with DB Ports World deal, and, in my own view, it ranks very 
near the bottom of the concerns to have the specific issue of 
terminal operators, because all these other gaps should be of 
much higher priority. But we are worried about it enough that 
we are looking at fundamentally changing the way this system 
works. And I worry that post the event that we may have in the 
not-distant future, we won't even have a conversation about how 
best to do this, we will just simply take actions that may in 
fact be cures worse than the disease.
    Now is the time to act, to work out the kinks, to put into 
place a robust system. But what is key to remember here is that 
the terminal operators at the end of the day, the global 
terminal operators, like DP World, whether it ultimately gets 
this piece of properties on the U.S. or not is going to have to 
be a part of how we deal with global security, maritime 
security.
    Dubai World is going to have one-half of the Port of 
Karachi. If you want to get a weapon of mass destruction from 
Pakistan to Dubai, or anywhere else in the Middle East, you are 
probably going to go through a container terminal. One-half of 
it is going to be by a global terminal operator called 
Hutchison Port Holdings, the other is going to be Dubai Port 
World. We are going to need to cooperate with that terminal 
operator to put in place counter-proliferation controls, even 
if something is not destined here.
    So we have to be very careful, I think, as we proceed with 
our legitimate concerns about seaport security in the United 
States that we are keeping an eye on the fact that it is a 
global system, and we have to work with all the partners who 
are legitimate. If that is what the end of the 45-day review 
gives us, we have to work with them in order to put in place 
the adequate safeguards.
    Thank you very much, Mr. Chairman.
    Mr. LoBiondo. Thank you, Dr. Flynn. We are going to ask a 
couple of questions of Dr. Flynn and let him try to catch his 
plane.
    Thank you for this rather comprehensive overview of where 
the shortfalls are, and I know that you have been talking about 
this for years. And if there is any good to come out of this 
latest incident with the United Arab Emirates, it is that I 
think more attention is being paid to maritime domain 
awareness. Your testimony last week before Armed Services I 
think was very powerful. I have appreciated the fact that you 
have at least gotten the attention of more people with your 
ability to get the story out on 60 Minutes and National Public 
Radio, which I both listened to--I have listened to both.
    But we have a great deal of frustration because most of the 
members are off doing other things, everybody is pretty busy, 
and this window that we have to make an imprint on changing how 
we are handling port security is, I think, very small. And I am 
very frustrated that we can't seem, no matter how loud we 
shout, no matter how loud you shout, to get other members of 
Congress, to get the Administration to pay attention to these 
issues.
    Obviously, if we had an incident, people would pay 
attention very quickly. And, obviously, if we had an incident, 
the faucets of money would open up and, you know, money would 
flow into port security like it did the aviation security, some 
$25 billion overall.
    With what you have seen, Dr. Flynn, and what you have heard 
and what you have observed, we have got the aspects of the 
MTSA, which have not been implemented, where no action has been 
taken, and there are lot of critical areas here. But the 
difficult part getting any of them started is then trying to 
prioritize, because they are not going to do them all at once. 
If you had to offer us advice on what we should focus the most 
on, the quickest, what would you say?
    Mr. Flynn. I think the first is the need to focus over 
there, to continue what has been an effort--certainly the 
Administration has taken important steps in putting Customs 
agents overseas and adopting the ISPS Code in order to get our 
trading partners and other maritime nations to share a common 
vision about where we need to go. The problem is there still 
isn't much behind these curtains.
    And so I think the top priority should be working with the 
overseas terminal operators and putting in place a system that 
are being piloted in Hong Kong, where every container coming 
into the truck gate, or one of two truck gates and two 
terminals in the Port of Hong Kong--the busiest terminal in the 
world is the Hong Kong International Terminal--is getting a 
radiation image, a cargo scan image, and a picture of the 
container's number and putting it into a database.
    The ability to capture all that data--not necessarily to 
examine and scrutinize everyone, but capture all that data--is 
something that I think the industry can put in. The technology 
is available, and it would help us in so many positive ways, 
both in terms of creating I think a more effective deterrent 
than what we have now in the system, but basically give a 
primary screen tool even to deal with false alarm issues that 
we don't have right now if we target a container overseas, 
which can wear out your welcome mat. For the 1 percent you 
have, if you constantly pull boxes out and it turns out there 
is nothing there, you are causing disruption, you are causing 
expense, and so primary screens of everything coming through 
could be helpful.
    It also can support counter-proliferation. I was talking 
about that in my remarks the Karachi to Dubai issue. The 
Department of Homeland Security doesn't have that as a focus, 
but the President has made counter-proliferation a top 
priority. Well, this material, as we know from Kahn network, 
moves through this system. As we build visibility in the 
system, we provide the means to support counter-proliferation 
as well. And I would hope that some resources come out of the 
intelligence community could then be applied to this problem, 
not just relying solely on Customs and Coast Guard's resources 
to deal with this.
    So putting this basically--turning to the terminal 
operators, the four biggest in the world would account for 
about 8 out of every 10 boxes coming to the United States, 
encouraging them to essentially make this investment, which 
they can recover through a surcharge for imports coming 
through, would be a big step forward that I think many who have 
looked at it said this could work at a reasonable cost, without 
disruption, that would make it a qualitative leap forward and 
giving us physical evidence that low-risk is low-risk.
    The second priority I would make would be the issue of some 
sort of third-party audit of the security plans. Customs will 
never have enough agents to do this; Coast Guard will never 
have enough agents to check everything overseas. Let us create 
essentially a third-party audit system where we then, 
Government, audit the auditors by setting high bars, bonded 
systems, folks that go out and check whether in fact companies 
are living up to what they say they are doing in terms of 
supply chain security.
    And the third option in terms of priority would be getting 
a handle on the whole issue of who is in the port on our end, 
because you can attack a port not just by bringing stuff 
overseas, but just by driving a truck in it full of explosives, 
and there is plenty of that stuff around here as well. So the 
need to get on with the credentialing process and knowing who 
is in the port, the TWIC process plus, anybody who is in that 
port, we should know who they are in order so that we can, if 
we have intelligence, we can manage that, but we can have some 
sense of adult supervision in these critical assets.
    So those would be the three things I would focus on: moving 
towards overseas, developing a radiation and gamma imaging and 
other technologies, creating database of what moves through the 
system, the third-party audit, and then, lastly, the TWIC 
process.
    I just want to make, I think, an important point as well 
about radiation portals that are currently deployed a lot in 
our ports that the Assistant Commissioner Ahern spoke about. 
Radiation portal technology such as the one we are using today 
will not help you find a nuclear weapon; they will not find--
they won't be able to detect a nuclear weapon, they won't help 
be able to detect a lightly shielded dirty bomb, and they won't 
detect highly-enriched uranium.
    Other than that, it is a great technology. It is capable of 
spotting plutonium and an unshielded dirty bomb. And the idea 
of putting radiation portals with gamma imaging together is 
that the radiation forces the need for shielding, and then the 
screening will see a dense object where there is not supposed 
to be a dense object. That application makes sense; it is 
affordable; it has been demonstrated in Hong Kong.
    But running away with lots of radiation portals in the 
United States and doing ribbon-cuttings to say we have made 
ourselves safe from nuclear weapons here is not quite true with 
basically what--representing what that capability really 
provides. We really need to get a handle on that.
    Mr. LoBiondo. How long has the Hong Kong project been 
running?
    Mr. Flynn. It started first in one terminal, Modern 
Terminal, in September, the first sort of startup, but it 
really has been running full test since January 2005. So a full 
year now or 14 months. In that time they have collected more 
than 1.2 million images of everything moving into those gates. 
And if I put that in contrast, CBP, through the Container 
Security Initiative, has examined about 3500 containers during 
that year under the CSI protocol. So we are capturing and have 
the ability to capture that amount of information.
    And this is no U.S. money and no Hong Kong government 
money; this is the terminal operator who invested in this 
capability, one who, by the way, does not have any terminals 
here in the United States. Hutchison Port Holdings has no 
terminals in the United States, but is vested in the network 
and vested in the system, and is terrified, legitimately, that 
if we shut it down, their whole enterprise implodes.
    Again, I think it is important to realize these global 
terminal operators, with appropriate checks and supervision, 
are an ally in how we can go about building a system, they are 
not just the problem. The key is not the ownership, for me, it 
is adequate rules and oversight of those rules. And we have to 
partner with foreigners--it is part of dealing with that 
outside world--and we also have to make sure that they are 
playing by rules that safeguard our interests. And my 
experience has been, dealing with terminal operators, all of 
whom are foreign owned, and many of the liners, is that they 
are for leaning on this, because it is their billions of 
dollars of capital investment that are at stake.
    Mr. LoBiondo. My recollection from Armed Services last 
week, when you gave testimony on the Hong Kong pilot project, 
was that DHS indicated that maybe this could work, but we don't 
have anywhere near enough data and we have got to wait much 
longer to see if in fact this is viable. In your view, how much 
longer do we have to wait before we decide that this is a 
viable system?
    Mr. Flynn. Well, the good news is there is progress. DHS, 
the Deputy Secretary, Michael Jackson, has essentially directed 
the Department in late December, Customs, to take a solid look. 
They have begun the process. They have a sample, I believe, of 
20,000 images, which are now sort of looking at how will they 
work into the protocol.
    So it is not a case that they have not been entirely 
disengaged from this process; they have been tentative because 
it is not a sponsored project. There is no requirement for them 
to evaluate this or anything else. So they have been looking at 
it sort of hesitantly, but now there is more engagement on it, 
which I think is constructive.
    The issues are legitimate on CBP's part. You know, they 
have legitimate concerns about essentially giving another big 
ticket highly visible program without their resources to 
actually manage it, the IT backbone, numbers of inspectors and 
personnel and so forth. Those are legitimate concerns. I mean, 
if the industry ends up making what could be about a $1.5 
billion investment to do this globally in the four biggest 
terminal operators companies and we work to get that built in 
the rest of the area, and it turns out CBP doesn't have the IT 
trunk to access those images, doesn't have enough inspectors to 
do examinations, then it is an albatross for them.
    And, so, given the track record of setting new requirements 
like the MTSA--I mean, the MTSA requires that the Coast Guard 
do all these audits, but nobody provided any new billets for 
them to do it; they had to take it out of hide. So there are 
legitimate concerns, I would say, within the bureaucracy about 
taking on another ambitious program, but not adequate funding 
to actually execute it and then ending up being with more egg 
on their face.
    This is a soluble problem. We are not talking about massive 
numbers of people. The IT problem is manageable. The people in 
San Diego can, right now, see all those images that are being 
collected in real-time through--remotely in San Diego. So it 
can be done in Northern Virginia, where the National Targeting 
Center is, as well, as the actual containers are moving 
through, if they knew to target it.
    But certainly they can go after the archive. It is doable, 
but there are practical issues. You need to have the IT 
backbone, you need the bodies. And if this is a big program, 
then they need the resources, they need commitment from the 
Administration and from this body, obviously, that they will 
get them.
    Mr. LoBiondo. I have got a couple more, but let me turn to 
Mr. Nadler.
    Mr. Nadler. Thank you, Mr. Chairman.
    It is good to see you again, Dr. Flynn. Dr. Flynn, this 
morning's testimony--I don't know if you heard Mr. Ahern's 
testimony in response to my questions this morning. He said 
that it was not feasible to require scanning of all containers 
in the foreign port. Is there any reason it is not feasible?
    Mr. Flynn. I mean, I think in principle, yes, we could 
mandate it happen. What I would be worried about is right now 
there is not the technology available to deploy this in this 
next year. If we said this applies by July 1st, everybody has 
to have it, it wouldn't be feasible------
    Mr. Nadler. Because we don't have enough of the scanning 
machines?
    Mr. Flynn. Yes. The machines would have to be fabricated. 
Nobody has taken on that scale of a project, so you would have 
to manufacture them, you would have to deploy them------
    Mr. Nadler. How long do you think it would take to do this?
    Mr. Flynn. I think you could set a clock, a reasonable 
clock, of two to three years, and------
    Mr. Nadler. So we could require------
    Mr. Flynn.--graduated process.
    Mr. Nadler. So we could require that in two to three years 
every container be scanned in the foreign port before it gets 
put on a ship bound for the United States?
    Mr. Flynn. I think that the marketplace could respond to 
that requirement if it were set with that kind of time frame. 
What I would say is that there is an opportunity I hear I think 
with this controversy that the main operators would do it on 
their own if they know that in fact the data they would produce 
is going to be used and if basically they can apply a surcharge 
to cover the costs.
    Mr. Nadler. Now, Mr. Ahern also said that we don't need to 
do that, in effect, because we are on track, that we are going 
to be scanning all the high-risk containers. Now, it is my 
contention, and I sort of said this to him, that we don't 
really know what high-risk containers are, that our low-risk 
container, the driver can be bribed to take an extra long lunch 
hour and somebody can put an atomic bomb in a container 
operated by a very reputable company, and no one knows the 
difference.
    So, in your judgment, is it necessary for the security of 
this Country to really go on track toward scanning all the 
containers, as opposed to somebody's judgment as to what high-
risk containers are?
    Mr. Flynn. I think the good news with the application in 
Hong Kong is it is not possible to build it into the truck 
entry process without scanning every container, including those 
who don't come to the United States, that, basically, it 
doesn't make sense. You can't create a traffic pattern for just 
U.S.-bound containers. That means the cost of doing this is 
applied to everybody.
    The issue becomes actually analyzing all those images, and 
the time that that would take. Now, clearly I think, in time, 
you are going to see computer-assisted tools that will so 
support that, but the answer--the particular concern I share 
that you have, Congressman, which is how is it that Customs 
knows what is high-risk. And the fact is, as we know, our 
intelligence services are broken big time, and we are having a 
real struggle reorganizing that, and I would say it is 10 to 15 
years before we are probably going to------
    Mr. Nadler. So we don't really know what is high-risk and 
what is low-risk.
    Mr. Flynn. We don't. And, further, the assumptions about 
what is risk is built around past efforts of criminality, which 
are ongoing conspiracies. And there we can see that there is a 
tendency to gravitate to the weakest links in the system, but 
terror is actually likely to be a one-short deal------
    Mr. Nadler. Exactly.
    Mr. Flynn.--and so penetrating a legitimate company once is 
doable in almost any circumstance.
    Mr. Nadler. And, therefore, there is no definition of high-
risk and low-risk that makes sense in an anti-terrorist 
situation.
    Mr. Flynn. Well, I think you have to view every container 
as a Trojan horse and as a high-risk.
    Mr. Nadler. OK.
    Mr. Flynn. If we can verify it in the systems that we are 
talking about here would provide to mean that low-risk is low-
risk.
    Mr. Nadler. So we should go to a system where we require 
every container be scanned as rapidly as feasible.
    Mr. Flynn. I think we can go to that system, and it would 
be, again, setting a reasonable time frame so the market could 
respond.
    Mr. Nadler. As rapidly as feasible.
    Mr. Flynn. And then--I do. And what I would set, though, is 
a tiered system for analysis right now------
    Mr. Nadler. OK.
    Mr. Flynn.--that would basically use------
    Mr. Nadler. Yes, you said that in your testimony.
    Mr. Flynn. Very good.
    Mr. Nadler. Let me ask you a different question. Right now 
we don't require seals on the containers that are tamper-proof 
and that would notify, in effect, a GPS or somehow notify the 
United States if that container was tampered with or opened 
after it was scanned. Do you think it would be a good idea or a 
mandatory idea to require such seals on all containers after 
they were scanned?
    Mr. Flynn. Yes, I think we have certainly got to do 
something about the seal issue. Again, there are lots of ways 
one could defeat the technology. You would want to have it 
checked. I would say one thing about building this beachhead in 
an overseas terminal is if you did have the seal and it had 
that information, it could be downloaded before it enters the 
terminal. So that would work, I think, well.
    Mr. Nadler. OK.
    Mr. Flynn. There are still some kinks with these seals; the 
false alarm issues and how you reconcile them and so forth. One 
thing is the Operation Safe Commerce Initiative, but nobody 
knows what the results are. You know, this has been treated as 
super-secret stuff. We need to know what basically we learned 
as a Government by doing lots of tests and figure out how we 
can improve on it. But I think we will reach a point where 
seals are used on containers for supply chain visibility and 
accountability purposes.
    Mr. Nadler. Thank you. Finally, Congressman Oberstar, the 
Ranking Member of the full Committee, and I yesterday 
introduced the Sale Only If Scanned Act, the SOS Act, which 
essentially requires--the bill said one year; maybe we will 
change it to two years--that no container can be put on a ship 
bound for the United States unless that container has been 
scanned with the latest available technology as defined as you 
have been talking about--gamma radiation plus--gamma ray plus 
radiation detection--and has a proper tamper-resistant seal 
that will tell you if it is tampered with; and that we should 
require as a matter of law that no container can be put on a 
ship bound for the United States until that has been done.
    Now, within this time frame of two to three years, do you 
think that is reasonable legislation, that that would greatly 
enhance our security, or not?
    Mr. Flynn. The key is the time frame.
    Mr. Nadler. Within the time frame that you specified.
    Mr. Flynn. My sort of approach here right now is let us see 
if we can get the four main terminal operators to jump forward 
and do it here and work out the kinks, and then definitely set 
the requirements that would move. We want a universal system 
that gets us there.
    And I think there is an opportunity here for the terminal 
operators themselves to embrace this if they get the right 
signal from the U.S. Government that we would use the data and 
move forward. There is some value in that, obviously, if the 
market takes the ownership of the issue, but the signal from 
Congress that basically we need to have a trust-but-verified 
system and we need the best------
    Mr. Nadler. And what we heard from the Administration this 
morning is that they see no necessity of scanning any but the 
high--as they define the high-risk containers. Your testimony 
is we don't really know what high-risk containers are because 
of a one-shot terrorist deal, and that we must go to a system 
where we will scan every container as soon as feasible.
    Mr. Flynn. I think if we adopt that globally, we will also 
make a big step forward on counter-proliferation, which is also 
another critical issue of our time.
    Mr. Nadler. Yes. Thank you very much.
    Mr. LoBiondo. Just one last question, Dr. Flynn. Is Hong 
Kong able to do anything with chemical or biological scanning?
    Mr. Flynn. Let me be clear that what this pilot project 
that was done by the private company was designed to show if it 
was possible to collect scanning data on every container, truck 
entering into a busy terminal at 300 trucks an hour. No 
analysis was done on this data because the private players 
don't make judgment about the risk, it was they can make this 
available. So the answer is no on the chemical and biological, 
there are not sensors in place. It is a radiation portal, it is 
gamma ray technology. That is what it would be focused on.
    Mr. LoBiondo. So that would be a whole separate problem we 
would have to worry about.
    Mr. Flynn. It is a complicated problem, particularly when 
you get to biological. The problems with biology, most of the 
tests we use, like pregnancy tests, have very limited shelf 
life because they actually have live agents in it to react to 
the agent. Chemical is a little more straightforward.
    But with the tools we have, I think you are able to do both 
the imaging I think is important to see whether you are seeing 
things in a shipment that is not supposed to be there. The 
notion is, if it evolves, as you merge commercial data, you 
will start to have archival information what Nike sneakers look 
like repeatedly, and the software will automatically check and 
say there is a big something in here which doesn't belong; it 
could be a weapon, it could be components for a weapon of mass 
destruction, or it could be chemicals or whatever.
    That would be helpful obviously for dealing with the 
counter-drug issue as well. A lot of the chemicals, for 
instance, that are used for methamphetamine are coming out of a 
place like India. Legitimate companies and transactions end up 
in Mexico. We can't see that right now, and that feeds that 
problem. The more transparency and visibility we can advance 
from the system, a lot of public goods will be served beyond 
just a terror threat.
    Mr. LoBiondo. Mr. DeFazio, Dr. Flynn was trying to catch a 
plane. I don't know, if you have got questions, if you will be 
able to------
    Mr. DeFazio. I always--I have read his book. I appreciate 
his comments. Mr. Chairman, sorry, I have been back and forth 
with the Aviation Transportation Security Administration 
markup.
    And I don't know if this would be repetitive, but, if you 
could, Dr. Flynn, I have seen your comments in the press 
regarding the Dubai transfer and where it doesn't raise to a 
level of concern, but you are raising other points about 
security at the ports. I don't know if you were here for the 
first panel.
    Mr. Flynn. I was, yes.
    Mr. DeFazio. You know, I--I mean, do you think that some of 
those issues I raised, the fact that we really don't track 
ships as they move, I mean, something could feasibly be on-
loaded, even if we had secure containers? And my understanding 
from the testimony is we don't have secure containers.
    I mean, are you looking outward and sort of moving back 
into the U.S. in terms of your ideas? Because, I mean, the idea 
that we screen 1 percent of containers overseas and the rest 
here seems a problem, because, once it is here, they don't 
necessarily have to deliver it to a predesignated spot to cause 
mayhem.
    Mr. Flynn. I am, and I think all those scenarios are there. 
Again, the honor system we have in place right now for a very 
scary scenario, which is a bit crazy, I think. But certainly in 
terms of every ship crossing the Pacific and the Atlantic Ocean 
that is legitimate and is of a legitimate size is using MARSAC 
to communicate with their home office.
    You can't talk to a satellite without giving away where you 
are. It would be possible to use existing technology of 
commercial networks here to track most of the ships moving 
across the ocean at a nominal cost. And why we are not there, 
why we are building a whole system to see line-of-sight--the 
Coast Guard is not out there patrolling every bit of the time 
around the clock.
    Twenty miles at 20 knots is an hour in a very big ship. I 
don't think a plane will fall out of the sky when you shoot at 
it, you have got to stop something with a lot of momentum. And 
that is not going to happen if there is nobody there.
    There was a sea marshal program, as you may recall, early 
after 9/11. The Coast Guard ran out of money, so it stopped 
doing it. So now it is relying on risk data and intelligence. 
Well, this is an area that we don't exactly have--it wasn't at 
the top of the intelligence food chain to monitor what was 
going on in the maritime transportation industry, so how we 
miraculously, after 9/11, had such good intelligence we could 
run a risk-based approach, without having any verifications in 
the system, I think is a bit of a stretch.
    We need the best intelligence we can get, but we need 
verification on the way, and there is lots in the 
transportation logistic industry that makes that required. But, 
again, I think one of the things is I don't know the nitty 
gritty and certainly not part of the classified review on DP 
World, but they will be the third biggest terminal operator in 
the world. And if we are talking about deploying a global 
system, you want to be able to work with the operators in that 
system.
    So the challenge here is obviously legitimate concerns 
about what this means for U.S. ports, but in the context that 
if we are pushing the borders out, we need all the partners we 
can get. And I think we should leverage this moment to get DP 
World, along with the other terminal operators, to do more on 
improving security, instead of throwing them out of the club, 
essentially being here, and then we have got to work with them 
in any event.
    I am trying to be pretty pragmatic about this, and I know 
it is not what is driving------
    Mr. DeFazio. Right. Well, I mean, I guess I question 
whether the UAE would be the partner I would look for in having 
a global system of security.
    Mr. Flynn. They will have the system, so, in my view, you 
don't look at the ownership issue, you say will you put in 
place this equipment and do you let us access to the data, is 
it maintained? And when they are not, then there is some 
leverage that you use there. So you work with the partners you 
have.
    Mr. DeFazio. But I am just intrigued by your comments about 
an honor system, which seems to me--I mean, we are so reliant 
upon essentially the bills of lading. You know, I mean, I don't 
know if you are familiar with the crew issue, but it was sort 
of the------
    Mr. Flynn. It is an honor system there as well.
    Mr. DeFazio. Right.
    Mr. Flynn. I mean, 96 hours you list the crew. We hope they 
put them all in and they spell them right; and these are 
complicated names, often, to spell. And, again, there is no 
underlying intelligence that supports most of that, so it is a 
problem.
    The real issue is not so much that we will have a single 
incident. The real issue for me is we will have an incident--it 
is almost inevitable--and our reaction, because these programs 
aren't as robust as they need to be, will we have these 
cascading--we will pull up the drawbridge and we will end up 
causing ourselves much more harm than the terrorist cause 
themselves.
    So we need to keep that duality in mind here. It is both 
trying to deal with the threat, but also the threat ourselves--
the threat of damage that we will do to ourselves by not having 
adequate systems in place that will pass the smile test for the 
American public post the event.
    Mr. DeFazio. Thank you.
    Thank you, Mr. Chairman.
    Mr. Flynn. Thank you.
    Mr. LoBiondo. OK, thank you, Dr. Flynn, very much. We 
appreciate it. Thank you for continuing to be such a strong 
advocate. Please keep shouting.
    Mr. Flynn. My apologies to the rest of the panel for taking 
your time.
    Mr. LoBiondo. Dr. Carafano.
    Mr. Carafano. Thank you, Mr. Chairman. I have submitted a 
statement for the record, and, if I could, I would just like to 
make five very brief comments. And thank you for trying to 
accommodate my schedule. I hope to get over to the White House 
for the signing of the Patriot Act, which I think is something 
that will make us a lot safer.
    I share and I validate the Congress's concerns and 
frustrations with the manner in which the Administration 
handled the Dubai World Ports deal and particularly the lack of 
notification and infrastructure. And I think we all share the 
good news here, that we have America's attention, and I think 
simply most Americans don't realize that global maritime system 
is simply the lifeline of the American economy. I mean, the 
internet could crash; we could ground all the airplanes 
tomorrow; and pretty much the U.S. economy would still be 
there. But if we stop moving goods and services out of this 
Country by sea, this economy would simply grind to a halt.
    And I admire and commend the Chairman and everyone on this 
Committee for all the work they have done, realizing the number 
of vulnerabilities that are out there and the spade work that 
is required to close them and the enormous amount of work that 
is left to be done.
    My approach to maritime security has been the same with my 
approach to all the aspects of strategy in the long war, and I 
have always argued there are four components that you have to 
have in every aspect of your long war strategy, that is: 
security, promoting economic growth, protecting the civil 
society and civil liberties, and winning the war of ideas.
    And if you have any security solution that doesn't meet all 
four of those criteria equally well, then you have got a bad 
answer and you need to go back and start over. And I would hope 
that the Congress would use this kind of criteria as they look 
forward to determine what are the next and most important steps 
to take.
    I have three, my top three on the list of what I would do 
in maritime security. Number one is simply fix the Coast Guard 
first. The Coast Guard is involved in every aspect of maritime 
security, and unless they are fully funded and have all the 
resources they need, everything else really hangs on that 
skeleton. And I think this is not just about funding Deepwater, 
which I think if the Administration funds this at anything less 
than $1.8 billion a year, it is inadequate.
    But I think it is time to have the conversation about 
building the kind of robust, specialized law enforcement 
capability tracks in the Coast Guard, building specialized 
special operations capabilities in the Coast Guard that are 
equivalent of every other service's, building, of course, 
security professionals, a degree of expansion in the Coast 
Guard that we simply haven't seen, and actually bringing to 
fruition some of the concept of maritime domain awareness.
    Number two would simply be we need better commercial 
information into the targeting process before containers are 
loaded on ships. And I think that commercial information is 
available. I think it would make high-risk targeting a lot more 
efficient. And that, I think, would be my second priority.
    And my third would be international cooperation. I really 
think that we lost the bubble and that we are not focusing on 
the weakest link in the system, which is the shippers and ports 
in the developing world, which are the entre into the system 
that I think terrorists are most likely to use.
    I think there are legislative--with regard to foreign 
ownership, I think there are legislative remedies that the 
Congress could do to give more confidence to the American 
people that these issues are being addressed, and I would point 
out two very quickly. One is MTSA and the other is the law that 
governs the CFIUS process. MTSA was simply not designed to 
think about the notion of changing of ownership and changing 
foreign ownership.
    And I think we have to ask what appropriate amendments 
could be made to the law that could strengthen our degree of 
confidence when maritime infrastructure is transferred between 
foreign ownership or to foreign ownership. And I think there 
are some common sense things that we could add to the law.
    Number one is a requirement that the security officer of 
the company be a U.S. citizen and have a suitable background 
check. And I have listed these in my testimony. I will just 
summarize some of the ones here. Number two is a mandatory 
review of the security plan by the Coast Guard on notice of an 
application.
    Also, there would be a mandatory requirement, after the 
application has been approved, that ownership is taken a 
mandatory requirement that changes have been made to the plan. 
Mandatory commitments to assist in law enforcement 
investigations. And, most important, penalties for non-
compliance with these measures.
    In regard to CFIUS, I think the problem with CFIUS is that 
the process is just too informal, and that what it needs is a 
stronger set of regulatory requirements as to exactly what the 
CFIUS process is supposed to accomplish. I think there should 
be mandatory regulatory requirements for agencies to obtain 
commitments where there is significant national security 
interest involved.
    I think there should be penalties in the law established 
for noncompliance with those commitments. I think that where 
there is a significant national security interest identified, I 
think the CFIUS approval should be based on the joint 
conclusions of DOJ, Department of Homeland Security, and DOD, 
not a consensus agreement by the committee as a whole. And I 
think there should be very firm and clear and specific 
reporting requirements to Congress.
    And I look forward to your questions.
    Mr. LoBiondo. Thank you very much. Do you--I am taking that 
you do share Dr. Flynn's assessment about doing something on 
foreign shores before containers are actually loaded?
    Mr. Carafano. I do, but I really oppose this notion that 
this is about pushing the border out. I think that is really 
the wrong impression, because that really doesn't actually get 
you anything. OK, let us say we have pushed the border out and 
we are 100 percent confident between Singapore and the United 
States that we are good to go.
    Well, you know what? Singapore is one of the key hubs of 
global commerce in the world, and if the terrorists get to 
Singapore and they do something in Singapore or Hong Kong, that 
is going to affect all of us almost as badly as if something 
happened in Los Angeles. So we need to get over this notion 
that it is about pushing security out. That is exactly the 
wrong impression. What we need to be talking about is about 
securing the global commons, securing the domain that we all 
use, that makes us all healthy and well.
    Now, you know, in regards to specific solutions, I have to 
admit I have a predisposed dislike of security screening as a 
measure, because what you wind up doing is spending 99 percent 
of your time and resources on things that are not a problem. I 
mean, this is the problem we have in the aviation realm. We 
screen--we spend $6 billion a year--that is the budget of TSA--
screening people that get on planes every day that we almost 
know for a fact are no security risk.
    And I much prefer security regimes that put the majority of 
the security resources against the threat, as opposed to mass 
screening, which I think is very, very inefficient. I have no 
problem with the mass screening scenario. The problem I have 
with a specific technology, if somebody can make a sound 
business case for these technologies, Steve and I totally agree 
that there has to be two fundamental requirements if we are 
going to do this. One is that there has got to be a business 
case for it and two is it has got to be global so it is a level 
playing field for everybody.
    But in terms of where screening of cargo, mass screening of 
cargo fits in my list of priorities, I, quite frankly, think it 
is not high, one, because I think mass screening is 
inefficient, it has high false positives and false negative 
rates; it puts a lot of drag on the system and actually doesn't 
give you a lot of security in the end because in a global 
supply chain, there are so many intervention points that mass 
screening secures one intervention point, but you get on either 
side of that point, you are vulnerable again.
    So it is a system that can be relatively easily defeated 
and I think the scenarios that we use to justify it, which is 
the nuke in the box, I think is among the most implausible of 
terrorist scenarios. If a terrorist has a nuclear weapon, then 
he wants--and this is true of every terrorist attack. 
Terrorists have limited assets, and they like predictability. 
They like predictability in knowing what they are going to face 
and they like predictability in knowing the outcome of their 
attack. And if you look at every terrorist tactic, it is based 
on trying to gain that predictability.
    Well, what is wrong with a nuke in a box scenario is if I 
have one nuclear weapon, why would I put it on a cargo 
container which I had no control over in environmental 
conditions--and there are--when you have a nuclear weapon, or 
any kind of bomb, you are concerned about environmental 
conditions--and send it off out of my control?
    If I had a nuclear weapon or a deadly biological weapon or 
a dirty bomb that I wanted to get into the United States or a 
U.S. port, I would do it the way smugglers do it: I would take 
it on a noncommercial vessel, I would land in Mexico and I 
would drive it across the border. Or I would take it on a non-
commercial vessel and I would land it between a port of entry, 
which is totally unguarded and I would walk it in. Or if I 
really wanted to blow up the port itself, I would take it on a 
non-commercial vessel, I would take it into the port and I 
would blow up the port.
    So this notion that we are going to do 100 percent 
screening to keep the nuke in a box out of the United States I 
think is just simply silly. You know, if you have an infinite 
number of vulnerabilities and you take one away, you have 
infinite number of vulnerabilities minus one. That doesn't 
really make you much safer.
    Mr. LoBiondo. Do you share the confidence that Customs and 
Border Patrol indicated in their process of identifying high-
risk and then running it through------
    Mr. Carafano. No, sir, I don't. I think that--I agree with 
high-risk analysis and screening of high-risk cargo. I don't 
think that they have access to the kind of information they 
need to do to do a quality high-risk assessment. And I think 
Steve and I agree on this, that you have to have information 
that goes to the beginning of the supply chain.--and I have 
listed some of these requirements in my testimony--but you have 
to know the shipper, the country of origin, who packed it. And 
that kind of commercial information needs to be part of the 
risk assessment before the container is loaded on the ship.
    Now, the other thing I think is very, very important to 
realize is will risk assessment give you 100 percent 
confidence? And the answer is no, of course not. But the other 
thing people have to realize is you are not depending on the 
risk assessment as your last line of defense. Risk assessment, 
in conjunction with robust law enforcement and auditing 
capabilities, that gives you real security.
    You know, it is like we don't ask the police to stop every 
car they see; we say stop the people that break the law. And I 
think that is what we want here. What you want is you want a 
high-risk assessment that is going to give a degree of you some 
confidence in the system, but you can't trust the system. And I 
think any part of the system that is based on honor is stupid.
    I mean, Reagan had it right when he said trust but verify, 
which meant don't trust anybody. So you have a system which 
provides high-risk assessment, which gives you some clues, but 
that is backed up by robust law enforcement and auditing. That 
is what gives you the confidence that the system is secure, not 
the screening process itself.
    Mr. LoBiondo. And that is where the critical nature of 
funding the Coast Guard comes into play?
    Mr. Carafano. Absolutely. I mean, this is simply silliness. 
I mean, quite frankly, I mean, to make an analogy, there is a 
burglar in the neighborhood. You know, Steve's solution is let 
us wall up all the houses. If there is a burglar in the 
neighborhood, let us tell everybody to lock their doors and 
then let us hire some cops to go out and get the burglar.
    That is the right answer. And so I think you are right, if 
there is an Achilles heel or the emperor has no clothes in 
this, it is that the one institution which really links all 
this stuff together and makes the system that we have credible 
is the Coast Guard, because they touch every aspect of maritime 
security, whether it is law enforcement or screening or 
maritime domain awareness, and they simply do not have the 
resources to make this system legitimate.
    Mr. LoBiondo. You mentioned the Deepwater program, which is 
certainly near and dear to me, and the funding of it, which 
certainly has been inadequate, and each year we seem to fight 
that battle. You, I think, mentioned anything less than $1.5 
billion is really a bad mistake. Was I correct?
    Mr. Carafano. Yes. And I think that is a very modest 
number.
    Mr. LoBiondo. Have you had an opportunity, up to this 
point, to review and study how they are spending the money? In 
other words, with all the challenges of replacing the assets, 
some of how they are choosing to replace these assets, have you 
looked at that?
    Mr. Carafano. Quite frankly--and I think this is actually 
true for all the services. In many sense they are making poor 
choices. What they are doing is they are making choices--they 
are making the choices they can make as opposed to the choices 
that over the long term would be the most cost-efficient.
    You know, for example, if this was a private sector firm, 
they would say, you know, spending a $5 billion over three 
years buys you a heck of a lot more than spending $10 billion 
over 10 years, because, you know, replacing older equipment 
more quickly, in the long term, just saves you a lot of money. 
So I think what they are doing is because we haven't 
accelerated the acquisition of the program, what they are doing 
is they are not making the cost-effective choices, they are 
making the most operationally-effective choices.
    In other words, they are trying to keep the car from 
falling apart. You really ought to buy a new car, so instead 
what they are doing is they are doing things like, well, they 
are fixing the brakes, you know, just to keep things running. 
But in the long run that just costs you more money.
    So I think that many of the choices that they are doing are 
grossly sub-optimal because they are dealing with the fiscal 
realities of having to go out and do their job every day, and 
they can't buy the stuff they would want to because the stuff 
they have got has got to work tomorrow.
    Mr. LoBiondo. I understand that. What I am actually trying 
to get at is I think some of their decisions to spend money on 
the biggest ticketed items in the range of what they have to do 
is what I question when they are spending all this money on a 
couple of huge ships, and they could, you know, be spreading it 
out and getting a whole lot more bang for the buck.
    Mr. Carafano. But I think that is part of the--I agree with 
you, and it is part of the same problem, is they are forcing 
and making these sub-optimal choices. You know, as we know, the 
big ticket items get people's attention, and the big ticket 
items are easy to get funded, and the little--if you have 15 
little things, you are much likely to get whittled to death 
than if you have one big thing.
    So I think that we have just given them an impossible job, 
we have told them to figure out how to do all this, and then we 
haven't--and then we have kept the checkbook in the drawer and 
kept them on an allowance. I just can't--it is just unfair to 
ask these guys to make smart decisions on the amount of money 
we are giving them.
    Mr. LoBiondo. The last question, I think, how do we improve 
the quality and quantity of information that comes into the 
Customs and Border Patrol through the advance submission?
    Mr. Carafano. I think that--I mean, that simply has to be 
done through the international agreement, and I just don't 
think that we have been aggressive enough in terms of pushing 
the envelope on this, and I think that Steve is right, the 
United States has an enormous stick because we are one of the 
world's largest global traders, and I just think we should be 
much more aggressive.
    Mr. LoBiondo. OK, Dr. Carafano, thank you very much.
    We are now going to move to Mr. Nagle. Thank you for 
joining us.
    Mr. Nagle. Thank you, Mr. Chairman. Good afternoon. Thank 
you for inviting us to testify before your Committee on areas 
where additional efforts are needed to meet the objectives of 
MTSA. I ask that my full written testimony be placed in the 
record.
    Enhancing maritime security and protecting America's 
seaports from acts of terrorism and other Federal crimes is a 
top priority for AAPA and our member U.S. port authorities. 
Ports handle 99 percent of our overseas cargo by volume, enable 
the deployment of our military, and serve as departure points 
for millions of cruise passengers each year.
    Let me begin by some comments on the proposed DP World 
acquisition of P&O ports.
    In reviewing a transaction of this type, it is the 
appropriate role of the Federal Government to determine if 
there are national security concerns with any proposed business 
arrangement involving non-U.S. interests, whether that involves 
port operations or any other business. There should be a 
rigorous process to appropriately consider and resolve those 
questions.
    AAPA believes that the current 45-day process underway 
regarding the Dubai Port World's acquisition of P&O ports 
should be allowed to run its course prior to Congress taking 
any action either on this proposed arrangement or on any 
blanket prohibition against a foreign government-affiliated 
company from providing terminal operating services at U.S. 
ports.
    With regard to individual business arrangements, public 
port authorities often have leases with terminal operating 
companies to operate port-owned facilities. These leases 
typically provide that any assignment of a lease to a successor 
company in the event of a merger or acquisition must be 
approved by the port authority. Leases generally cannot be 
transferred or assigned without permission.
    The recent focus on port security has made many question 
what else this Country needs to do to secure our ports. My 
testimony today will focus on three areas: one, the Port 
Security Grant Program; two, the Transportation Worker 
Identification Credential, TWIC, that has been mentioned this 
morning; and, three, adequate resources for the Federal 
agencies primarily responsible for port and maritime security.
    Soon after September 11th, Congress established the Port 
Security Grant Program to provide much needed help to port 
facilities to harden security to protect these vital ports of 
entry from acts of terrorism. While the program has provided 
much needed funding, it still has several problems. Let me 
begin with the funding level.
    From its inception, the Port Security Grant Program has 
been dramatically underfunded. DHS has been able to fund only 
about 20 percent of the identified needs through the 
applications. AAPA recommends an annual funding level of $400 
million for this program. Limited funds have placed huge 
burdens on port authorities as security projects compete with 
funds required for maintenance of facilities, channel dredging, 
and other port expansion projects to meet growing international 
trade. The biggest impact of funding limitations, however, is a 
delay in making security enhancements. Limited funds means 
slower progress.
    This low level of annual funding has resulted in DHS 
limiting the eligibility of the program. Last year, DHS decided 
to limit eligibility, leaving nearly half of our member ports 
ineligible to even apply. We support a risk-based system; 
however, we believe that each port facility that must meet the 
requirements of MTSA should be able to apply. We are also 
concerned that limits on eligibility might leave a class of 
perceived underprotected ports.
    The Administration, also as has been mentioned this 
morning, has sought to eliminate the Port Security Grant 
Program during the last two years by lumping port security into 
a broader targeted infrastructure protection program. This is 
not the time to dilute the focus on port security; it should 
remain as a separate dedicated program. AAPA is also concerned 
by the slow pace in making the funds available. For fiscal year 
2006, we are still waiting for the application process to open 
for the port security grants, nearly six months after the 
appropriation bill became law.
    A second priority for AAPA related to port security is 
quicker implementation of the TWIC. Four years after this 
requirement was enacted in MTSA, we are still far from 
implementing a TWIC system nationwide.
    The third area AAPA believes should be a priority for port 
security is ensuring that adequate resources are available for 
the Federal agencies with primary responsibility for port and 
maritime security. Again, there has been a significant 
discussion of this both this morning and in this panel.
    The U.S. Coast Guard and Customs and Border Protection are 
the two key agencies that need adequate resources to address 
port security. Both have done a great job to address these new 
challenges post-9/11. Projections on container and passenger 
volumes, however, show a huge increase at seaports in the 
coming years. Congress needs to take a careful look at whether 
these agencies will have the manpower and resources to handle 
this growth in their security responsibilities.
    In conclusion, our Nation and its public ports have made 
great progress in enhancing port security since September 11th, 
in large measure due to the actions of this Committee and your 
leadership in moving forward MTSA legislation. However, we 
continue to need to make progress in this area. On behalf of 
the American Association of Port Authorities and our member 
ports, thank you for the opportunity to be here this afternoon, 
and I am willing to answer any questions at your time, Mr. 
Chairman. Thank you.
    Mr. LoBiondo. Well, thank you very much. There are so many 
different areas to talk about. The port security grant issue is 
one that has disturbed us a great deal. Depending on what 
numbers we use, the current requested level of funding from DHS 
I think last week looked like it would take some 60 years 
before we come to even the bottom line of what was required.
    In the meantime, you are expected to continue to do more, 
you are just given more and more mandates. And we are hoping 
that we can get someone's attention or the secretary and Mr. 
Baker carries back this message. He heard some pretty strong 
messages last week in Armed Services, and I think he did hear 
again today.
    But I would like to ask you some specific questions about 
how do you interact with the Coast Guard and other DHS agencies 
to carry out the common mission of the port security?
    Mr. Nagle. I think as was relayed this morning, certainly 
with Representative Coble's discussion as far as the four-
legged stool, it definitely is a partnership effort between the 
Federal agencies. Again, certainly Customs on the cargo 
security side and Coast Guard on the vessel and facility 
security side have primary responsibility. However, the public 
port authorities have a role in that, the terminal operators 
have a role in that, as well as the private sector that are 
involved.
    As indicated, all of the facility operators, whether they 
are public agencies or private, do need to prepare and provide 
a facility security plan that is reviewed and approved by the 
Coast Guard. And then--so you have a facility security plan 
process that is approved and in place and ongoing. You then 
also have essentially a local port area maritime security 
program that is chaired by the Coast Guard captain of the port, 
and the local port authorities are part of that local security 
committee that looks at the broader, beyond the individual 
facilities, to generally the port area. And there are--also as 
part of that there are studies, analysis, et cetera, to 
determine and make recommendations as far as what security or 
enhancements are required to address security in the broader 
port area.
    Mr. LoBiondo. Do you receive sensitive or classified 
information from the Coast Guard or any other Federal agency 
regarding potential threats to homeland security at our ports?
    Mr. Nagle. We, as AAPA, do not receive sensitive security 
material. If there are--and in many cases at the local port 
authority the facility security officers or others that may 
well have security clearances would be able to receive that 
information, but as a general course of matter, and certainly 
through the Association, no. We are on certainly the 
correspondence with Department of Homeland Security regarding 
security sensitive information that they are able to provide 
that we can provide through the Association to our local 
individual members, but not secure information.
    Mr. LoBiondo. I take it from your testimony that the top 
two items that you would suggest the Federal Government needs 
to get on quickly would be additional port security grants and 
then the TWIC card?
    Mr. Nagle. I would say from the port authority's 
perspective, I think all three of the areas are--I would 
certainly indicate as equal, the two you mentioned as well as 
the additional resources for Coast Guard and Customs. Again, 
the first two are principally looking at the security of the 
port facilities and making sure that the people that are on 
that facility are who they say they are and have authorization 
to be on that facility and to take cargo either onto or off of 
that facility as appropriate.
    The third area as far as the Coast Guard and Customs is in 
the essentially outside of the terminal gates responsibility 
regarding cargo and vessels that are entering the U.S. And as 
has been mentioned, whether you defining it as pushing the 
borders out or however you define that process, certainly there 
is significant value and interest in moving the determination 
of any either vessels or cargo at risk before it reaches the 
U.S. port. As Mr. Oberstar mentioned earlier, certainly, while 
it is the last layer of defense, doing something, radiation 
portals at the U.S. port in many instances that could 
potentially be too late.
    Mr. LoBiondo. Could you say what is the biggest risk, 
exposure, threat because of lack of port security grants? What 
gaping hole is that leaving that the private side is not able 
to pick up? We know there is an enormous number of dollars that 
are necessary to even come up close. How would you rank what 
are the areas that are most at risk because of lack of port 
security clearance?
    Mr. Nagle. The areas that our members tell us are the areas 
that they have identified as still requiring significant 
enhancements at the funding because of lack of funding is being 
at least delayed, if not being able to be done, period, are in 
the areas of access control--again, whether that is physical 
access controls or credentialing systems, et cetera, that, 
again, are in many having to wait to be implemented because of 
the TWIC, not knowing what their requirements are going to be 
from the Federal TWIC to make sure that they are compatible 
with what a local port authority would do in terms of 
credentialing, et cetera.
    But access controls. Perimeter security, whether, again, 
that is the physical perimeter security by personnel or by 
fencing, lighting, video surveillance, certainly utilizing 
technology to better being able to provide surveillance of the 
facility. Communication systems, being able to communicate 
amongst the various--whether it is the port authority security 
personnel, local law enforcement. In general, those would be 
the first responders in any incident related to a port or 
maritime environment. Communications command and control 
systems are certainly recognized as very important.
    And probably the final area that again is still a subject 
of particular interest is water-side security. Again, the Coast 
Guard has primary responsibility for that, but with their 
limited resources, they are obviously not able to be at every 
single facility at all times. So looking at the opportunity of 
either patrol boats and either radar or sonar detection devices 
that help provide a level of security regarding any intrusion 
from the water side. Those are, I would say, the four areas 
that our members have identified as most in need of additional 
funding.
    Mr. LoBiondo. So are you saying that if we had an incident 
with one of your members at one of the ports, that there would 
be an inability for the different entities involved to 
communicate directly?
    Mr. Nagle. I would say that there are still cases that you 
are still looking at the compatibility--I think that was 
certainly given the experience in September 11th, the inability 
of the various responders to be able to communicate------
    Mr. LoBiondo. What I am getting at.
    Mr. Nagle. Yes. Certainly there has been progress made in 
that, but I would not say that there has been certainly 
conclusive determination of what that interoperability between 
systems is between all those local responders. In many cases 
they are outside the control, obviously, of either the port 
authority or the Federal, say, Customs, Coast Guard, et cetera, 
because you are coordinating with the local and State agencies 
that would have their own communications systems. So it is a 
matter of trying to coordinate all of those various potential 
first-responders and be able to communicate amongst themselves. 
That is still an issue.
    Mr. LoBiondo. I have a hunch you are being pretty kind in 
your description of how that has come together and where we are 
with all that. Last question I have, do you have any estimate 
of what your members have spent, either on their own initiative 
or mandated, in port security that has been non-governmental 
help?
    Mr. Nagle. I can't give you an actual figure, but 
essentially we have been able to determine--I would say it is 
beyond what is provided in the Port Security Grant funding, 
which has been, to date, actual, $707 million, and then with 
the additional $175 million that will be coming out in this 
upcoming round, so roughly a little over $880 million. In 
general, it looks like there has been, I would say, hundreds of 
millions of dollars spent by the port authorities in addition 
to that figure.
    I think the numbers that were referenced this morning, the 
$5.4 billion estimate was only for facility security. There was 
some intimation that that was for a broader level of security 
beyond facilities. The estimate, when Coast Guard looked at the 
costs of implementing MTSA on facility security was $5.4 
billion over 10 years. The first five rounds of grants, there 
has been a total identified needs applied for of $3.8 billion, 
and only $700 million has been applied. That is the 20 percent 
that I was referencing in the reference that you made as far as 
how little has been provided to public ports.
    So I think there has been some level of correspondence 
between the level of identified needs that have been applied 
for and that Coast Guard estimate that gives us the general 
feeling that that total figure of $5.4 billion seems to be 
certainly within the ballpark.
    Mr. LoBiondo. I thank you very much. We apologize and we 
thank you for adjusting your travel schedule. We understand 
that you have missed your original flight and had to 
reschedule, and we very much appreciate that. And if in fact 
you need to go, please feel free.
    Mr. Nagle. At this point, because of the switch, I am fine, 
and if you would prefer for me to stay for the panel, I would 
be happy to do that.
    Mr. LoBiondo. Might be an additional question.
    Mr. Nagle. OK, sure.
    Mr. LoBiondo. OK.
    Mr. Scavone, please.
    Mr. Scavone. Thank you, Mr. Chairman. I have submitted my 
comments for the record. I know that you, sir, heard my remarks 
at the Armed Services Committee last week. I will mention a few 
points relative to my comments today and try not to be 
repetitive.
    In addition to being also responsible for security at P&O, 
I also serve on the Board of the National Association of 
Waterfront Employers, who did submit comments on port security 
to the Senate Commerce Committee today, and with your 
permission, sir, I would like to send those into this Committee 
for its record.
    Mr. LoBiondo. Without objection.
    Mr. Scavone. I would like to offer first a few comments on 
the security of the global supply chain.
    Of late, we have become accustomed to hearing that our 
ports in the U.S. are the most vulnerable points of entry. This 
tends to lead to the conclusion that the ports themselves are 
the location where security needs most to be enhanced.
    That is not a correct conclusion. Our ports in the U.S. are 
already the one point in the supply chain over which we have 
the most control. It would be more accurate to say that if the 
security of the supply chain in a foreign location should fail, 
the place where we in the U.S. will be first exposed to that 
failure would be in the U.S. port. However, no amount of 
security on the part of the terminal operator in that U.S. 
facility will change that fact.
    Therefore, the enhancement of the security of our U.S. 
ports and, by extension, our homeland, is best accomplished by 
improving the security at the point of origin. We have heard 
today about programs like the 24-hour rule, C-TPAT, the CSI 
program, which have all contributed to that goal. If efforts 
will be made to continually improve our security, this is where 
the focus must remain, to include such matters as the integrity 
of container seals, the improved capability to conduct non-
intrusive inspections at port of loading, ideally at the 
direction of U.S. Customs, and the upgrading of Customs' 
Automated Targeting System.
    Some of these objectives will experience substantial 
progress via the simple decision to devote more resource to 
them, which has been discussed already today. Others would 
require a global program joining the governments of virtually 
every trading company with carriers, terminal operators, 
technology vendors, and international standards bodies such as 
the International Standards Organization, or ISO, which leads 
me to a few points about foreign ownership.
    The fact that foreign interests own many of the companies 
that manage our terminals in the U.S. has recently, as we know, 
become a major point of discussion. The focus has been on the 
extent to which such ownership may impact the security inside 
our terminals. The answer is it does not impact the security 
function at all. We have already heard that the Coast Guard, 
Customs, and the port itself continue to be responsible for 
that security. We, as terminal operators, do have 
responsibility to have access controls to our facilities, but 
that function is approved, monitored, audited, and enforced by 
the Coast Guard.
    The terminal operator has no role in verifying or 
inspecting the declared contents of any container entering the 
United States. A terminal operator does not open a container to 
verify its contents. Inspection is performed exclusively by 
U.S. Customs under its own supervision. And no container leaves 
a U.S. facility until U.S. Customs indicates that it is free to 
go.
    In every case of which I am aware, foreign ownership of 
terminal operating businesses in the U.S. is conducted by U.S. 
subsidiaries employing predominantly U.S. citizens and U.S. 
labor. However, under no circumstances does this permit the 
foreign shareholder to control any port or terminal in the U.S. 
Obviously, the shareholder will control indirectly the overall 
business strategy of the company, but like any business, it 
will be subject to the laws of the countries in which it 
operates, and it may only exercise its influence within those 
limits.
    If you accept that the security at the originating end of 
the supply chain is the area most requiring attention, you will 
then recognize that the participation inside the U.S. of the 
major global terminal operating companies of the world, 
alongside our U.S. terminal operating companies, permits us to 
have a much broader global cooperative effort to address the 
ways and means to enhance the security of that supply chain.
    For example, the global operators who also have a U.S. 
presence represent possibly the single greatest resource in the 
effort to deploy scanners in foreign countries and to supply to 
U.S. Customs the scans of every container they move onto a 
vessel bound for the U.S., which in turn addresses the question 
of intervention that Dr. Carafano raised, where you could 
potentially intervene at any point along the way. But if you 
check the box before it is actually loaded onto the vessel 
heading for the U.S., there is no additional intervention after 
that.
    A question was raised about the impact of DP World deal on 
the security of the New York cruise terminal. By agreement with 
the Coast Guard at the New York cruise terminal, the role of 
the facility security officer is actually filled by Michael 
Stapleton Associates, a private security firm composed of ex-
NYPD detectives and officers. That firm, in cooperation with 
the Coast Guard, prepared our facility security plan and they 
operate it.
    The Coast Guard has been highly complimentary of our 
security measures there, which include measures beyond those 
required by the regulations, such as canine patrols, and 
nothing about that is going to change. Further, we do not have 
access to passenger lists or crew lists; those are kept by the 
cruise lines and CBP. The sailing schedules are on the cruise 
line Web sites; thus, the sale of the P&O parent company in 
London would have no impact on the security at this terminal.
    In Beaumont, Texas we load military vehicles on vessels 
chartered by the military. We use longshoremen to do it. 
Numerous military personnel are always present to supervise 
that operation. The only information we receive about the cargo 
is a written list of equipment to be loaded. If anyone wanted 
access to this information, they would only have to stand 
outside the terminal fence and count what goes in and out, the 
point being the information we have is not confidential to 
begin with.
    In conclusion, Mr. Chairman, when we discuss risk in the 
supply chain, I believe it is important to distinguish between 
risks that exist today and risks that might somehow be created 
if P&O is sold. I believe we have seen that those who know how 
security really works are virtually unanimous that this sale is 
not an issue from a security standpoint.
    Thank you, Mr. Chairman, for the opportunity to submit 
these comments today.
    Mr. LoBiondo. Thank you.
    Mr. Brown, thank you for your patience. Thanks for making a 
very long trip, and I am waiting for your remarks.
    Mr. Brown. Thank you, Chairman LoBiondo. And thank you, 
Member Filner and the rest of the members of the Committee. I 
want to thank you for having the opportunity to come and speak 
here and for the invitation.
    My name is Gary Brown. I am a third generation longshoreman 
in the Port of Tacoma, Washington; roughly 37 years down there. 
I am also privileged to serve as the security liaison officer 
for the International Longshore and Warehouse Union. And in 
this capacity I have received numerous security certificates 
and certifications from the Coast Guard. I have taken my class 
with FEMA and I was very fortunate to have taken a class that 
was sponsored by the U.S. Attorney's Office for anti-
terrorists. So that is a little bit of my background.
    Also, on February 14th and 16th of this year, I organized a 
port security training session for the ILWU and its members in 
conjunction with the Pacific Maritime Institute, which is one 
of the few government recognized and organizations institutes. 
I had longshore workers from every local up and down our coast, 
the whole International, including two members from Hawaii, and 
they were trained on a facility, company and vessel security 
regulations required by the Coast Guard.
    I had the distinct pleasure of having retired Captain Danny 
Ellis, Coast Guard, and Assistant Chief AD Vickery, Seattle 
Fire Department, who has been involved in several--I guess he 
is the grandfather, as they say, or the founding father for the 
Marine Terrorist Response Program in Puget Sound, and which is 
going to be nationwide. They have helped me with my program and 
were nice enough to have the Coast Guard send two people to 
speak at the class, Customs sent two people, and along with, 
like I said, the Fire Department, first responders, and a 
gentleman that was retired from the Treasury Department to 
speak on some anti-terrorist things for us to be watching out 
for.
    So it was a very good class. All the members were certified 
and this was totally funded by and paid for by the ILWU. We 
paid and initiated for this because our employer had failed to 
conduct a proper training course which is required by the Coast 
Guard. And on that note there, that is where we are at with our 
training, and if we could get any help with any funding, we 
would appreciate it.
    Just to touch on the Dubai Ports deal as far as the 
International Longshore and Warehouse, where we stand is that 
we fully support the bipartisan calls in Congress for the Bush 
Administration to direct a committee on the foreign investment 
to conduct a full 45-day investigation, because our seaports 
are part of our global economy.
    The ILWU believes that we should not rush to open the doors 
for such assets to companies owned or operated by foreign 
countries where there were serious concerns with existing 
terrorist activities and funding. Therefore, we are urging that 
the decision for the approval be based on national security 
interests of the United States, and not on commercial interests 
of any one company or one country.
    We also urge the Federal Government, including Congress, to 
focus its attention beyond the controversy over the one future 
commercial contract and to recognize and correct immediate 
major deficiencies of the security that exists today in 
American ports. It is the current lack of effective port 
security since the terrorist attacks of 9/11 that is the real 
concern of all the dockworkers and millions of Americans who 
live within close proximity of our Nation's ports.
    To touch on that, you have heard several discussions from 
everybody today on panel one and the gentleman here was on 
seals. Seals was something that we as longshoremen used to 
conduct, physically check the seals, and now they are done via 
the cameras, and the cameras, you can't see the number and you 
can't tell if it is secured. It is a severe problem.
    Another problem is empties. This is something that was 
brought up and a lot of people wonder why empties are such a 
problem. Empties are a perfect example of an access for 
somebody to use to put something in to transport something in, 
because they are not examined. We used to examine them for 
several reasons: number one, to make sure they were empty; 
number two, to make sure they were clean, because a lot of the 
customers require a certain type of container; and we also 
checked for structural damage, which is a safety factor.
    And not only that, but we have found--I personally found 25 
Chinese in a container one night that was an empty, and, 
fortunately, the only reason we found it was because we were 
getting ready to stack it in the storage area, which is where 
it would have probably stayed for about four or five days. And 
for some reason it was close to lunch time, so I told my driver 
just leave it on the ground, and within five minutes I got 
calls on the radio that there were people running all over the 
terminal down there, so I caught one of them and that is what I 
found out, that they had been in that container, it was an 
empty.
    And another problem we have is we don't have, like on our 
shipping list. They talked about--the gentleman earlier talked 
about the honor system, and we work with several of those 
companies that are on this honor system, but these same 
companies we have containers, if we get a discharge list of 
approximately 450 containers, we have 462 come off. That is 12 
extra. And they are not on the list.
    Well, according to regulations, and if everybody was to 
follow the rules, you call Customs, because now you have got a 
break in security; you have got 12 extra containers. 
Unfortunately, the companies' response is just write those 
numbers in and worry about it later on. And this is something 
that we deal with every day, and this is not acceptable.
    We talk about rules and regulations, and they are not being 
followed. And like I said, with the seals, with the loads, with 
the empties, we have loads coming off ships now and it is such 
a fast paced business that we are getting--if you happen to 
look at some of these manifests on there, they are listed as 
dummy, D-U-M-M-Y, because they don't want to take the time to 
stop and verify that container, so they come through as 
dummies.
    And I have had several meetings with the companies and I 
said, you know, what is the process with that, because you have 
these dummy containers? Well, what they will do is they will 
run it through and the computer will pick it up, where, in the 
old days, I had--I am a marine clerk, and I had the manifests, 
I would verify these things; I would verify the seal, I would 
verify the container, and at one time we knew what the contents 
were. And we don't have access to any of that anymore, and this 
is all done through the computer process, and this is what our 
concerns are at, because we don't have access to that anymore.
    And we have had several where there was an incident in Long 
Beach where the container blew up. Had we had access like the 
old days, what we are supposed to do is check that container, 
we would have found out that it had propane in it. But on this 
list that was set out, it was FAK, freights of all kinds/dummy. 
And luckily nobody was killed, but it blew the container doors 
off and, my understanding, it blew things about 40 feet behind 
it. And these are our concerns, you know, the empties, loads, 
and, of course, now we have at our gates now we have--to give 
you a quick incident, if I could.
    We used to be down in the lanes. When a driver would pull 
in, he would give us his manifest, we would double check to 
make sure the container was right, the seal number was right, 
plus it was locked; you would physically grab it and pull it. 
And if it was placarded with ``Hazardous,'' you would walk 
around and make sure it has all the placards on it because of 
Coast Guard regulations.
    Well, now a driver pulls up and he gives you the seal 
number over the phone. And, of course, your camera on it 
shows--you look in your camera and the density and stuff, it 
just shows a glob. There is no way you can verify the number; 
there is no way you can verify if that seal is actually secure.
    And in this one incident, the gentleman came out of Canada 
and it was hazardous, and he pulled up to the lane down there 
and I asked him the seal number, and he gave me a seal number. 
Well, he had had placards on it, so I had to go down and walk 
around it.
    Well, when I got to the rear of the container, there was no 
seal. And I walked up to the driver and I said, you gave me a 
seal number over the radio; there is no seal on the door. And 
he just shook his shoulders. And I said, did you check the 
container before it left the dock in Canada, and he goes no. 
And, of course, he didn't stop because he used a NAFTA lane 
coming across the border, where he doesn't have to stop.
    And I said, did you stop anywhere along the way? And he 
goes no. And I said where is the seal? There is no seal on 
this. He says, I don't know. So at this point I had just 
finished one of my classes, and, of course, that was a red 
flag, foreign container, hazardous, no seal, breach of 
security. And so the response was the protocol is to call 
Customs.
    Well, unfortunately, when I called the terminal operator 
and explained to them--that is their job to call Customs--their 
response was throw another seal on it, it is going to miss the 
ship. And I said, no, we have got a severe breach here, we have 
to call Customs. So I was chastised for that, but I called 
Customs and that container was taken aside. So I don't know 
what happened at the end of that, but this is just things we go 
through daily down there as far as security. And it is of great 
concern because, like with the empties, I like to touch back on 
that.
    It is also the empties coming in from inside, not just the 
ones coming off the ship, because we have found tons of things 
in there, and the gentleman eluded earlier about the empty 
containers and the drivers. Drivers come in and a lot of these 
companies the terminal operators, a couple of them own their 
own trucking companies now, so they actually have a little kind 
of a card they put on their dashboard, and they are just in and 
out of the terminals.
    And there is no way you can monitor these guys. I have seen 
drivers come in with giant sleepers, and just out of the corner 
of my eye I catch them where they are parking in the terminal, 
and I see two or three guys pile out of this sleeper. You know, 
they are helping them with the container or they are lose on 
it. Those aren't being inspected and the drivers aren't being 
I.D.'d, you know. That is another concern of ours. And since we 
aren't checking empties any more, you know, the people ask me, 
they say why would you check an empty? Because I told them I 
found people in there, I found cargo in there.
    And, you know, the stuff that--we are looking at loads and 
we are looking at seals, you know, this is where we are 
concentrating, but we have also got to concentrate on those 
empties because as we know, you know, the people that want to 
do us harm are very methodical, and they are very inventive, 
and if they can see we are paying attention to loads and seals 
and all this stuff, but not on empties, because these empties 
are loaded on the ship next to the loads and the empties are 
loaded on and off trucks just as they do as the loads, and if 
we are not paying attention to those empties, it is a golden 
opportunity for these people.
    And I say from the enemy within, because, as we all know, 
unfortunately, the terrorists that attacked us on 9/11, that 
attack occurred within the United States, within our States, 
and I believe after some of the classes I have been and 
listened to some of the people, that there are people in this 
Country that have pretty much established themselves, and for 
them to put--if their goal is to destroy or disrupt our docks, 
you know, they could very easily build a bomb or whatever they 
want in Scottsdale, Arizona and ship it, and once it is on the 
terminal ignite it. So the concern from inside as well as 
outside is very sincere.
    And like I said, you have my statement, and I thank you for 
the time, if you have any questions.
    Mr. LoBiondo. Thank you. What would be in your order of 
priority? You mentioned a lot of things, but the top three 
things that we need to do from your perspective to better 
secure the ports?
    Mr. Brown. Well, like I said, Mr. Chairman, the sad part is 
that we used to do the job of, like I say, checking the seals 
and checking empties. That is something we don't do any more. 
We actually had letters from terminal operators that don't want 
it done any more. I have been to several meetings on committees 
and stuff where people have asked me, you know, why did you 
guys quit doing that, and I said, well, it wasn't us. And they 
thought it was pretty silly. And in this day and age, after 
what we have had happen, we should be a little bit more 
vigilant and a little bit more checking this stuff, and it has 
just gone backwards.
    So actually the checking of the seals, the documentation, 
and--because, like right now, you cannot--if a container pulls 
up to the terminal, we are looking at the seal now with a 
camera, and you can't tell the number; you have to take the 
driver's word for it. And, unfortunately, you can't go find out 
if that thing is--I did a test with a news reporter up in our 
area about a year ago, and I told them, and they said, well, 
what is the big hoopla about seals, once they are sealed?
    Well, there was a broken seal that had already been cut, 
and I went over and put it on a container, used my chewing gum, 
put the tip back on it and stood back and said, now look 
through your camera. Does it look like it is sealed? He said 
yes. So I went over and popped it off. And when we were doing 
it, you know, you give it a good yank and make sure and make 
sure the number matched, all that stuff, and we would look for 
any abnormalities on that stuff.
    And we are just not doing that anymore, and that is the big 
concern, because, you know, people--like I said, people in 
there, if they wanted to store something in there--but the 
seals and the empties and probably the drivers that come, the 
truck drivers. A lot of these guys are around the terminal, 
they are not--you know, they are not monitored. And you get on 
a busy terminal down there and you have got a couple thousand 
people rolling around there, it is impossible, absolutely 
impossible to catch.
    And the only time we come across, like I mentioned earlier 
with the empties coming off the container ship, that is when I 
call or have my members call Customs or Coast Guard, and they 
will respond. But we have to catch them. And on a busy day, you 
know, like I mentioned before, the Coast Guard and Customs, 
those people are very thin; they can't be at every port, they 
can't be at every ship.
    And this is kind of like when--that is what we are down 
there for. And with this training and stuff, you know, we 
figure, you know, we are down there daily, we know who belongs 
or who doesn't, you know, and we are a valuable resource 
working with the first responders.
    To give you a quick instance of why we want to enhance our 
training and be there to help is they had a ship fire up in 
Seattle, and the Fire Department--I mean, it was an intense 
fire, and they stood on the dock and they weren't going to go 
aboard because there was a container right on the middle of the 
deck and it had placards on it. And they were waiting for that. 
They didn't want to get on board and have that thing blow up 
and then kill a whole bunch of people.
    And nobody knew what to do, but the longshore, one of our 
members had gone back up in the crane and hoisted that 
container out of the fire, got it off the ship they were in. So 
this kind of brought on our program, because I had worked with 
a lot of first responders and like the fire chief says, he 
says, I don't know how to drive a crane and you don't know how 
to drive a fire truck, but together, if there is an incident, 
an event, you know, we will make a hell of a partnership. And 
that is kind of where our program has gone.
    Mr. LoBiondo. Thank you.
    Mr. Scavone, if the acquisition of P&O ports by Dubai Port 
World is approved, would Dubai Port World also have direct 
control over stevedoring operations in these 16 additional 
ports?
    Mr. Scavone. Yes. Well, P&O Ports, which would remain a 
place as a U.S. company with U.S. employees operating in the 
U.S., yes. They would be the ultimate owner of that company, 
about five or six corporations up the chain.
    Mr. LoBiondo. And how does P&O Ports' involvement at U.S. 
ports where it operate terminals differ from its operation as a 
stevedore in the 22 U.S. ports?
    Mr. Scavone. The 22 locations I think you are referring to, 
Mr. Chairman, include the 6 where we actually manage terminal 
facilities. All this information is on our Web site and has 
been for a long time. In most ports we serve purely as a 
stevedore, simply to remove the cargo from a vessel and put it 
down in the terminal.
    But in those cases the terminal itself is operated by, for 
instance, a port authority that is an operating port authority 
like Houston or Norfolk, and that entity would be the one 
responsible for the security of the terminal facility and for 
the preparation of the facility security plan with the Coast 
Guard; whereas, in places like Port Newark, we also operate the 
terminal itself.
    So in addition to stevedoring the vessel, we manage the 
terminal facility and then it becomes our responsibility to 
agree with the Coast Guard a facility security plan, which is 
primarily the access controls to that facility for people and 
vehicles under the supervision and direction and enforcement of 
the Coast Guard.
    Mr. LoBiondo. OK, gentlemen, I thank you very much. It has 
been very helpful and informative. We appreciate your patience.
    And the Committee stands adjourned.
    [Whereupon, at 1:37 p.m., the subcommittee was adjourned.]
  


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