[Senate Hearing 109-548]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 109-548

 NEUTRALIZING THE NUCLEAR AND RADIOLOGICAL THREAT: SECURING THE GLOBAL 
                              SUPPLY CHAIN

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

                                HEARINGS

                               before the

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               ----------                              

                         MARCH 28 AND 30, 2006

                               ----------                              


       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs

           NEUTRALIZING THE NUCLEAR AND RADIOLOGICAL THREAT:

                    SECURING THE GLOBAL SUPPLY CHAIN

                                                        S. Hrg. 109-548
 
 NEUTRALIZING THE NUCLEAR AND RADIOLOGICAL THREAT: SECURING THE GLOBAL 
                              SUPPLY CHAIN

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

                                HEARINGS

                               before the

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                         MARCH 28 AND 30, 2006

                               __________


       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs



                    U.S. GOVERNMENT PRINTING OFFICE
27-754                      WASHINGTON : 2006
_____________________________________________________________________________
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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
   Joyce A. Rechtschaffen, Minority Staff Director and Chief Counsel
                      Trina D. Tyrer, Chief Clerk


                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                   NORM COLEMAN, Minnesota, Chairman
TED STEVENS, Alaska                  CARL LEVIN, Michigan
TOM COBURN, Oklahoma                 DANIEL K. AKAKA, Hawaii
LINCOLN D. CHAFEE, Rhode Island      THOMAS R. CARPER, Delaware
ROBERT F. BENNETT, Utah              MARK DAYTON, Minnesota
PETE V. DOMENICI, New Mexico         FRANK LAUTENBERG, New Jersey
JOHN W. WARNER, Virginia             MARK PRYOR, Arkansas

       Raymond V. Shepherd, III, Staff Director and Chief Counsel
               Brian M. White, Professional Staff Member
        Elise J. Bean, Minority Staff Director and Chief Counsel
                   Laura E. Stuber, Minority Counsel
                     Mary D. Robertson, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Coleman.............................................. 1, 66
    Senator Collins..............................................     4
    Senator Levin................................................ 6, 70
    Senator Domenici.............................................     8
    Senator Lautenberg...........................................    10
    Senator Akaka................................................    12

                               WITNESSES
                        Tuesday, March 28, 2006

Hon. Thomas Kean, Former Governor of New Jersey and Chairman of 
  the 9/11 Commission............................................    14
Stephen E. Flynn, Ph.D., Commander (USCG, Retired), Jeane J. 
  Kirkpatrick Senior Fellow for National Security Studies, 
  Council on Foreign Relations, New York, New York...............    16
Eugene E. Aloise, Director, Nuclear and Nonproliferation Issues, 
  Natural Resources and Environment, Government Accountability 
  Office.........................................................    31
Gregory D. Kutz, Managing Director, Forensic Audits and Special 
  Investigations, Government Accountability Office, accompanied 
  by Keith A. Rhodes, Chief Technologist, Center for Technology 
  and Engineering, Government Accountability Office..............    34
David G. Huizenga, Deputy Assistant Secretary, National Nuclear 
  Security Administration........................................    42
Vayl Oxford, Director, Domestic Nuclear Detection Office, 
  Department of Homeland Security................................    46
Jayson P. Ahern, Assistant Commissioner, U.S. Customs and Border 
  Protection.....................................................    48

                        Thursday, March 30, 2006

Hon. Lindsey Graham, a U.S. Senator from the State of South 
  Carolina.......................................................    62
Hon. Charles E. Schumer, a U.S. Senator from the State of New 
  York...........................................................    63
Hon. Michael P. Jackson, Deputy Secretary, Department of Homeland 
  Security.......................................................    75
Christopher L. Koch, President and Chief Executive Officer, World 
  Shipping Council...............................................    91
Gary D. Gilbert, Senior Vice President, Hutchison Port Holdings, 
  Oakton, Virginia...............................................    94
John P. Clancey, Chairman, Maersk, Inc., Charlotte, North 
  Carolina.......................................................    97

                     Alphabetical List of Witnesses

Ahern, Jayson P.:
    Testimony....................................................    48
    Prepared statement...........................................   173
Aloise, Eugene E.:
    Testimony....................................................    31
    Prepared statement...........................................   128
Clancey, John P.:
    Testimony....................................................    97
    Prepared statement...........................................   212
Flynn, Stephen E.:
    Testimony....................................................    16
    Prepared statement...........................................   115
Gilbert, Gary D.:
    Testimony....................................................    94
    Prepared statement...........................................   205
Graham, Hon. Lindsey:
    Testimony....................................................    62
Huizenga, David G.:
    Testimony....................................................    42
    Prepared statement...........................................   152
Jackson, Hon. Michael P.:
    Testimony....................................................    75
    Prepared statement...........................................   181
Kean, Hon. Thomas:
    Testimony....................................................    14
    Prepared statement...........................................   110
Koch, Christopher L.:
    Testimony....................................................    91
    Prepared statement...........................................   187
Kutz, Gregory D.:
    Testimony....................................................    34
    Prepared statement...........................................   143
Oxford, Vayl:
    Testimony....................................................    46
    Prepared statement...........................................   163
Rhodes, Keith A.:
    Testimony....................................................    34
Schumer, Hon. Charles E.:
    Testimony....................................................    63

                                EXHIBITS

 1. Photograph of the Port of Hong Kong.........................   217

 2. Photographs of radiation portal monitors:
       Ga. Port of Norfolk, VA;..................................   218
       Gb. Port of Oakland, CA;..................................   219
       Gc. San Ysidro, CA-Tijuana, Mexico Border; and............   220
       Gd. Karakalpakia, Uzbekistan..............................   221

 3. U.S. Government Accountability Office (GAO) Report to 
  Congressional Requesters, COMBATING NUCLEAR SMUGGLING--
  Corruption, Maintenance, and Coordination Problems Challenge 
  U.S. Efforts to Provide Radiation Detection Equipment to Other 
  Countries, March 2006, GAO-06-311..............................   222

 4. U.S. Government Accountability Office (GAO) Report to 
  Congressional Requesters, COMBATING NUCLEAR SMUGGLING--DHS Has 
  Made Progress Deploying Radiation Detection Equipment at U.S. 
  Ports-of-Entry, but Concerns Remain, March 2006, GAO-06-389....   301

 5. U.S. Government Accountability Office (GAO) Letter Report to 
  the Honorable Norm Coleman, Chairman, Permanent Subcommittee on 
  Investigations, Border Security: Investigators Successfully 
  Transported Radioactive Sources Across Our Nation's Borders at 
  Selected Locations, March 28, 2006, GAO-06-545R................   359

 6. High Risk Shipments and Exams for all CSI Ports, Feb. 2005-
  Feb. 2006, chart prepared by the Permanent Subcommittee on 
  Investigations Majority Staff..................................   370

 7. High Risk Shipments and Exams Conducted at Selected CSI 
  Ports. Feb. 2005-Feb. 2006--CSI Ports: Hong Kong, Yokohama, and 
  LeHavre, chart prepared by the Permanent Subcommittee on 
  Investigations Majority Staff..................................   371

 8. High Risk Shipments and Exams Conducted at Selected CSI 
  Ports. Feb. 2005-Feb. 2006--CSI Ports: Durban, Gothenburg, and 
  Rotterdam, chart prepared by the Permanent Subcommittee on 
  Investigations Majority Staff..................................   372

 9. Congressional Budget Office Analysis, The Economic Costs of 
  Disruptions in Container Shipments, March 29, 2006.............   373

10. Boxes Containing Radioactive Material; Bill of Lading; and 
  Nuclear Regulatory Commission Document, charts prepared by the 
  U.S. Government Accountability Office, Office of Forensic 
  Audits and Special Investigations..............................   405

11. Statement for the Record of Richard M. Stana, Director, 
  Homeland Security and Justice Issues, U.S. Government 
  Accountability Office, CARGO CONTAINER INSPECTIONS--Preliminary 
  Observations of the Status of Efforts to Improve the Automated 
  Targeting System, GAO-06-591T..................................   408

12. Statement for the Record of the Retail Industry Leaders 
  Association....................................................   427

13. Correspondence from Linton F. Brooks, Administrator, 
  National Nuclear Security Administration (NNSA), Department of 
  Energy, dated April 24, 2006, to the Permanent Subcommittee on 
  Investigations, regarding NNSA's Management Decision on the 
  Government Accountability Office's Report GAO-06-311, COMBATING 
  NUCLEAR SMUGGLING: Corruption, Maintenance, and Coordination 
  Problems Challenge U.S. Efforts to Provide Radiation Detection 
  Equipment to Other Countries...................................   433

14. Inspectors: Security lags when traffic jams, March 29, 2006, 
  Detroit Free Press.............................................   436

15. Photograph and x-ray image taken at a Michigan port of a 
  container carrying Canadian trash..............................   440

16. Department of Homeland Security, Office of Inspector General 
  Report, Audit of Screening of Trucks Carrying Canadian 
  Municipal Solid Waste, OIG-06-21, January 2006.................   441

17. SEALED EXHIBIT: Official Use Only U.S. Government 
  Accountability Office (GAO) Letter Report to the Honorable Norm 
  Coleman, Chairman, Permanent Subcommittee on Investigations, 
  BORDER SECURITY: Counterfeit Documents Were Successfully Used 
  to Transport Radioactive Material Across Our Nation's Borders 
  at Selected Locations, March 28, 2006, GAO-06-422SU............     *

18. Response to supplemental question for the record submitted 
  to Gene Aloise, Director, Natural Resources and Environment, 
  U.S. Government Accountability Office..........................   463

19. GResponses to supplemental questions for the record submitted 
  to The Honorable Michael P. Jackson, Deputy Secretary, 
  Department of Homeland Security................................   465

20. GResponses to supplemental questions for the record submitted 
  to Jayson P. Ahern, Assistant Commissioner, U.S. Customs and 
  Border Protection, U.S. Department of Homeland Security........   485

21. GResponses to supplemental questions for the record submitted 
  to Vayl Oxford, Director, Domestic Nuclear Detection Office, 
  Department of Homeland Security................................   487

22. Responses to supplemental questions for the record submitted 
  to David G. Huizenga, Deputy Assistant Secretary, National 
  Nuclear Security Administration................................   492
23. Response to supplemental question for the record submitted 
  to Cmdr. Stephen E. Flynn (USCG, Retired), Jeane J. Kirkpatrick 
  Senior Fellow for National Security Studies, Council on Foreign 
  Relations......................................................   498

24. An Assessment of U.S. Efforts to Secure the Global Supply 
  Chain, Report prepared by the Majority and Minority Staff of 
  the Permanent Subcommittee on Investigations...................   501



 NEUTRALIZING THE NUCLEAR AND RADIOLOGICAL THREAT: SECURING THE GLOBAL 
                              SUPPLY CHAIN

                              ----------                              


                        TUESDAY, MARCH 28, 2006

                                     U.S. Senate,  
              Permanent Subcommittee on Investigations,    
                    of the Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:32 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Norm Coleman, 
Chairman of the Subcommittee, presiding.
    Present: Senators Coleman, Collins, Domenici, Levin, Akaka, 
and Lautenberg.
    Staff Present: Majority: Raymond V. Shepherd III, Staff 
Director and Chief Counsel; Brian M. White, Professional Staff 
Member; Joanna Ip Durie, Detailee, ICE; Mary D. Robertson, 
Chief Clerk; Leland B. Erickson, Counsel; Mark L. Greenblatt, 
Counsel; Matthew S. Miner, Counsel; Cindy Barnes, Detailee, 
GAO; Kathy Kraninger and Allison Boyd (HSGAC/Collins); Henry 
Abeyta (Energy Comm./Domenici); Minority: Elise J. Bean, Staff 
Director/Chief Counsel; Laura Stuber, Counsel; Richard Kessler 
(Akaka); Peter Vallario (Akaka); Madelyn Creedon (Armed 
Services/Levin); and Wendy Anderson (Lautenberg)

              OPENING STATEMENT OF SENATOR COLEMAN

    Senator Coleman. This hearing of the Permanent Subcommittee 
on Investigations is called to order. Good morning and thank 
you all for being here.
    Today we'll be holding 2 days of hearings on perhaps the 
most important threat confronting our country: Terrorists 
acquiring and detonating a nuclear weapon in the United States. 
Have no doubt, this threat is real.
    The Director of National Intelligence, John Negroponte, 
starkly noted this threat in his public testimony last month. 
``Attacking the U.S. homeland, U.S. interests overseas, and 
U.S. allies,'' he said, in that order, ``are al-Qaida's top 
operational priorities. . . . al-Qaida remains interested in 
acquiring chemical, biological, radiological, and nuclear 
materials or weapons to attack the United States, U.S. troops, 
and U.S. interests worldwide. In fact, intelligence reporting 
indicates that nearly 40 terrorist organizations, insurgencies, 
or cults have used, possessed, or expressed an interest in 
chemical, biological, radiological, and nuclear agent or 
weapons.''
    While the potential threat of a nuclear bomb is real, we 
cannot overlook the serious consequences that would result from 
a dirty bomb. For example, a dirty bomb constructed with 
Cesium-137, which is significantly less powerful than a nuclear 
weapon, detonated in New York, would wreak havoc, forcing 
millions to flee the city, and costing us billions in cleanup 
costs. It could close down Wall Street.
    A disturbing report from GAO that will be part of today's 
hearing demonstrates significant vulnerabilities in our 
defenses against a dirty bomb and other terrorist's threats.\1\ 
GAO investigators were able to smuggle enough radioactive 
source material to manufacture a dirty bomb across our northern 
and southern borders.
---------------------------------------------------------------------------
    \1\ See Exhibit 5 which appears in the Appendix on page 359.
---------------------------------------------------------------------------
    However, there is both good news and bad news to this 
story. The radiation detectors correctly alarmed, signaling the 
presence of radioactive material. The Customs officers followed 
the proper procedures as well. This is the good news.
    The bad news, however, is that the officers were fooled by 
fraudulent documents and didn't have the mechanisms to verify 
the documents. These are documents that my 20-year-old son 
could easily develop with a simple internet search using his 
computer at home. We cannot allow this potentially deadly 
material to transit our borders with such ease.
    Following this report, I am pleased to report that DHS has 
done the right thing. They have acknowledged the vulnerability 
and are taking corrective action to ensure that we close this 
gap. The Nuclear Regulatory Commission (NRC), however, does not 
appear ready to acknowledge that this is a problem, and I 
disagree with that. It is a problem when it is tougher to buy 
cold medicine today, after what we did with the Combat Meth 
Act--than it is to acquire enough material to construct a dirty 
bomb.
    Many experts, including one here this morning, believe that 
a maritime container is the ideal platform to transport nuclear 
radiological material or a nuclear device into the United 
States. Since 90 percent of global trade moves in maritime 
containers, we can not allow these containers to be utilized to 
transport weapons of mass destruction. The consequences of such 
an event would be devastating to our way of life and our 
economy.
    Therefore, it is imperative that we look at these issues 
holistically, neutralizing the radiological and nuclear threat 
and securing the global supply chain. We must, first, secure, 
detect, and interdict nuclear and radiological materials, and 
second, ensure the global supply chain is secure.
    Our defenses against this threat must start overseas. The 
first line of defense is securing source material in Russia and 
the former Soviet Union states. Simultaneous to securing the 
material at the source, our second line of defense must be to 
detect and interdict this material if it falls into the hands 
of a terrorist or if an insider tries to sell this material to 
a terrorist or a terrorist network.
    These initiatives push our borders out, yet concurrent with 
these efforts, we need to secure material in the United States 
and detect and interdict material at our ports of entry. The 
borders of the United States must be the last line of defense. 
Collectively, this layered strategy will bring us closer to 
preventing the nightmare scenario--a terrorist with a nuclear 
weapon.
    For the past 2 years, the Subcommittee has conducted an 
extensive investigation into global supply chain security and 
our layered defenses against nuclear terrorism. Today, in the 
first of our two-part hearing, we will address this layered 
approach to detect and interdict potential smuggling attempts--
both abroad and domestically--as well as our efforts to secure 
the material domestically. In the second part of the hearing, 
on Thursday, we will focus on global supply chain security.
    I want to take this opportunity to thank Ranking Member 
Levin, Chairman Collins, Senator Lieberman, and Representative 
Dingle for their support and interest in this important 
subject. Preventing nuclear terrorism and securing our Nation's 
ports demands a bipartisan and bicameral approach.
    I will note that Chairman Collins will be conducting a 
hearing on the broader issue with the full Committee. She 
authorized the GreenLane Maritime Cargo Security Act. This is 
really the holistic approach, and I appreciate her leadership 
on this issue. And I appreciate the opportunity for this 
Subcommittee to take a piece of it.
    The Government Accountability Office has laid the 
groundwork for today with three superb reports.\1\ 
Collectively, the reports detail many positive steps taken by 
the U.S. Government to address these issues, but more 
importantly, note several gaps in our defense. Specifically, 
4\1/2\ years after September 11, less than 40 percent of our 
seaports have basic radiation detection equipment. This is a 
massive blind spot. Pervasive corruption poses a significant 
challenge to our detection efforts.
---------------------------------------------------------------------------
    \1\ See Exhibits 3, 4, and 5 which appear in the Appendix on page 
222, 301, and 359, respectively.
---------------------------------------------------------------------------
    And the Nuclear Regulatory Commission, I believe, remains 
in a pre-September 11 mindset in a post-September 11 world. For 
example, the NRC has yet to implement even the most basic of 
reforms to secure radiological material, which I believe the 
GAO set forth in 2003. And I anticipate asking the GAO about 
that today.
    These issues must be addressed with a sense of urgency. We 
must close the gap at our ports. The NRC must reform the 
processes by which anyone can acquire radiological material. 
And the National Nuclear Security Administration must continue 
to aggressively build safeguards against corruption.
    I would like to welcome Governor Kean, former Chairman of 
the distinguished 9/11 Commission, and Commander Flynn, to our 
hearing today. Our hearing will address the efforts to prevent 
the smuggling of nuclear and radiological materials, the 
disturbing fact that less than 40 percent of maritime 
containers entering the United States are screened for 
radiation, and the ability of undercover GAO investigators to 
use fraudulent documents to transport enough radiological 
material across the border to construct a dirty bomb. I look 
forward to your testimony and an engaging hearing.
    I would like to turn to my Ranking Member. I do know 
Chairman Collins has to be covering the floor on major 
legislation. But I'll turn to, I think, Senator Levin.
    Senator Levin. Well, Madam Chairman, if you're going to 
cover the floor, please go ahead. Thank you, though. Thank you, 
Mr. Chairman.

             OPENING STATEMENT OF CHAIRMAN COLLINS

    Chairman Collins. Thank you, Senator Levin, for your 
courtesy. As you're aware, the Lobby Reform Act is on the floor 
today. We're in the midst of trying to work out the final 
negotiations to allow us to finish that bill today. So I very 
much appreciate your courtesy.
    I want to commend both the Chairman and the Ranking Member 
for their efforts to strengthen the security of our ports by 
securing the global supply chain. If terrorists were to obtain 
nuclear material and smuggle it into this country, the 
consequences would be catastrophic: A tremendous loss of life 
and a crippling blow to our economy.
    As we learned after the attacks on our country on September 
11 when all commercial aircraft was grounded for a time, it is 
undoubtedly true that an attack on one port would result in all 
ports being closed for a period of time. That would quickly 
deliver a crippling blow to our economy.
    The Chairman's work builds on the hearings that the full 
Committee has held on this challenge, beginning 3 years ago. 
And I commend you for your in-depth investigation into this 
issue.
    Many security experts, including the two experts that are 
before us on the first panel, have warned that a weapon of mass 
destruction is most likely to be smuggled into our country via 
a marine container. The number of containers entering this 
country continues to grow by more than 10 percent per year. In 
fact, Customs and Border Protection's latest estimate is that 
the number arriving by ship exceeds 11 million. Just a couple 
of years ago when we were discussing this issue, it was 9 
million. Now it's more than 11 million.
    Given current technology and the sheer volume of traffic, 
we simply cannot physically search every container without 
bringing trade to a standstill. The U.S. Government cannot 
follow every container throughout its global journey, nor can 
the government track every container and every piece of cargo 
along the roads, rails, and airways that bring them to the 
ports.
    What we need is a public/private partnership--that was the 
purpose of the C-TPAT program--and also a partnership with 
other countries, as we have with the Container Security 
Initiative (CSI). But previous work done by this Committee and 
by this Subcommittee have shown that those programs, while 
well-conceived, have been flawed in their implementation. 
Indeed, through CSI, only 17.5 percent of high risk cargo 
targeted for additional inspection actually receives it before 
being loaded onto ships and sent to our shores.
    We are making some progress in deploying radiation portal 
monitors at our ports. I recently visited the Port of Seattle 
and saw the trucks rolling through these monitors. I was 
impressed with the speed. There are quite a few false 
positives, sometimes caused by kitty litter and marble, but 
they certainly are a step in the right direction.
    But as I watched the trucks with the containers rolling 
through the nuclear detectors, I couldn't help but think that 
it's too late by that point. If there is nuclear material or 
the makings of a dirty bomb in one of these containers in 
Seattle, we have failed. We need to install radiation detection 
equipment overseas, at the ports of origin. That is just 
critical.
    But we must be mindful that even if the equipment is 
functioning properly and in the right place, if it's not 
administered effectively, the program will not be a success. We 
see evidence of this concern in the Government Accountability 
Office reports that the Chairman has commissioned. These 
reports indicate that corruption and the use of false documents 
are a problem overseas--findings that are very troubling. It 
tells me that we need to have more of our own agents and 
inspectors stationed at foreign ports, and we need to make this 
a priority.
    Again, Mr. Chairman and Senator Levin, thank you for your 
courtesy in allowing me to proceed. I will be watching the 
hearing from afar as I continue the negotiations. Thank you.
    [The prepared statement of Senator Collins follows:]

                 PREPARED STATEMENT OF SENATOR COLLINS

    Thank you, Mr. Chairman. I commend you for your efforts to 
strengthen the security of our ports by securing the global supply 
chain. If terrorists were to obtain nuclear or radiological material 
and smuggle it into this country, the consequences could be 
catastrophic: a tremendous loss of life and a crippling blow to our 
economy. Your important work builds on hearings the full Committee has 
held on this challenge beginning three years ago.
    Many security experts, including notably Governor Kean and Dr. 
Flynn, who will testify this morning, warn that a weapon of mass 
destruction is most likely to be smuggled into our country via a marine 
container. The number of containers entering this country by sea 
continues to grow by more than 10 percent per year. In fact, Customs 
and Border Protection reports that in fiscal year 2005, the number 
arriving by vessel was more than eleven million.
    Given current technology and the sheer volume of traffic, we cannot 
physically search every container without bringing trade to a 
standstill. The United States government cannot follow every container 
throughout its global journey, nor can it track every container and 
every piece of cargo along the roads, rails, and airways that bring 
them to ports. No one nation can secure the international supply chain.
    For that reason, executive branch agencies engage in global 
initiatives to detect and interdict the illegal transport of nuclear 
and radiological materials through programs such as the Department of 
Energy's Second Line of Defense. The deployment of radiation detection 
equipment overseas, at the borders of nations that are the most likely 
source of illicit nuclear materials, is a proactive investment in our 
national security. It is in every nation's best interest to stop 
smuggling efforts as close to their source as possible.
    The United States has set a policy of zero tolerance for the 
arrival of weapons of mass destruction at our borders. That includes a 
plan to deploy radiation detection technology at all 380 sea, land, and 
air ports of entry. The intent is to scan all containers and vehicles 
entering our country for radiation by 2009. I am interested to hear 
from our witnesses today about the appropriate mix of detection 
technologies deployed overseas versus at domestic ports of entry. 
Clearly, we should detect and interdict these dangerous materials as 
far from the United States as possible. It may well be too late if a 
weapon of mass destruction were discovered at one of our major 
seaports, such as Seattle or Los Angeles.
    Just a few weeks ago, I visited both of those ports. The physical 
size of these facilities and the amount of activity that takes place 
are startling. So too is the proximity of these ports to major 
population centers. The Port of Seattle is in the midst of a large 
urban population, with two stadiums nearby and ferries carrying 
thousands of passengers each day. The consequences of an attack at a 
port like Seattle would be catastrophic.
    In improving port security, we are always mindful of the need to 
avoid hampering the flow of legitimate goods. While in Seattle, I 
watched a line of trucks pass through the portal monitors exiting a 
terminal. I was impressed with the speed at which the trucks were able 
to move. While the current technology is not perfect, CBP has proven 
that radiation monitors can be deployed without significantly impeding 
the flow of commerce. I also noted the small footprint required to 
install the equipment, which seemed to fit naturally into the flow of 
the traffic. While terminal operators use every inch of possible space 
to move more containers, they need only travel to Seattle and other 
places where the equipment is installed to see that security can be 
increased without sacrificing commercial flow or space.
    While progress has been made in deploying a global network to 
detect and interdict nuclear materials, we will hear today from the 
Government Accountability Office about continuing challenges. Clearly, 
in order to be effective, equipment deployed must be properly used. 
Reports of corrupt personnel at certain foreign border stations and 
ill-functioning equipment undermine the effectiveness of these 
programs.
    In closing, I wish to voice my support of Secretary Chertoff's 
decision to make nuclear detection and interdiction a priority through 
the creation of the Domestic Nuclear Detection Office last year. The 
GAO's preliminary findings indicate this office has made positive 
contributions already. Its mission is too important to fail.

    Senator Coleman. Madam Chairman, again, thank you for your 
leadership on this issue. And, I know it's going to make a 
difference. This Subcommittee is pleased to be doing its piece, 
its small piece. But we really do applaud your overall 
leadership. So I want to thank you for that.
    Ranking Member Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Mr. Chairman, thank you particularly for the 
great leadership that you're showing in an area which is of 
critical importance to our Nation, and for your focus of this 
Subcommittee's attention on the smuggling of nuclear and 
radiological materials across international borders.
    The International Atomic Energy Agency has estimated that 
as of the end of December 2004, there were approximately 660 
known attempts to smuggle nuclear or radiological materials 
across borders worldwide. Now, those efforts were the ones that 
have been discovered, and logic dictates that many other 
attempts have been made and may have succeeded. And just how 
many is unknown.
    The damage which a small amount of nuclear material can do 
is incredible. Plutonium metal the size of this water glass can 
destroy a city. It can be easily carried, without danger to the 
carrier until it is part of a nuclear explosion, so that a very 
easily carried hunk of plutonium this size can destroy 
Washington, or any other city, and can be easily transported 
without danger to the person who is carrying it.
    So the vulnerability of our country is clear. The 
Government Accountability Office will testify today that on two 
occasions during the last year, using personnel posing as 
importers, it managed to transport radioactive sources across 
our Nation's border. And the ease with which the GAO was able 
to move these materials into the United States should be an 
alarming wake-up call to all of us, in particular to the 
Department of Homeland Security, but to all Americans, about 
the extent of our vulnerability.
    The Chairman and Senator Collins have described the dangers 
and the threats to U.S. security by these materials, and I will 
not repeat this. And I only regret that I'm going to have to 
leave in a few minutes for a White House commitment or else I 
surely would want to be here for the entire hearing, Mr. 
Chairman.
    But again, I just want to ask that my entire statement be 
made part of the record.
    Senator Coleman. Without objection.
    Senator Levin. And thank you for your ongoing and your 
continuing leadership in this and so many other areas.
    [The prepared statement of Senator Levin follows:]

                  PREPARED STATEMENT OF SENATOR LEVIN

    I commend the Chairman for his leadership in focusing this 
Subcommittee's attention on the smuggling of nuclear and radiological 
materials across international borders, which is a real and ongoing 
threat to the national security of the United States. The International 
Atomic Energy Agency has estimated that as of the end of December 2004, 
there have been approximately 662 known attempts to smuggle nuclear or 
radiological materials across borders worldwide. These efforts are the 
ones that have been discovered. Logic dictates that many other attempts 
have been made and may have succeeded--just how many is unknown.
    The vulnerability of the United States to this threat is clear. The 
Government Accountability Office will testify today that, on two 
occasions during the last year, using personnel posing as importers, it 
managed to transport radioactive sources across our nation's borders. 
GAO's ease in moving these materials into the United States should be 
an alarming wake-up call to the Department of Homeland Security and to 
all Americans about the extent of our vulnerability.
    Smuggling nuclear and radiological materials presents two distinct 
threats to U.S. national security. The first and the most serious 
threat is that weapons grade nuclear material in quantities sufficient 
to build an improvised nuclear explosive device are smuggled undetected 
into U.S. territory. An improvised nuclear device constructed and 
detonated by individuals with technical knowledge could result in 
massive casualties and widespread physical and economic damage.
    The second threat is smuggled radiological materials which are 
incorporated into a dirty bomb which, when detonated, could cause 
widespread contamination. Immediate casualties resulting from a dirty 
bomb would probably be those killed or injured as a result of the 
explosion itself. A secondary consequence would be that the 
radiological material would likely contaminate a large area and result 
in major economic damage, disruption, and an expensive cleanup.
    These serious consequences demand that serious effort be taken to 
prevent nuclear and radiological materials from falling into the hands 
of terrorists, criminals, or other non-state actors.
    Since the fall of the Soviet Union, the Departments of Energy, 
Defense and State have worked to secure and consolidate nuclear and 
radiological materials in Russia and the States of the former Soviet 
Union. More recently, the United States, Russia and the International 
Atomic Energy Atomic Agency, have expanded their efforts to address 
radiological and nuclear materials at risk around the world. Governor 
Kean notes in his prepared testimony a concern about the slow rate at 
which these nuclear weapons and materials have been secured. The data 
suggests that it will take another fourteen years before the material 
in just the former Soviet Union is fully secured.
    In 1998, after recognizing the possibility that materials could be 
stolen or illegally diverted, even from secure sites, DOE, DOD and the 
DOS, working with Customs, initiated the Second Line of Defense program 
to detect and interdict nuclear and radiological materials at border 
crossings. These are the programs which will be discussed today.
    More recently, the Department of Homeland Security has worked to 
improve U.S. capabilities to detect and interdict nuclear and 
radiological materials at U.S. land borders and seaports, and initiated 
new programs, such as the Container Security Initiative (CSI), and the 
Customs Trade Partnership Against Terrorism (C-TPAT), which will be the 
subject of Thursday's hearing.
    Today, we need to understand the nature of the threat, including 
who is working to smuggle these materials into the United States and 
elsewhere, where is the material coming from, where are the 
vulnerabilities and greatest risks, what is being done, and what more 
can be done to stop the smuggling. One note of caution is that, as we 
consider how to stop nuclear smuggling by inspections and other means, 
we must also consider the needs of legitimate commerce to keep goods 
moving.
    The GAO reports show that much more can and should be done to 
secure nuclear materials where they are stored, and to prevent these 
materials from moving across international borders illegally. The 
nuclear threat is one of the gravest facing this country and the world. 
The Administration and Congress must provide more resources, more 
effective attention to the problem, and more international cooperation 
with our friends and allies to stop the illegal trafficking of nuclear 
and radiological materials worldwide.

    Senator Coleman. Thank you, Senator Levin. I want you to 
know I have a newfound appreciation for the concern about 
garbage being transported into Michigan after reading the 
report and listening to your concerns. And I am hopefully that 
of all the issues we address, it's one that wasn't high on my 
radar screen until I kind of looked at pictures of material 
coming in where you couldn't see anything.
    And sometimes the most obvious stuff is the stuff we ignore 
until it's too late. So I just wanted you to know that you have 
awakened the consciousness of this Chairman on an issue that I 
know has been of great concern to you.
    Senator Levin. I really appreciate that. Thank you, Mr. 
Chairman. We'll get into that on Thursday.
    Senator Coleman. Senator Domenici.

             OPENING STATEMENT OF SENATOR DOMENICI

    Senator Domenici. Senator and Mr. Chairman, I came today 
and probably would not be able to spend as much time as I would 
like. But I thought I would share a few thoughts on this issue 
of supply chain.
    It might not be within the immediate recollection of even 
our distinguished Chairman that the supply chain of dangerous 
components as part of a nuclear bomb's potential really fell 
upon the world when Russia and the United States decided that 
the Cold War was over. There was a period of time when nobody 
knew how badly Russia had turned loose the controls they had 
over material that was dangerous. I mean, it was, Mr. Chairman, 
literally beyond belief.
    The way the Russians secured things was to have a secret 
city in which all of these items of danger were cast about and 
used. And the security was not like what we worry about. It was 
a ring of soldiers. So in other words, a general was in charge 
of securing it with the troops.
    And, the troops at a point in time started disappearing. I 
think you all remember that. You even alluded to it one time in 
a speech that there were no more soldiers guarding these 
places. They just decided to go home.
    Well, literally, the supply chain was open. And it was open 
for a long time. And frankly, the United States didn't know 
what to do about it, to be honest. We had a strange 
philosophical dilemma up here. Maybe I would say neo-
conservatives would say don't pay the Russians anything to 
clean up their mess; you're giving them our money. You know 
that. You know who they were. Others said, it is so risky, we'd 
better pay them. Even if it's our money going to them and 
they're not necessarily our friends yet, we'd better do 
something.
    I give you this background because to get where we are, we 
have gone through the passage of a law called Nunn-Lugar which 
we just plunked down upon this issue as I just reviewed it for 
you. And we said, we've got to do something about the issue.
    And believe it or not, although it worked, anybody that has 
read its history will know that it had a devil of a time 
working. And if you were reviewing it now, Mr. Chairman, you 
would find that it had so many failures because of bureaucracy 
that it would frighten you--who stopped it, who started it, who 
wouldn't do it.
    Then we had the issue of who pays for it. Well, you 
understand much of your testimony is we need more money, as I 
read what you have to say. Well, we had a problem of the 
Defense Department wasn't quite sure that as this grew, that it 
should come right out of the defense budget to pay for cleaning 
up the stockpile of the Soviet Union and to build security 
apparatus so you couldn't steal their stuff and circulate it 
around the world. Why should the military pay?
    We have now spent more than $10 billion, if you're 
interested, on that, and we have invented a whole new system 
for them that we have put in place through the Material 
Protection Control and Accountability. It is literally an 
American-built system that says to the Russian--that's where 
most of this stuff is, you understand; that's where it came 
from--it says, let's build ways that we can at least know where 
the equipment is. Take stock of it.
    I had an incident--I was there once and they were showing 
me that we now do have some cameras to take pictures that show 
you who came in, who came out. And I looked up, and there was a 
neat little camera there. And I saw the little purchase--little 
thing advertising it, and it said, ``Made in Albuquerque, New 
Mexico.'' Which probably meant the Sandia Laboratory guys were 
doing a good job building cameras and things.
    In any way, that concluded with an astronomical effort on 
the part of the United States, and I was very pleased to lead 
it, where we decided to purchase, for $350 million 500 metric 
tons of highly enriched uranium. Now, that's highly enriched. 
And you've got to down-blend to use it. It's ready for bomb 
work.
    We bought it. It is what is feeding our nuclear power 
plants in the United States right now. We bought it. We get it 
from them under a great agreement. They get paid. But the 
United States is paying a lot of money into the Russian coffers 
to get that. But guess what it did? It prevents the building of 
20,000 warheads. That's what that did.
    Now, that's not your problem of stealing it across borders. 
That's a big macro global problem. But that's pretty good work. 
We also bought 38 tons of pure plutonium at the same time in 
that same deal and said, if we can change its form so it can 
never be used in a bomb again, we've done something to inhibit 
the supply chain in a dramatic way.
    So my advice, for what it's worth, to those who observed 
this, and you, Mr. Chairman, as you work on this, is to make 
sure you try to understand how difficult it is for those who 
you're calling upon to be participants to find their role 
within their departments. Because they have to find the money, 
too. And they have to justify it.
    It's still there as to who wants to voluntarily come up 
with the money and who's saying, why should I come up with it. 
And I think we're coming full circle again, and I'm not there 
yet but I'm saying close, as to how much of our money should we 
be giving them to do their cleanup and to do their security 
work when they're doing pretty well now with lots of oil and 
gas money.
    That's going to come into battle, and it probably is being 
felt there in the State Department and probably impacting on 
some of the things you think might be happening. Thank you very 
much.
    Senator Coleman. Thank you, Senator Domenici.
    Senator Akaka. Oh, I'm sorry. I didn't see Senator 
Lautenberg.

            OPENING STATEMENT OF SENATOR LAUTENBERG

    Senator Lautenberg. As all of us are called upon for so 
many other things, this is great importance and we've got to be 
able to devote some time for it. But we are being--I want our 
expert witnesses to know that the distinguished Chairs do not 
suggest a lack of interest. But Mr. Chairman, I thank you for 
calling this hearing and having this focus on what's described 
as the greatest threat to our national security in the nuclear 
materials that could be used for weapons of incredible 
destructive destruction.
    As the report issued by the 9/11 Commission--we've just 
turned on the clock, Mr. Chairman; that's a note of interest, 
if you don't mind. Thank you--I'm the first among equals here--
that Governor Kean, a dear friend and colleague in government 
for so many years and who has made such a great contribution to 
our country by his leadership on the 9/11 Commission as well as 
so many other things that go on in our State and our country, 
the report card that was issued by the 9/11 Commission last 
year gave the Bush Administration a grade of ``D'' for its 
efforts to secure nuclear materials around the world.
    The Commission's report said, ``Countering the greatest 
threat to American security is still not the top national 
security priority of the President and the Congress.'' And I 
recall, Mr. Chairman, when we were talking about budget for DHS 
and I made reference to Governor Kean's suggestion or 
recommendation that money for security grants be distributed 
based on risk, well, we had a vote on this Committee and the 
issue lost 15 to 1. Guess who the one was.
    So the question is: How seriously are we going to take 
these threats? How much political interest is entered into the 
equation? I think a lot. But these nuclear terror threats are 
still out there, and nuclear materials could be smuggled into 
our countries through one of our greatest vulnerabilities, our 
ports.
    And if you look at the port of New York and New Jersey and 
see the activity there, you just know that there's a momentum 
created by the transfer of materials that could obscure or hide 
lots of things that we wouldn't like to see in our area. Some 9 
million cargo containers enter our ports every year, and almost 
3 million in the port of New York and New Jersey alone. But we 
still inspect only 5 percent of these containers. Five percent. 
Unacceptable, given the threats that we face.
    And I share the belief that we need to inspect or scan all 
containers that enter our country. And no longer is it a 
thought that it can't be done. It can be done. We've seen it in 
places like Hong Kong, and we see it in other areas where 
attempts to create scanning machinery are bearing fruit.
    And I strongly support the amendment that my colleague, 
Senator Menendez, offered to the budget resolution to require 
100 percent screening. The alternative is to continue to rely 
on intelligence, the same intelligence that President Bush 
relied on in determining whether Iraq had weapons of mass 
destruction. And we now know that we can't afford to be wrong 
again.
    One nuclear device smuggled into Port Newark in New Jersey 
could threaten the lives of 12 million Americans. Threats from 
other weapons of war, like chemical, biological, could 
similarly create havoc in unimaginable proportion. But we know 
that this item under discussion can certainly do that.
    Since 1991, the United States has invested approximately a 
billion dollars a year to monitor reactors in the former Soviet 
bloc from illegal transfer of nuclear materials. Today those 
reactors are considered relatively secure, but it's believed 
that almost 50 reactors in other countries still lack adequate 
security. And most of them are in China, Ghana, Pakistan, and 
Uzbekistan, according to a list compiled by the International 
Atomic Energy Agency. There are also research reactors in 
countries hostile to America, including Iran and North Korea.
    Mr. Chairman, our Nation can do better than a grade of D. 
We know that we can do better than inspecting 5 percent of 
cargo containers. The Administration needs to heed the warnings 
of the 9/11 Commission and make this a top national security 
priority with the funding and the mandate that accompanies 
that. Thank you very much.
    [The prepared statement of Senator Lautenberg follows:]

                PREPARED STATEMENT OF SENATOR LAUTENBERG

    Mr. Chairman, thank you for calling this hearing and giving us an 
opportunity to learn more about the greatest threat to our national 
security--nuclear materials that could be used to build weapons of mass 
destruction.
    The report card issued by the 9/11 Commission last year gave the 
Bush Administration a grade of ``D'' for its efforts to secure nuclear 
materials around the world.
    The Commission's report said, ``Countering the greatest threat to 
America's security is still not the top national security priority of 
the President and the Congress.''
    Nuclear terror threats are still out there--and they could be 
smuggled into our country through one of our greatest vulnerabilities: 
Our ports.
    Some nine million cargo containers enter our ports every year--
almost three million in the Port of New York and New Jersey alone.
    But we still inspect only five percent of these containers. Five 
percent. That is unacceptable given the threats we face.
    I believe we need to inspect or scan all containers that enter our 
country. The alternative is to continue to rely on intelligence--the 
same intelligence that President Bush relied on in determining whether 
Iraq had weapons of mass destruction.
    We can't afford to be wrong again. One nuclear device smuggled into 
Port Newark in New Jersey could threaten the lives of 12 million 
Americans.
    Since 1991, the U.S. has invested approximately one billion dollars 
a year to protect reactors in the former Soviet bloc from illegal 
transfer of nuclear materials.
    Today, those reactors are considered relatively secure. But it is 
believed that almost 50 reactors in other countries still lack adequate 
security.
    Most of them are in China, Ghana, Jamaica, Pakistan and Uzbekistan, 
according to a list compiled by the International Atomic Energy Agency.
    There are also ``research'' reactors in countries hostile toward 
the United States, including Iran and North Korea.
    Mr. Chairman, our nation can do better than a grade of ``D.'' We 
can do better than inspecting five percent of cargo containers.
    The Bush Administration needs to heed the warning of the 9/11 
Commission, and make this a top national security priority.
    Thank you, Mr. Chairman.

    Senator Coleman. Thank you, Senator Lautenberg. Senator 
Akaka.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman. I want to 
commend you for holding this hearing, which is very important 
to me and to all of us. I want to tell you it's a pleasure in 
welcoming our distinguished and qualified witnesses this 
morning.
    Mr. Chairman, I have a longer statement, and I'll ask that 
it be entered into the record.
    Senator Coleman. Without objection.
    Senator Akaka. I'm pleased that we are addressing the 
critically important issue of nuclear and radiological 
security. Over the past few years, I've requested several GAO 
reports that have identified insufficient efforts by the 
Federal Government to secure and dispose of radioactive 
sources, both domestic and internationally.
    Going back to early 2003, GAO reported to me problems with 
the Nuclear Regulatory Commission's documentation and 
licensing, which according to GAO's testimony remain a problem 
to this day. This is shocking. And I will be discussing with 
the NRC why this is so and why haven't they implemented the 
corrective regulations they pledged to do at that time. I also 
successfully added a provision to the Energy Policy Act of 2005 
designed to help secure radiological sealed sources in the 
United States.
    I have some continuing concerns. I'm particularly concerned 
about the nuclear and radiological security at our Nation's 
ports because commercial harbors play a critical role in the 
economy of my home State of Hawaii. My State receives 98 
percent of the goods it imports via sea. Hawaii has been 
successfully using radiation portal monitors at its seaports 
and airports to screen international cargo and mail.
    However, identifying radioactive sources at our borders and 
ports of entry must be our last line of defense in a layered 
approach that begins overseas. To be secure, we must identify, 
interdict, and secure radioactive sources and nuclear materials 
at their point of origin before they ever reach our shores.
    However, as I looked over the findings GAO will present 
today, I am troubled about the lack of accountability for 
programs and duplication of effort. The Federal Government has 
spent more than $178 million to provide 36 countries with 
radiation detection technologies that are not being used as 
efficiently nor as effectively as they should. Congress needs 
specific performance measures, cost estimates, and timelines 
for international nuclear detection programs.
    I'm also concerned about the possibility of duplicative 
programs in the newly established domestic nuclear detection 
office and the National Nuclear Security Administration in the 
area of radiation detection technologies. The new DNDO runs the 
risk of becoming another layer of bureaucracy on a crowded 
organizational chart, duplicating technologies being developed 
elsewhere in the Federal Government, and siphoning off scarce 
science and technology funds from other programs.
    Mr. Chairman, I look forward to hearing the testimony of 
our witnesses. Thank you very much.
    [The prepared statement of Senator Akaka follows:]

                  PREPARED STATEMENT OF SENATOR AKAKA

    Thank you, Mr. Chairman. It is a pleasure to see so many 
distinguished and qualified witnesses appearing before the Subcommittee 
today.
    I am pleased that we are addressing the critically important issue 
of nuclear and radiological security. Over the past few years, I have 
requested several Government Accountability Office (GAO) reports that 
have identified insufficient efforts by the federal government to 
secure and dispose of radioactive sources both domestic and 
internationally.
    In early 2003, the GAO reported to me problems with the Nuclear 
Regulatory Commission's (NRC) documentation and licensing, which 
according to GAO's testimony, remain a problem to this day. This is 
shocking, and I will be discussing with the NRC why corrective 
regulations have not been implemented, as they pledged to do.
    I also successfully added a provision to the Energy Policy Act of 
2005 designed to help secure radiological sealed sources in the United 
States.
    However, today we are here to discuss the potential of radiological 
material crossing our borders. And, according to the testimony GAO will 
present today, as a nation the federal government isn't doing enough to 
protect our citizens against this threat.
    A nuclear or even a ``dirty bomb'' attack on American soil would 
cause unimaginable destruction to our society. I am particularly 
concerned about the nuclear and radiological security at our nation's 
ports because commercial harbors play a critical role in the economy of 
my home state of Hawaii. My state receives 98 percent of the goods it 
imports via sea. Hawaii has successfully been using radiation portal 
monitors at seaports and airports to screen international cargo and 
mail. However, I am troubled that the Department of Homeland Security's 
plan to deploy additional detection technologies has been delayed, and 
now faces a projected $342 million overrun.
    Detection technologies used at US ports are the last layer of 
defense. The simple fact is that if a nuclear device is already in the 
US, it's too late. Furthermore, many of these detectors can be defeated 
by effective shielding techniques. The difficulty associated with 
detecting nuclear or radiological materials and responding to these 
threats when they are already present in the United States underscores 
the importance of preventing these dangerous materials from being 
smuggled into the United States in the first place.
    Identifying radioactive sources at our borders and ports of entry 
must be our last line of defense in a layered approach that begins 
overseas. To be secure, we must identify, interdict, and secure 
radioactive sources and nuclear materials at their point of origin 
before they ever reach our shores. However, as I read over the findings 
GAO will present today, I am troubled about our lack of capability in 
this area.
    My first concern is one of accountability. Our nation has spent 
more than $178 million to deploy radiation technologies overseas at 
strategic locations. The Departments of Defense, State, and Energy have 
programs with foreign governments in 36 countries to provide detection 
technologies at screening locations in order to reduce nuclear 
smuggling efforts. While there have been some successes, detection 
technologies are not being used as efficiently nor as effectively as 
they should, according to GAO. The additional threat of corrupt border 
officials in some foreign countries further undermines our security. 
The GAO also found that federal agencies have fallen short in their 
ability to coordinate with one another. As GAO notes, we need specific 
performance measures, cost estimates, and timelines for our 
international nuclear detection programs.
    I am also concerned about the possibility of duplicative programs 
in the newly established Domestic Nuclear Detection Office (DNDO) and 
the National Nuclear Security Administration in the area of radiation 
detection technologies. These technologies must be both effective at 
detecting nuclear or radiological materials and they must operate 
efficiently enough to expedite and not impede the flow of commerce. The 
new DNDO runs the risk of becoming another layer of bureaucracy on a 
crowded organizational chart, duplicating technologies being developed 
elsewhere in the federal government, and siphoning off scarce science 
and technology funds from other programs.
    Lastly, we need a comprehensive understanding of the threat at the 
federal, state, and local levels. Intelligence, analysis, and 
information sharing play a critical role in combating nuclear and 
radiological smuggling efforts. Our intelligence community must be 
capable of sharing information rapidly with first responders at the 
state and local levels.
    I look forward to hearing the testimony of our distinguished 
witnesses. Thank you, Mr. Chairman.

    Senator Coleman. Thank you, Senator Akaka. And again, thank 
you for your leadership on this whole issue of nuclear and 
radiological security. I know how important it is to your 
State.
    I'd now like to welcome our first witnesses to this 
morning's important hearing: The Hon. Thomas Kean, former 
Governor of New Jersey, and Chairman of the 9/11 Commission. 
Governor Kean, it's truly an honor to have you with us this 
morning. I'd also like to welcome back to the Subcommittee 
retired Coast Guard Commander Stephen E. Flynn, a Jeane J. 
Kirkpatrick Senior Fellow for National Security Studies at the 
Council on Foreign Relations in New York City. Commander Flynn 
testified before the Subcommittee last May at our hearing on 
Container Security Initiative, or CSI, and the Customs-Trade 
Partnership Against Terrorism, or C-TPAT.
    I appreciate your attendance at today's hearing and look 
forward to your testimony and perspective on perhaps the most 
important threat confronting the United States, and that's 
nuclear terrorism.
    As I stated earlier, today's hearing will kick off 2 days 
of hearings on Neutralizing the Nuclear and Radiological 
Threat: Securing the Global Supply Chain. Today we'll assess 
U.S. efforts to detect and interdict radiological and nuclear 
material domestically and abroad. Governor Kean has championed 
the importance of this issue from his perch at the 9/11 
Commission and at the Public Discourse Project. Commander Flynn 
is one of this Nation's preeminent supply chain and homeland 
security experts.
    I look forward to hearing both of your thoughts on this 
critical issue. As you're well aware, pursuant to this Rule 6, 
all witnesses before this Subcommittee are required to be 
sworn. I ask you to stand and raise your right hand.
    Do you swear the testimony you are about to give before 
this Subcommittee is the truth, the whole truth, and nothing 
but the truth, so help you, God?
    Governor Kean. I do.
    Commander Flynn. I do.
    Senator Coleman. Thank you. Governor Kean, we'll have you 
go first, followed by Commander Flynn. And after we've heard 
your testimony, we'll turn to questions. Governor Kean, please 
proceed.

 TESTIMONY OF THE HON. THOMAS KEAN,\1\ FORMER GOVERNOR OF NEW 
           JERSEY AND CHAIRMAN OF THE 9/11 COMMISSION

    Governor Kean. Mr. Chairman, distinguished Members of the 
Permanent Subcommittee on Investigations, it's an honor to 
appear before you today with Commander Flynn, who's done so 
much in this area to make the country safer. And this 
Subcommittee, under both its past and current leadership, has 
made a profound contribution to the security of the United 
States.
---------------------------------------------------------------------------
    \1\ The prepared statement of Governor Kean appears in the Appendix 
on page 110.
---------------------------------------------------------------------------
    Your investigative and oversight work on the question of 
the safety, secure storage, and interdiction of nuclear 
materials continues to be a vital part of the Nation's 
nonproliferation efforts. And I would commend you, sir, for 
your leadership and the leadership of this Subcommittee.
    We made 41 recommendations from the 9/11 Commission. We 
think every one of those recommendations is important. But we 
worked very hard, and I think all 10 of us believe this: The 
most important of all our recommendations is to prevent 
terrorists from getting access to nuclear weapons because these 
are the weapons Osama bin Laden promised to get and promised to 
use.
    And we know that he and the leadership of al-Qaida have 
been working over the years to acquire them, for more than a 
decade. And we document this in our report. Testifying in a 
Federal courtroom in early 2001, an al-Qaida member explained 
his mission: It's easier to kill more people with uranium.
    Now, we know al-Qaida's intent. We know they're patient, 
and we know that bin Laden and al-Qaida plan very carefully. 
We're not saying, nor do we believe, that a nuclear event is 
the most likely. Attacks of the kind we probably saw in Madrid 
or London mark the most likely pattern. But a nuclear event is 
possible, and it would have profound and incalculable 
consequences.
    It would put millions of lives at risk. It would devastate 
our economy and change, we believe, our way of life. It must be 
elevated, therefore, above all problems of national security 
because it represents, simply put, the greatest threat to the 
American people. The Commission's report could not be more 
clear: Preventing the proliferation of these weapons warrants a 
maximum effort.
    Now, how are we doing in this area? What progress are we 
making? Are we keeping weapons out of the hands of terrorists? 
The Commission believed, and I know Senator Nunn believes as 
well, that it is most important, if we can, to secure these 
materials at their source. The Cooperative Threat Reduction 
Program, better known as the Nunn-Lugar program, is carrying 
out very important and useful actions to secure nuclear 
materials at their source, and in some cases to take these 
materials and transport them to a secure location. People in 
government, especially at the Defense, State, and Energy 
Departments, are working hard to implement these programs, and 
I commend them for this important work.
    So there are on this policy some positive signs. President 
Bush and President Putin made an agreement in Bratislava last 
year, and that gave the bureaucracy a push. American inspectors 
now have additional access to weapons storage sites in Russia. 
Liability issues, which had delayed efforts to eliminate 
plutonium from dismantled weapons, seem, as I speak to be 
getting resolved.
    More of the vulnerable nuclear facilities in Russia are 
receiving security upgrades. The current Defense Authorization 
Act includes amendments by Senator Lugar that cut bureaucratic 
red tape and hopefully will speed up the work of Nunn-Lugar. 
These are good steps, but they are simply not enough.
    What is most striking is that the size of the problem still 
totally dwarfs the policy response of our government. The Nunn-
Lugar program to secure nuclear materials in the former Soviet 
Union is now 14 years old, and about half of the nuclear 
materials in Russia still have no security upgrades whatsoever. 
At the current rate of effort, it's going to take another 14 
years to complete the job. And is there anybody anywhere who 
thinks in this country we have 14 years?
    This is unacceptable. Bin Laden and the terrorists will not 
wait. And the challenge is bigger, as you know, than the ex-
Soviet Union. Some 40 countries have the essential materials 
now for nuclear weapons. Well over 100 research reactors around 
the world have enough highly enriched uranium present to make a 
nuclear device. Too many of these facilities lack any kind of 
adequate protection. Now, the terrorists are smart, and they 
plan, and they'll go where the security is weakest.
    Our own agencies need to make protecting the Nation from a 
possible WMD attack an absolute priority. And we are 
disappointed to hear, for instance, that the FBI is not further 
along on preventing weapons of mass destruction. In short, we 
do not yet have a maximum effort against what everybody agrees 
is the most serious threat to the American people.
    Now, when is an issue a priority? I think everybody knows 
when it's a priority. It's a priority when our leaders are 
talking about it. Now, why isn't the President talking more 
often about securing nuclear materials? Why, apart from the 
superb efforts of this Subcommittee, why isn't the Congress 
focused? Why aren't there more hearings? Why isn't there 
greater member interest? And what about the media? Why aren't 
the airwaves filled with commentary if everyone agrees that the 
crossroads of terrorism and nuclear weapons is simply the most 
serious threat that we are facing in this country?
    What we recommend: The President should develop a 
comprehensive plan to dramatically accelerate the timetable for 
securing all nuclear weapons-usable material around the world 
and in securing our ports. He should request the necessary 
resources that he needs to complete this task. He should 
publicly make this goal his top national security priority, and 
ride herd on the bureaucracy so that we can maintain in this 
country the sense of urgency that we need on this issue.
    The Congress should provide the resources needed to secure 
vulnerable materials and our ports at the fastest possible 
rate. The Congress hopefully will work with the President to 
secure as much public support as possible for this effort. In 
this area, the President and the Congress simply need to work 
together, and to do so on a bipartisan basis because there is 
simply, in my view, no higher priority on the national security 
agenda.
    Thank you, Mr. Chairman.
    Senator Coleman. Thank you, Governor. Commander Flynn.

    TESTIMONY OF STEPHEN E. FLYNN, PH.D., COMMANDER (USCG, 
 RETIRED),\1\ JEANE J. KIRKPATRICK SENIOR FELLOW FOR NATIONAL 
 SECURITY STUDIES, COUNCIL ON FOREIGN RELATIONS, NEW YORK, NEW 
                              YORK

    Commander Flynn. Thank you very much, Mr. Chairman. It's an 
honor to be back here before you today. And I want to thank 
you, I want to echo what has been said here before, and commend 
you for your leadership, and that of Chairman Collins, on these 
critical issues.
---------------------------------------------------------------------------
    \1\ The prepared statement of Commander Flynn appears in the 
Appendix on page 115.
---------------------------------------------------------------------------
    And I'm also very pleased that Senator Akaka and Senator 
Lautenberg are here. I know they've been such strong voices on 
the issues of port security and container security that have 
been an issue that's consumed a lot of my attention, 
particularly since September 11, but before then when it was 
unfashionable.
    I am especially pleased to be alongside Governor Tom Kean, 
who of course has provided this Nation such an extraordinary 
service with the leadership you provided at the 9/11 
Commission. I was sort of astonished to the extent at which 
many Americans didn't want to look closely at that event of 
that day. I think that's been part of the trauma of it. But I 
think so many Americans I certainly hear around the Nation are 
so grateful for the work that you've done, sir. And it's an 
honor to be with you today.
    Particularly, Mr. Chairman, thank you for your outstanding 
leadership in raising the profile and advancing practical 
approaches to this complex challenge. You've been hard at work 
on this issue, I know, long before the Dubai Ports World 
controversy made this issue of port and container security the 
hot button issue here in Washington.
    I also want to commend the work of Ray Shepherd and Brian 
White of your staff for their tireless oversight of activities 
of the U.S. Government on these issues. I would count Mr. 
Shepherd and Mr. White, along with Kathleen Kraninger and Jason 
Yanussi, who are on the staff of the Senate Homeland Security 
and Governmental Affairs Committee, as four of the most 
knowledgeable individuals on supply chain container security in 
Washington.
    One of the extraordinary things about this issue is it's 
very difficult to see the forest for the trees. And the 
tendency is for people to just take pieces of it, whether it's 
under Committee jurisdictions or whether it's in the 
bureaucracy. And there's only a handful of folks, like this 
Subcommittee, who have been trying to rise above it and see its 
totality.
    As I will outline in my testimony today, the Government 
Accountability Office is largely on the mark in highlighting a 
number of serious shortcomings in the design and the execution 
of the radiation detection programs being pursued by both the 
Department of Energy and the Department of Homeland Security. 
But before getting into the particulars about what are the 
limits of these programs and outlining some recommendations for 
next steps, I think it important to review the nature of the 
terrorist threat as it relates to this issue.
    Let me share with you at the outset the terrorist scenario 
that most keeps me awake at night that I recently shared before 
the House Armed Services Committee. This scenario has been 
informed by the insights provided to me by Gary Gilbert, the 
Chairman of the Corporate Security Council and Senior Vice 
President, Hutchison Port Holdings, who will be testifying 
before your hearing on Thursday, March 30.
    The scenario goes this way. Imagine that a container of 
athletic footwear for a name brand company is loaded at a 
manufacturing plant in Surabaya, Indonesia. The container doors 
are shut with a mechanical seal that is put into the door's 
pad-eyes. These designer sneakers are destined for retail 
stores in malls across America.
    The container and seal numbers are recorded at the factory. 
A local truck driver, though, turns out to be sympathetic to 
al-Qaida, and he's the guy who's going to pick up the 
container. On the way to the port, he gets lost, turns into an 
alleyway, and backs the truck up at a nondescript warehouse, 
where a small team of operatives pry loose one of the door 
hinges to open the container so they can gain access to the 
shipment. This is a common technique in cargo theft.
    Some of the sneakers are removed, and in their place the 
operatives load a dirty bomb wrapped in lead shielding, and 
then refasten the door. The driver then takes the container, 
now loaded with the dirty bomb, to the port of Surabaya, where 
it is loaded on a coastal feeder carrying about 300 containers 
for the voyage to Jakarta.
    In Jakarta, the container is then transferred to an inter-
Asia ship, which typically carry 1,200 to 1,500 containers to 
the port of Singapore or the port of Hong Kong. In this case, 
the ship goes to Hong Kong, where it is loaded on a super-
container ship that carries typically 5,000 to 8,000 containers 
for a trans-Pacific voyage.
    The container then is offloaded in Vancouver, British 
Columbia. Because it originates from a trusted name brand 
company that has joined the Customs-Trade Partnership Against 
Terror, the shipment is never identified for inspection by the 
Container Security Initiative team of U.S. Customs inspectors 
located in Vancouver.
    Consequently, the container is loaded directly from the 
ship to a Canadian Pacific rail car, where it is shipped to a 
rail yard in Chicago, crossing the border somewhere, I think, 
in your home State, Mr. Coleman. Because the dirty bomb is 
shielded in lead, the radiation portals currently deployed 
along the U.S.-Canadian border do not detect it. When the 
container reaches a distribution center in the Chicago area, a 
triggering device attached to the door sets the bomb off.
    There would be four immediate consequences associated with 
this attack. First, there would be the local deaths and 
injuries associated with the blast of the conventional 
explosives. Second, there would be the environmental damage 
done by the spread of industrial-grade radioactive materials.
    Third, there would be no way to determine where the 
compromise to security took place, so the entire supply chain 
and all the transportation nodes and providers must be presumed 
to present a risk of a potential follow-on attack. Fourth, and 
perhaps most importantly, all the current container and port 
security initiatives would be compromised by the incident.
    Now, in this scenario, the container originated from one of 
the 5,800 companies that now belong to the Customs-Trade 
Partnership Against Terrorism. It would have transited through 
multiple ports--Surabaya, Jakarta, Hong Kong, and Vancouver--
that have been certified by their host Nation as compliant with 
the post-9/11 International Ship and Port Facility Security 
Code that came into effect on July 1, 2004.
    Because it came from a trusted shipper, it would not have 
been identified for special screening by the Container Security 
Initiative team of inspectors at Hong Kong or Vancouver. Nor 
would it have been identified by the radiation portal.
    As a consequence, governors, mayors, and the American 
people would have no faith in the entire risk management regime 
erected by the Bush Administration since September 11. There 
will be overwhelming political pressure to move from a 5 
percent physical inspection rate to a 100 percent inspection 
rate, effectively shutting down the flow of commerce at and 
within our borders.
    Within 2 weeks, the reverberations would be global. As John 
Meredith, the group managing director of Hutchison Port 
Holdings, warned in a January 20, 2004 letter to Robert Bonner, 
then the Commission of Customs and Border Protection, ``I think 
the economic consequences could well spawn a global recession--
or worse.''
    In short, the stakes are enormous. But there are four 
factors associated with the scenario that I just laid out that 
usefully informs the focus of this hearing. First, the threat 
is not so much tied to seaports and U.S. borders as it is to 
global supply chains that now largely operate on an honor 
system because the standards are so nominal.
    Second, no transportation provider, port operator, or 
border inspector really knows what's in the containers that 
pass through their facilities, and the radiation portal 
technology currently being deployed at U.S. borders as a part 
of the Second Line of Defense and Megaports programs can be 
evaded by placing light shielding around a weapon.
    Third, private companies must be part of the solution since 
they have huge investments at stake. And fourth, the scenario I 
just laid out involving Vancouver as the offload port in North 
America highlights that the challenge of securing global supply 
chains can involve both port security and border security 
measures simultaneously.
    Mr. Chairman, I believe that we are living on borrowed time 
when it comes to facing some variation of the scenario I just 
laid out. This is because both the opportunities for terrorists 
to target legitimate global supply chains remain plentiful, and 
the motivation for doing so is only growing as jihadists 
gravitate towards economic disruption as a major tactic in the 
war with the United States and the West. I'd like to elaborate 
on this latter point.
    The primary conclusion that I reached in researching my 
book, America the Vulnerable, is that Americans and the West 
must assume our most critical infrastructures that underpin our 
economy will become the target of choice for terrorist groups 
like al-Qaida. This perspective runs a bit contrary to the 
longstanding view of terrorism that has held that terrorists 
are mainly interested in symbolic and spectacular acts of 
violence that kill lots of people.
    But this trend towards economic targeting has been growing 
in Iraq, for instance. Beginning in June 2003, Iraq's energy 
sector became a primary target for insurgents. By mid-July 
2005, nearly 250 attacks on oil and gas pipelines has cost Iraq 
more than $10 billion in lost revenues. Successful attacks on 
the electric grid have kept average daily output at 5 to 10 
percent below the pre-war level despite the $1.2 billion that 
United States has spent to improve Iraqi electrical production.
    Now, the key here is that we have insurgents who are 
increasingly learning how to target critical infrastructure, 
many of them foreign insurgents who are going to take their 
skill-set back home. And disruption is a big part of their 
efforts.
    Against this strategic backdrop, I believe there remains 
too little appreciation within the U.S. Government that global 
supply chains and the intermodal transportation systems that 
support them remain a vulnerable critical infrastructure to 
mass disruption. Instead, U.S. law enforcement agencies and the 
national security community have been looking at supply chains 
as one of but a menu of smuggling venues.
    Some agencies like my own former agency, the Coast Guard, 
and the Office of Naval Intelligence have argued that a weapon 
of mass destruction is more likely to be smuggled into the 
United States on a fishing vessel, an ocean-going yacht, or a 
bulk cargo vessel rather than in a container.
    Now, this is probably an accurate assumption in the case of 
a nuclear weapon. A nuclear weapon would be of such high value 
asset to a terrorist organization that they would be unlikely 
to surrender custody to unwitting third parties to transport 
it.
    But the opposite reason applies to a dirty bomb, which is 
more commonly referred to by national security experts as a 
weapon of mass disruption because its lethality is fairly 
limited, a factor primarily of the conventional explosives with 
which it's made.
    The radioactive material contained in the bomb would create 
costly environmental damage and potentially some long-term 
health risk for those that were exposed, but not immediate 
deaths. The fact that a dirty bomb is suited for disruption 
makes it an ideal weapon to set off within the intermodal 
transportation system precisely because it would generate the 
kinds of consequences that my scenario portends.
    I'm afraid, for the foreseeable future, the material to 
make a dirty bomb will likely be available throughout the 
international community despite even stepped-up counter-
proliferation. This is because radioactive materials that can 
be used in the construction of weapons are becoming more widely 
available as sophisticated medical and engineering equipment 
are purchased and used throughout the international community.
    It is against this threat backdrop that we should evaluate 
the effectiveness of the U.S. Government programs which aim to 
confront this threat.
    I review in my written testimony the various initiatives 
that have been undertaken since September 11 by the Coast 
Guard, CPB, DOE, DOS, and DOD. Overall, these programs have 
been largely well-conceived by the parent agency or the 
department that sponsors them. But I do not believe it's 
appropriate to conclude that all this activity should be 
confused with real capability.
    For one thing, the approach has been a piecemeal one, with 
each agency pursuing its signature program or programs without 
much regard for the other initiatives. There are also vast 
disparities in the resources that the agencies have been 
allocated.
    But most problematic are some of the questionable 
assumptions about the nature of the terrorist threat that 
underpin these programs and the poor state of intelligence that 
underpins the risk management approach that CBP and the Coast 
Guard are relying upon to decipher high risk and the low risk. 
Using Secretary Chertoff's language, they are relying almost 
entirely on what they know about known risk, with virtually no 
capability to deal with the unknown risk.
    Further, in an effort to secure funding and public support, 
agency heads and the White House have often over-sold the 
contributions that these new initiatives are making towards 
addressing a very complicated and high stake challenge. Against 
a backdrop of these inflated and unrealistic expectations, the 
public will be highly skeptical of official assurances in the 
aftermath of a terrorist attack involving the intermodal 
transportation system.
    Absent change, in the scramble for fresh alternatives to 
reassure an anxious and angry citizenry, the White House and 
Congress are likely to succumb to the political pressure to 
impose draconian inspection protocols that will dramatically 
raise costs and disrupt the cross-border trade flows.
    We can certainly do better than all of this. And I lay out 
in my testimony a framework that I have testified about before, 
which I'll just briefly summarize here. It involves several 
layers.
    The first and most important is that at the factories, we 
move from a C-TPAT, which relies primarily on customs agents to 
do the job of trying to verify compliance, to one that would 
use independent third parties overseen by not just customs, our 
customs agents, but perhaps by an international team of 
oversight.
    Second, continue to explore the ability to track movements 
of containers and monitor their integrity as they move 
throughout the supply chain.
    Third, and most importantly, I recommended to you an 
initiative that I know you looked at and saw, Mr. Chairman, in 
Hong Kong as I think a true model of where we might be able to 
go, which is that within private facilities overseas, begin the 
effort of scanning every container for not just radiation, 
because of their ability to defeat it in the ways that I just 
laid out, but also for its contents to find big dense objects 
that don't belong there, and to record what moves through the 
system so we can both better deter, ideally be able to identify 
and intercept without false alarms, and ultimately, in the 
worst case, be able to resolve issues of where something 
happened so the whole system won't fail.
    And finally, we need to do a much better job in 
coordinating all this activity and giving it the scale of 
urgency that Governor Kean has laid out so eloquently here 
today.
    In conclusion, at the end of the day, confronting the 
nuclear smuggling threat requires that we take the post-
September 11 security framework the U.S. Government has been 
developing, largely on the fly over the past 4 years, and 
quickly move it to the next generation that builds on the 
original framework. We have a version 1.0. We need a version 
2.0.
    The three key ingredients in getting from where we are to 
where we must be is first to recognize that it's a global 
network that we're trying to secure. Second, that much of the 
network is owned and operated by private entities, many who 
have foreign ownership, so the U.S. Government must be willing 
and able to work with those companies as well as their host 
governments to advance appropriate safeguards.
    And finally, both Congress and the White House should 
embrace a framework of ``trust but verify,'' in President 
Ronald Reagan's phrase, based on real global standards and 
meaningful international oversight.
    Thank you, Mr. Chairman, and I look forward to responding 
to your questions.
    Senator Coleman. Thank you very much, Commander, and my 
thanks to the Governor.
    But just quickly, your last four points, when you summarize 
C-TPAT, you said trust but verify. It's a voluntary system 
today, but you're recommending including a verification piece 
in there, which we don't presently have. Is that a fair 
statement?
    Commander Flynn. That's exactly right, sir.
    Senator Coleman. In terms of monitoring for integrity, in 
the scenario that you laid out, if in fact there was within 
that container from the time it's sealed a device, an RFS 
device, or a monitor that would let us know if that container 
was opened, that might prevent the disruptive scenario that you 
laid out. Is that a fair statement?
    Commander Flynn. That is correct. And I think, the dream is 
that we'd actually have something built into the container. 
Because the release of radioactive material would happen over 
time, and that would be ideal, a sensor for that. But certainly 
something that helps to detect an intrusion would be quite 
helpful.
    Senator Coleman. And that technology is readily available 
today?
    Commander Flynn. It is. The challenge, of course, 
ultimately managing this technology in a system of millions of 
containers would require political leadership and a real 
commitment on the U.S. Government's part. But it's technically 
feasible and economically viable.
    Senator Coleman. One of the things that I have found 
fascinating, Commander, is in working with the private sector 
in my State in the past. Companies such as Target Corporation 
and Best Buy, I didn't want to incur any extra cost in the cost 
of a container.
    But today, when I talk to the private sector, they're 
looking for more uniform standards like this. They understand 
the risk of the system being shut down. And I think they'd be 
more inclined to incur costs for security. However, we need 
leadership in this country to ensure that you have these kind 
of systems across the board. Does that corresponded with your 
conversations----
    Commander Flynn. Absolutely. What I hear from a number of 
chief security officers of some of the biggest companies is 
they look around and they see because there is no verification 
process in C-TPAT, they see a lot of free riders. So they're 
making a case for standards and enforcement and making a real 
commitment of resources. But as Governor Kean was saying about 
the terrorists gravitating to the weakest point, they can't 
secure the supply chain on their dime when others are basically 
allowed to essentially come in on the fly.
    So it's an issue of raising the bar so there is a level 
playing field for all of them, and therefore we don't put the 
whole system at risk. Because we don't like to discriminate by 
companies and say, oh, Target, you're great; everybody else is 
bad. When the attack happens, we're going to bring it all down.
    The other issue is, frankly, C-TPAT, in a curious way, puts 
all the liability on the private sector. When basically customs 
inspectors are only focused on a narrow universe of unknown 
shippers, basically, to examine, if something goes wrong within 
their supply chain--and no chief security officer can protect 
against the scenario that I laid out here today as a one-time 
incident. They just can't do it with existing technology. That 
whole company's brand goes up in smoke because customs as well 
as the U.S. Government will be the first to say, you failed to 
live up to your security obligations.
    So I'm hearing increasingly a willingness to go further, to 
have a set of standards that we can have confidence, to reduce 
their own liability exposure, and to level the market playing 
field so we secure the system.
    Senator Coleman. And you've mentioned the ICIS system in 
Hong Kong, in which every container is scanned. A concern has 
been raised--and I want to discuss this more fully, and we will 
discuss it more fully Thursday.
    But one of the concerns being raised is that, well, you can 
get the scan, but you can't really analyze. You're not really 
doing an analysis of that. And somehow, that would be a reason 
for not scanning every container. How would you respond to 
that?
    Commander Flynn. Well, one of the key things about the Hong 
Kong project, and I was involved a bit in sort of the thought 
leader side of putting it together, is that the basic notion is 
to defeat--the way that I laid out in the scenario was you 
shield the weapon and we know the existing radiation portal 
can't find it.
    But now you have a very dense object because you surround 
it in lead. The scan can alarm around a very dense object where 
it's not supposed to be. Twenty-foot containers and 40-foot 
containers actually are set to carry the same amount of weight. 
Typically, you put more heavy things, therefore, in 20-foot so 
they take up less room on the ship. So you basically don't 
expect to see very dense material inside 40-foot containers.
    The main application as a primary screen is to validate low 
risk is low risk. And it also solves your kitty litter problem 
that alarms off because you see the consistency across the load 
with the manifest.
    The problem is the current protocols of how we do this has 
not been developed yet on the U.S. Government side. When the 
pilot was undertaken as a private sector initiative, nobody 
knew whether it could work or not. And yet what it was about 
was to say, if it's possible to do 100 percent screening, it 
works better for the terminal if that can be done as a part of 
its routine instead of disrupting its life. And it should 
provide a treasure trove of information for customs to work 
with.
    My own--as I see this evolve very quickly, it is as we 
merge commercial data about what's supposed to be in the 
container, and the software builds the archival information, it 
sees in my sneaker scenario--it's seen 40 shipments of sneakers 
before, and this is the first one that has this object in it. 
The software will support the analytical job.
    So at the end of the day, we're operating a system where we 
have no data. In Hong Kong last year, the Customs and Border 
Protection Service inspected about 3,500 containers total in a 
port that moved 22 million containers. Now, all those weren't 
coming to the United States. But in just two of the gates--
because it's not just in Hutchison Terminal; it's also in 
another terminal called Modern Terminal--those two gates have 
collected to date almost 2 million images.
    I think--which is better, a system where we rely on 
intelligence that's weak to basically look at 3,500 with 
foreign cooperation, or one that we're gathering much more 
information and we can enhance our targeting for it? I think 
most Americans would rightfully choose the latter, particularly 
when the facilities are willing to put the equipment in and pay 
for it and maintain it for us.
    Senator Coleman. And on the back end in your very chilling 
scenario--I'm going to move from your chilling scenario to the 
one that the Governor has presented--you talk about shutting 
down the entire system until we put in place 100 percent 
monitoring.
    I think the reality is we'd be shutting down the system 
because we wouldn't know where the problem came from; whereas 
with this system you could at least--you'd have a database and 
a multiple layer of database. You'd have an image. You'd have 
an RPM monitor. You'd have a manifest. I presume you have the 
computer capacity to go back and track it down.
    And then you'd have one part of the system you'd shut down, 
but there would still be integrity in the rest of the system. 
And I think folks have to understand: We shut down the global 
supply chain, we shut down the ability to bring cargo 
containers to this country, we greatly disrupt, absolutely 
destroy for a period of time, the economy of this country.
    Commander Flynn. Yes. And the world.
    Senator Coleman. And the world. I'll start with worrying 
about Minnesota--but that is the reality that we face.
    Commander Flynn. And I think, Mr. Chairman, it's important 
to realize that there is deterrent value by building this 
capability. The scenario laid out was the assumption by the 
terrorists that putting the dirty bomb in the system would 
disrupt this critical infrastructure, that it would get that 
response.
    As you build the capability to have the system potentially 
fare better, you basically take that off as an attractive 
target. And I think the key is to recognize that there is 
deterrent value in putting safeguards in place. You almost hear 
that it's hopeless. They're suicide bombers.
    They have limited capabilities, and acquiring a weapon of 
mass destruction could take years. They have a very limited 
threshold for failure. They're not going to put it in a system 
where there's a high risk of detection, or even where the 
consequences are going to be limited, given the alternatives, 
and we could therefore safeguard this critical network against 
the worst case scenario by building it.
    I think the bottom line is to recognize that it's not about 
necessarily preventing a conduit for getting bad things to the 
United States. It's the system itself that is critical and 
needs to be safeguarded. And that's why it deserves greater 
priority than it's been receiving.
    Senator Coleman. And Governor Kean, you've been part of 
this across the board. You present a very chilling scenario. 
The first scenario is of a nuclear weapon. And clearly, the 
case you're making is we've got to get back to the sources, and 
still throughout the world there are a significant number of 
sources that are still not secured. And that presents a grave 
threat.
    In addition, though, if I can go back to your service as 
head of the 9/11 Commission. If a dirty bomb were to have 
exploded at the base of the World Trade Center, can you talk 
about the economic and the emotional impact?
    Clearly it would not be a Hiroshima-like effect of taking 
at one swipe perhaps hundreds of thousands of lives, if not 
more. But can you talk a little bit about the economic and 
psychological impact of a nuclear or radiological device being 
exploded in a high population area?
    Governor Kean. Well, first of all, the psychological impact 
of just having that go off in a highly populated area. And for 
instance, in the financial district, that could make parts of 
that district unlivable for any number of years. Totally 
disrupt our economy in the process. Terrify residents of urban 
areas, or any area where a lot of people live together.
    I think the psychological, economic consequences of that 
would be almost impossible to imagine. It's hard to think of 
something that would be any worse, which is the reason why that 
kind of scenario is the one that keeps me awake at night.
    Senator Coleman. We don't have the capacity to lock down 
all nuclear material. We use a lot of it in construction. We 
use a lot of it in medical technology. Therefore, the threat of 
a dirty bomb becomes a great concern. I envision two scenerios: 
Building a dirty bomb elsewhere and bringing it into this 
country; or two, bringing in enough material into this country 
and then construct it here.
    In either scenerio, one of the things that we're going to 
have to do is rely upon foreign companies like the Hutchison 
company and others. There's been a lot of discussion about 
that, and I'm not going to get into the Dubai situation, but 
the reality today is that 80 percent of our ports are foreign 
operated. The Megaport Initiation is a program in which we work 
with companies in other countries to do the screening for us.
    I'd be interested if you have any kind of reflections as 
you look at the overall security on this program. Since you've 
talked about taking a holistic approach to this issue. How 
should we be looking at this program? How should we be looking 
at these issues today?
    Governor Kean. Well, I like the old Reagan phrase, trust 
and verify, because in any system that we come up with, you've 
got two problems. One is how you acquire the material, and my 
own view is it's more likely to be acquired in another place 
and transported to this country. So if possible, you stop the 
acquisition, or make it very difficult. That may be number one.
    But second, of course, we don't know how many nuclear 
materials have escaped now from various sources or in various 
parts of the world. And then comes the issue of our borders, of 
whether or not you can get the kind of system which Commander 
Flynn was talking about, whether or not again, in my view, you 
can raise it on the country's radar screen.
    I mean, the problem politically I see is that when we 
studied September 11, there were very good people both in the 
Clinton and Bush Administrations who understood the problem, 
who understood the dangers, who understood what might happen--
not necessarily a plane crashing into a building, but what 
might happen with al-Qaida and terrorism.
    But it was here on the priority list rather than up here. I 
think in this issue that we're talking about, with the 
exception of yourself, Senator Lautenberg, and others who 
really recognize this problem, we're in the same status today 
on this issue. People know it's a problem. Good people are 
working on it. But they're working on it slowly. They're not 
saying it's urgent. They're not raising it to the top of their 
priority level.
    And if the worst occurs, I think the reactions, immediate 
reactions of the people, of the economy, and, frankly, of our--
I think we'll rush to judgment on legislation. I think it will 
be a bad scenario from every point of view.
    Senator Coleman. Commander Flynn.
    Commander Flynn. If I could just comment, a big part of the 
formula that I've been involved with in terms of pushing 
borders out is that you have to work with both the companies as 
well as the countries which you're in. Most of the efforts to 
date has been primarily in the traditional format, going 
country to country. That is, container security is from customs 
to customs.
    I spent a good bit of time at the end of my Coast Guard 
career in the Caribbean. We have huge problems with corruption, 
and this is one of the things you're going to have here. That's 
just a fact of life. In many cases, the industry players have 
more integrity in the process than you might find in the local 
countries. They're very much invested in the enterprise they're 
protecting.
    So take the port of Karachi, for instance, which is now 
going to be half run by Hutchison Port Holdings and the other 
half by Dubai Port Worlds. You can't get a container out of 
there to the Middle East unless you run through those two 
facilities. I'd like to work with those facility operators for 
that problem.
    I worry, as one of the fallout of what we just recently 
went through Dubai Port World--I mean, this is now the third 
biggest terminal operator on the planet--that it's going to--
well, I think the company will figure out that it's good to be 
forward-leaning in any event, but let's just say we made the 
diplomatic element of that more challenging. We need both to 
work with foreign countries and with foreign companies.
    Senator Coleman. Senator Lautenberg.
    Senator Lautenberg. Thanks, very much, Mr. Chairman, for 
your patience. The question devolves here and I look at the 
Committee structure and get an example of how things operate. 
So the question is: What is the urgency of full participation 
by all of the Committee members?
    I want to start off by asking a very simple question of 
Governor Kean. Thanks so much for all the things that you have 
done and will continue to do for us. And Commander Flynn, your 
testimony was invaluable and your research thorough, and we 
really appreciate that. And I ask you to continue to sound the 
alarm, as you have.
    During the debate on next year's budget, the Senate 
rejected an amendment that would have required 100 percent 
screening of cargo. Governor, is 100 percent screening an 
essential factor in protecting our country and protecting our 
people?
    Governor Kean. It is certainly desirable at some level. I'm 
not a technical expert, as Commander Flynn is, as to know where 
that falls on the kind of continuum that he was talking about 
as to what you do internationally and where you screen things. 
But certainly if we could do it technologically, it would be 
certainly a step in the right direction.
    Senator Lautenberg. Well, as we hear Mr. Flynn's testimony, 
do we shortchange other areas of concern by focusing so much on 
port security, on containers? I think we have to kind of take a 
look at the world out there in which we exist and ask the 
questions whether or not we must go--let me call it modularly 
and say, OK, this is the most likely case of vulnerability, and 
start there, put the resources there and put the focus there.
    Governor Kean. Well, I think you're right. And we certainly 
have to take the technology we have and install it. I mean, 
when you hear we have technology that can detect a nuclear 
device, and yet it's not installed in our various ports and at 
our borders because we can envision--as Commander Flynn said, 
we did a movie with Sam Nunn to try to alert the country a bit, 
and the idea we had was that somebody, again coming across in a 
station wagon from Canada with a small lead shield, and the 
radiation wand waves over it and doesn't pick up a thing 
because that technology--we have the technology that could have 
gotten through that lead shield, but it's just not installed as 
yet.
    So I don't think we have much excuse for being able to do 
it and having the technology there at our ports and at our 
borders and not using it.
    Senator Lautenberg. So we should get on with it. I was down 
at the port a couple weeks ago, and every time I go there--and 
I know that you've been there--and you see the activity and the 
volume of material that is shipped in. And everything, whether 
it's from sneakers to Ferraris, it's there. And it is a likely 
place for something terrible to be delivered to our shores.
    And particularly when the FBI says that the most dangerous 
two miles of targets exist between Newark Airport and Port 
Newark, exist in the country as a target for terrorism. And 
here these containers are just overwhelming the whole area. You 
see them wherever you look. To me, there is no excuse for not 
getting on with this inspection and these structures for 
process to make sure that we're doing it.
    And why hasn't the Administration, in the view of either 
one of you, worked to develop such a 100 percent screening 
regime? What could cause this--I'll call it benign neglect?
    Governor Kean. Well, again, I can't--Commander Flynn is the 
expert on these areas. But it just seems to me that, as I said 
before, that we get very distracted in this country. Things 
come at us unexpectedly in the legislative and political arena, 
and we sort of respond to what hits us. And it's sort of like a 
boxer described the Olympic Games: When he gets hit in the 
face, his hands go to his face, and if he gets hit in the 
stomach, his hands go to his stomach. And they wonder why he 
never wanted to fight.
    We tend to do that, I think, in the political system in the 
United States. We don't say this is a No. 1 priority, and we're 
going to stick to it and we're not going to be distracted. 
There are good people in the Administration working on this, as 
there are good people in the Congress working on this. But it's 
not at the top of the priority list.
    People aren't saying, as I think the Committee is saying, 
and I believe and Commander Flynn believes, this is a No. 1 
priority. I mean, the common defense of the United States is 
the reason government was formed. It's the reason we have a 
government. And if we're not doing this, then we're not doing 
anything.
    And somehow, with the good leadership, I think if you and 
the Chairman and this Subcommittee and others who understand 
this and believe it, we've got to somehow demand that the 
Administration, the leaders of the Congress, the news media, 
and other people focus on this, if it is the greatest danger, 
as I believe it is.
    Senator Lautenberg. Governor Kean, your voice carries a lot 
of weight, and I urge you to continue to raise it on behalf of 
the well-being of our country and this world in which we live.
    Commander Flynn. I think there are two pieces to that, that 
is why we're not--as you well know, our ports have basically 
been managed as a local/State matter. And so to some extent, it 
was a federalism argument made initially here that these are in 
fact assets that belong to the localities, and they should 
therefore respond--they should be responsible primarily for the 
security of them.
    Although clearly we have a Coast Guard and customs role, 
the bulk of the resources--that's basically a fly-by visit kind 
of presence that we've maintained in there because we've had 
them being State and local matters. And we don't have a 
national ports kind of a focus. So that's made it very 
problematic. You ended up with each agency sort of saying, 
well, what have I got on my shelf to help with this? And there 
wasn't much.
    States and locals weren't in a position to do this because 
if Baltimore raises its security cost and bar it makes business 
more attractive down in Norfolk. I mean, this thing screams for 
Federal standards. And things like dealing with Halifax and 
Vancouver as potential competitors, that's a Federal role to 
negotiate this within a hemispheric context because the 
transportation system will move around to where the costs are 
least. So that's one real issue.
    The other was, which is why I was so thrilled with what has 
happened in the Hong Kong model, going to the world's busiest 
port, two of the world's busiest terminals on the planet, and 
with the support of the CEOs of those two companies, none of 
whom have ports in the United States but we're vested in trying 
to explore this, and customs initially believe it would just be 
impossible to do this without slowing things down. And they got 
a lot of importers who said, you can't do this.
    So the challenge there was to prove it could be done. Now 
it's how do we adapt our government protocols to deal with the 
reality that you could have this amount of screening data 
available? They can't do it without more resources. They need 
analysts. They need technology, and they--on our end.
    So if the private sector ends up, as in this case they're 
offering to do, to build this infrastructure and to pay for it 
through a surcharge, maintain it globally, if they produce that 
capability and our own government isn't capable of processing 
it, then it's just another embarrassment that the customs has 
got to face, or Coast Guard or others, because we're going to 
have the data we can save up and say, you should have seen it. 
But because we starved them of analysts and starved them of 
capabilities, we're not going to get there.
    Customs and Border Protection has a total of 80 inspectors 
to manage the C-TPAT program. There are 11,000 companies in 
application for that, and some of those companies have 
literally thousands of providers. Now, how can you provide 
oversight? There are more--I came down on the shuttle this 
morning. There are more TSA screeners at the Delta shuttle 
terminal than we are providing for the entire Customs and 
Border Protection to do this critical job.
    And that's where things start to break down, and I really 
think that at the end of the day, this is going to expose our 
government to the biggest cost of terrorism, which is the loss 
of public credibility and confidence when we have the next 
attack.
    Americans gave their government a pass on September 11, I 
believe. But they expect that everything that can be done is 
being done to deal with this threat. And they're going to be 
appalled at what they see, the lack of effort that's still 
being made on these issues. While good intentions are there, as 
the Governor has said, we're just not treating with the level 
of urgency that certainly this Subcommittee is trying to treat 
it with. Thank you.
    Senator Lautenberg. Well, to make your point even clearer, 
in comparison, TSA screeners: We have 130,000 to 150,000 people 
in uniform trying to protect our security, we're told, the 
fight against terrorism. We have an additional billion dollars 
put into the budget for next year for port security.
    Isn't that kind of a hard comparison to understand? I mean, 
if we want to protect people on our shore--we lost 3,000 people 
on September 11, and it left a mark on this country that we 
will probably never recover from. To the Chairman's question 
earlier about what the effects could be if a dirty bomb was 
placed in the same area, the fact is that people today are 
still paying a direct health price for that terrible attack. 
There are people who have respiratory diseases as a result of 
being exposed there.
    And so when we look at a billion dollars for increased 
funding to examine these containers, does that strike you as 
being a major step toward solving the problem?
    Commander Flynn. Well, I think the disconnect here is we're 
an extraordinarily wealthy Nation who's at war. And I think it 
would strike most Americans, when it comes to what we're doing 
on the homeland, we're not acting like a Nation at war.
    Senator Lautenberg. Governor Kean, do you----
    Governor Kean. Yes. I can't say it any better than that. I 
mean, this is something--everybody's said it from the President 
on down. This is a longtime struggle. We're fighting a new 
enemy that is training people in the ungoverned areas of this 
world as we speak, and plotting in areas where we can't get at 
them. You can't attack them like we used to attack a nation 
state. These are, in a sense, entrepreneurs, these people who 
we're fighting.
    And if we don't recognize that and recognize that 
nevertheless this is a war we're in and we've got to make long-
term plans because they've got long-term consequences, then 
this Nation and our children are going to suffer.
    Senator Lautenberg. We have to step up to it.
    Governor Kean. Have to step up to it, I believe.
    Senator Lautenberg. Thank you very much. Thanks for these--
our thanks, Mr. Chairman, go to these two people who have 
devoted so much of their energy and skill to helping protect 
this country. I for one am grateful, and I'm sure that all of 
those who are aware of the mission you're on are grateful.
    Senator Coleman. I want to echo the words of Senator 
Lautenberg, Governor Kean, and Commander Flynn, because it 
speaks volumes. We hope that this clear message you're raising 
will go beyond the confines of this Subcommittee.
    We appreciate your questions, Senator Lautenberg, and we 
appreciate the testimony of the witnesses. Thank you.
    I would now like to welcome our second panel to this 
hearing. Eugene Aloise, Director of the Natural Resources 
Environment Team, and Gregory D. Kutz, the Managing Director of 
Forensic Audits and Special Investigations, both at the 
Government Accountability Office.
    Mr. Aloise, I welcome you to the Subcommittee. Mr. Kutz, I 
welcome you back to the Subcommittee. By my count, you've 
testified before this Subcommittee, I think, at least six times 
and assisted us in identifying over $8 billion in waste, fraud, 
and abuse. So I want to thank that. I note that Mr. Rhodes is 
also here from the Government Accountability Office.
    GAO is here to testify on three reports you have developed 
pursuant to our request. These reports are an impressive body 
of work. Two of these reports, on the domestic and 
international deployment of radiation detection equipment, were 
led by Mr. Aloise and his team. Mr. Kutz and his team made an 
invaluable contribution with their undercover operation at our 
Nation's borders. I am confident that these three reports will 
lead to reforms at the Department of Homeland Security, the 
Nuclear Regulatory Commission, and the National Nuclear 
Security Administration.
    I'd also like to thank Stockton Butler, James Shafer, 
Eugene Wisnoski, Rich Egan, and Andy O'Connell for their 
contributions to these reports.
    Gentlemen, I look forward to your testimony today. As 
you're aware, pursuant to Rule 6, all witnesses before this 
Subcommittee are required to be sworn in. I'd ask you to please 
stand and raise your right hand.
    Do you swear the testimony you're about to give before this 
Subcommittee is the truth, the whole truth, and nothing but the 
truth, so help you, God?
    Mr. Aloise. I do.
    Mr. Kutz. I do.
    Mr. Rhodes. I do.
    Senator Coleman. Mr. Aloise, we'll have you go first, 
followed by Mr. Kutz. After we've heard testimony, we'll turn 
to questions.
    I would like to know, Mr. Kutz, in my notes here, it says 
Mr. Ryan. That's a typo, but it demonstrates just how often you 
and Mr. Ryan are here. But it's great to have you back.
    Mr. Aloise, you may proceed.

    TESTIMONY OF EUGENE E. ALOISE,\1\ DIRECTOR, NUCLEAR AND 
  NONPROLIFERATION ISSUES, NATURAL RESOURCES AND ENVIRONMENT, 
                GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Aloise. Thank you. Mr. Chairman and Members of the 
Subcommittee, I am pleased to be here today to discuss our two 
reports on U.S. efforts to combat nuclear smuggling in foreign 
countries and in the United States. Together with our March 
2005 report on DOE's Megaports Initiative, these reports 
represent GAO's analysis of the entire U.S. effort to deploy 
radiation detection equipment worldwide.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Aloise appears in the Appendix on 
page 128.
---------------------------------------------------------------------------
    The threat of nuclear smuggling is real. According to IAEA, 
between 1993 and 2004 there were 662 confirmed cases of 
smuggling of nuclear and radiological materials. Twenty-one of 
these cases involved material that could be used to produce a 
nuclear weapon. Over 400 cases involve materials that could be 
used to make a dirty bomb.
    While these cases occurred in other countries, there is 
concern that terrorists may try to smuggle nuclear materials or 
a nuclear weapon into the United States. In response to these 
threats, four U.S. agencies--DOE, DOD, the State Department, 
and DHS--are installing radiation detection equipment in 
foreign countries and in the United States.
    My remarks will focus on our two reports being released 
today. Specifically, I will discuss the progress made by and 
the challenges facing U.S. agencies in installing this 
equipment in foreign countries and DHS's effort at U.S. ports 
of entry, and the challenges DHS faces in completing its 
program.
    The first major initiative to deploy radiation detection 
equipment was on the borders of the former Soviet Union and 
Eastern Europe. In the mid-1990s, DOD and the State Department 
provided portal monitors and other equipment to a number of 
countries, and in 1998 DOE created the Second Line of Defense 
program.
    Today, in addition to the Second Line of Defense program, 
six other programs--one at DOE, two at DOD, and three at the 
State Department--have provided equipment and related training 
to 36 countries. Combined, these programs have spent about $178 
million since 1994.
    While much progress have been made, these programs face a 
number of challenges, including possible corruption of border 
security officials, technical limitations of equipment 
installed by the State Department and now maintained by DOE, 
and inadequate maintenance of some handheld equipment.
    Regarding possible corruption, officials from several 
countries we've visited told us that corruption is a big 
problem within the ranks of border security organizations. 
Corrupt officials could defeat these systems by turning off the 
equipment or ignoring the alarms. We face the danger that a $20 
bribe could compromise a $200 million system.
    To lessen this threat, DOE and DOD plan to deploy 
communication links between border sites and command centers so 
that alarm data is simultaneously evaluated by multiple 
officials. In addition, screening and training of border guards 
is also planned.
    Another problem relates to limitations of the portal 
monitors previously provided to some countries by the State 
Department, which makes them less effective in detecting 
weapons-usable nuclear material because the portals can only 
detect gamma radiation.
    Since 2002, DOE has maintained this equipment, but except 
for one site has not upgraded it. We have urged DOE to upgrade 
this equipment because until these sites receive equipment with 
both gamma and neutron detection capability, they will be 
vulnerable to nuclear smuggling.
    In addition, much of the handheld equipment provided by the 
State Department and other agencies may not function properly 
because it is not being maintained. While DOE is maintaining 
the handheld equipment it has given to other countries, no U.S. 
agency has maintained about 1,000 handheld detectors that are 
vital to border officials conducting inspections on vehicles 
and pedestrians. For example, we observed border guards using 
handheld equipment that has not been calibrated properly since 
1997. This equipment needs to be recalibrated every year.
    In addition, no U.S. agency keeps accurate data on the 
status and location of all the equipment provided by U.S. 
programs. Without such a list, we cannot assess if equipment is 
operational and being used as intended.
    Turning to the deployment of radiation detection equipment 
in the United States, DHS has made progress in deploying and 
using portal monitors and other equipment. But it is 
significantly behind in its total deployment schedule. As of 
the end of last year, about $286 million had been spent on this 
effort.
    DHS is deploying radiation detection equipment in the 
following five phases: International mail and express courier 
facilities; major northern border crossings; major seaports; 
southwest border crossings; and all other categories, including 
international airports, remaining northern border crossings and 
seaports, and all rail crossings.
    These categories were prioritized according to their 
perceived vulnerability to the threat of nuclear smuggling. For 
example, major seaports are vulnerable because sea cargo 
containers are suitable for smuggling. Also, over 95 percent of 
the cargo entering the United States does so through seaports.
    As of December 2005, about 670 portal monitors have been 
deployed in the United States, about 22 percent of the planned 
total portal deployment at U.S. border crossings, seaports, and 
mail facilities. In fact, deployments in mail facilities and 
the first phase of northern border sites are complete. However, 
deployments at seaports and southwest border crossings are 
about 2 years behind schedule. Importantly, deployments at 
airports and land rail systems have not yet started.
    DHS estimates that with the work it has completed, it is 
screening about 62 percent of container shipments but only 32 
percent of seaborne shipments and about 77 percent of private 
vehicles. DHS plans to deploy over 3,000 portal monitors by 
2009 at a cost of $1.3 billion. This is a massive undertaking.
    However, in our view this estimate and time frame are 
highly uncertain. In fact, our analysis shows that if DHS 
continues to deploy portals at its current rate, the program is 
facing a likely cost overrun of about $340 million and will not 
be completed before 2014.
    We found a number of factors that account for this slow 
deployment. Specifically, delays by DHS in releasing funds to 
contractors has in some cases disrupted and delayed 
deployments. In addition, difficult negotiations with seaport 
operators about where to place portals, especially for rail 
cars, has delayed work at seaports.
    Many seaport operators are concerned that the construction 
needed to install the equipment, as well as the screening 
process itself, will slow down the movement of commerce. Mr. 
Chairman, it is important that DHS resolve this problem at 
seaports because until it does, our seaports are vulnerable to 
nuclear smuggling.
    In addition, uncertainties exist in the type and cost of 
radiation detection equipment DHS plans to employ. DHS's $1.3 
billion estimate to complete the program is based on widespread 
deployment of advanced technology portals. However, the 
prototypes of these portals have not been shown to be more 
effective than the portals now in use.
    Furthermore, when this technology is available, experts 
estimate it will cost about $330,000 to $460,000 per portal. 
Currently, portal monitors cost about $50,000 to $60,000 each. 
Even if future tests indicate that this equipment works better, 
it is not clear that the dramatically high cost for this new 
equipment will be worth the investment.
    During our review, we found that CBP officers had made 
progress in using radiation detection equipment correctly and 
are following inspection procedures. However, we found gaps in 
the procedures that need to be addressed.
    For example, CBP officers lack access to NRC's license 
database that could be used to verify that shippers of 
radiological material actually obtained required documentation. 
As a result, unless nuclear smugglers in possession of faked 
NRC licenses raise suspicion in other ways, CBP officers could 
follow agency procedures yet unwittingly allow them to enter 
the country with illegal nuclear cargo. In our view, this is a 
significant gap in the procedures that must be closed. My 
colleague, Mr. Kutz, will discuss in his testimony just how 
serious a loophole this is.
    Mr. Chairman and Members of the Subcommittee, that 
concludes my statement. I will be happy to respond to any 
questions you may have.
    Senator Coleman. Thank you, Mr. Aloise. Very appreciative.
    Mr. Kutz.

 TESTIMONY OF GREGORY D. KUTZ,\1\ MANAGING DIRECTOR, FORENSIC 
 AUDITS AND SPECIAL INVESTIGATIONS, GOVERNMENT ACCOUNTABILITY 
  OFFICE, ACCOMPANIED BY KEITH A. RHODES, CHIEF TECHNOLOGIST, 
       CENTER FOR TECHNOLOGY AND ENGINEERING, GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Mr. Kutz. Mr. Chairman, thank you for the opportunity to 
discuss our undercover operation to test border security. Our 
operation had three objectives: First, to determine whether the 
radiation portal monitors worked; second, to observe the 
reaction of CBP inspectors to our test; and third, to see 
whether we could beat the system using a ruse. As I discuss our 
operation, I will address all three objectives, along with 
several other key facts and findings.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Kutz appears in the Appendix on 
page 143.
---------------------------------------------------------------------------
    We tested two land ports of entry that had radiation portal 
monitors installed, one at the U.S.-Canadian border and the 
other at the U.S.-Mexican border. For each border crossing, we 
used radioactive sources commonly used in industry and 
sufficient to manufacture a dirty bomb.
    It is important to note, and as Commander Flynn noted, that 
a dirty bomb would contaminate an area and could result in 
significant loss of business and cleanup costs. Although the 
blasts from the explosives could result in some deaths, the 
dirty bomb generally would not contain enough radiation to kill 
people or to cause serious illness. Thus, a dirty bomb is 
generally considered to a weapon of mass disruption rather than 
a weapon of mass destruction.
    We purchased a small amount of our radioactive sources from 
a commercial supplier over the telephone. To do so, we used a 
fictitious company and a fabricated story as to why we needed 
the radioactive sources. Suppliers are not required to exercise 
any due diligence when selling small quantities of radioactive 
sources.
    Note that we could have purchased all of the radioactive 
sources that we needed for both of our border crossings with 
the same fictitious company and fabricated stories. It is also 
important to note that our fictitious company was located in 
the Washington, DC area, and that the items that we purchased 
were shipped directly to our Nation's capital.
    In preparing for our operation, we also produced 
counterfeit documents. First, we searched the internet and 
found several examples of official NRC documents. We then used 
commercial off-the-shelf software to counterfeit these 
documents, which authorized us to acquire, possess, and 
transfer radioactive sources. We also produced a logo for our 
fictitious company and a counterfeit bill of lading.\1\
---------------------------------------------------------------------------
    \1\ See Exhibit 10 which appears in the Appendix on page 405.
---------------------------------------------------------------------------
    On December 14, 2005, two teams of investigators made a 
simultaneous crossing of the north and south border. The 
radioactive sources in the trunks of both vehicles were 
sufficient to make a dirty bomb. The radiation portal monitors 
properly signaled the presence of the radioactive sources when 
we entered the United States from both Canada and Mexico.
    We observed CBP inspectors at the northern border follow 
their required procedures after the portal alarm sounded. For 
example, the inspector directed our investigators to a 
secondary area for a more thorough inspection. The inspector 
then located the source of the radiation, identified the 
source, reviewed our documents, and notified his supervisor of 
the incident. Although most of the required procedures were 
followed, the secondary inspection conducted at the southern 
border was less rigorous.
    Although both of our vehicles were inspected in accordance 
with CBP policy, we were able to enter the United States with 
enough radioactive sources to make two dirty bombs. The CBP 
inspectors never validated the existence of our fictitious 
company or the authenticity of the counterfeit bill of lading 
and NRC documents. We look forward to working with this 
Subcommittee, CBP, and NRC to improve the security of our 
Nation's borders. Mr. Chairman, that ends my statement. I look 
forward to your questions.
    Senator Coleman. Thank you very much, Mr. Kutz. I 
understand, Mr. Rhodes, you're here to provide additional 
information should the questions warrant that.
    Mr. Rhodes. That's true, Mr. Chairman.
    Senator Coleman. Let me start with you. Why don't we start 
with the investigation, and then I want to move to some broader 
issues with you, Mr. Aloise.
    First, I noted in some of the news stories about this that 
folks in the Department of Homeland Security's Domestic Nuclear 
Detection Office said that the substance could have been used 
with limited effects in terms of a dirty bomb. Could you talk 
about the effects of a dirty bomb? I will follow up with 
Director Oxford on the next panel, but I'm interested in your 
perception.
    There seems to be a disagreement between the NRC and 
perhaps the GAO on the impact of dirty bombs and what their 
effects could be. Had this material been used to create a dirty 
bomb, and had that dirty bomb been set off at the New York 
Stock Exchange or set off at the Nation's Capitol, what would 
be the effect?
    Mr. Kutz. Yes. Let me make a couple comments. Then Mr. 
Rhodes is our expert; that's why he's here today. But the items 
that we were able to get, we could have actually gotten much 
more. We used what we thought was a minimal amount that we 
could use to make a dirty bomb that would cause disruption and 
loss of business and chaos, as I think the prior panel 
discussed.
    And so I would defer to Mr. Rhodes on the more technical 
aspects of that. But again, there were two parts: We took it 
across the border, and we also had it shipped here to 
Washington, DC without anyone asking any questions.
    Senator Coleman. And the issue wasn't really the quality. I 
mean, the monitors went off with that quality. You could have 
had a larger quality.
    Mr. Kutz. Correct.
    Senator Coleman. But in the end, it was the documents that 
allowed you to get through and past the secondary check. Is 
that correct?
    Mr. Kutz. Yes. That's correct.
    Senator Coleman. Mr. Rhodes, could you talk a little about 
dirty bombs?
    Mr. Rhodes. The point I'd like to make is last evening when 
I was driving home, I heard on the radio the term, ``It was an 
insignificant amount.'' Just to clarify why we used the amount 
of material we did, ultimately it was 1,250 times the allowable 
amount, according to the EPA standards. So according to the 
Environmental Protection Agency, it was not insignificant.
    I've also heard statements made about it being comparable 
to a smoke detector. First of all, the material we brought 
across is different than what's in a smoke detector, and the 
kind of radiation that it emits is different. Also, if we were 
to destroy it, either via dirty bomb or even if we just ground 
it up and just blew it out the back of a truck with a fan, in 
Wall Street, for example, it would register. And then the 
standard operating procedures would go into play.
    Concentric circles would start to be sealed up around the 
city. And if you apply the standard operating procedures for 
some period of time until it could be cleared up and until it 
was considered safe to go into the zone of contamination, 
nobody would be doing any dealing on Wall Street.
    They'd have to go to secondary locations or something like 
that because no one in their right mind is going to say, well, 
all of our radiation detectors are going off, but we don't 
think it's very high, or we think it's insignificant, or it 
seems to us it's only the amount that's in a smoke detector.
    Because you have to have the standard operating procedures 
and you have to make certain that the area is safe and is 
uncontaminated. At a minimum, you're going to have to wash Wall 
Street. You're going to have to hose it down to try to clean 
the material up.
    If this is an insignificant amount of material, then I 
guess those radiation monitors at the borders are set too low 
because the whole operation was set to trip those monitors, to 
make certain that they would go off, to make certain that we 
had to check the secondary procedures. That's why it's a 
disruption.
    Certainly if I took all of this material and I put it in 
your coffee, Mr. Chairman, you wouldn't like that. If I were to 
have you hold it in your hand for more than an hour, you would 
certainly get a radiation burn from it. So this discussion of 
insignificance in amount is really a function of how do we 
respond to it. And if we spread it, and the alarms went off and 
the radiation detectors showed positive, and it was verified, 
and the isotope came back as being what it was that we used, 
there would be tremendous impact.
    Senator Coleman. Let me talk about the amount that you 
could have purchased. Is there anything that would preclude 
somebody from buying a thousand smoke detectors? Would that 
trigger any kind of review regarding concerns about the 
radiological nuclear material in those? Is there anything that 
triggers a review by the Federal Government when one purchases 
even commercial products that have quantities of radioactive 
material?
    Mr. Rhodes. The threshold--with respect to what we 
purchased, we already had some materials from a prior operation 
that we did. So we purchased a certain amount, below any 
threshold that anyone would validate the existence of our 
company or ask any questions immediately when we got it, to 
prove a point. We could have actually done that time and time 
again and accumulated larger amounts, much larger than we 
actually used when you combine both of our operations together.
    Senator Coleman. All right. You mentioned that there is no 
due diligence. Are there any requirement for anyone to check 
the bona fides of folks who have multiple purchases of material 
that would have radioactive material?
    Mr. Aloise. NRC allows the applicant who applies for a 
license and buys a license up to 12 months before they check if 
that's a valid applicant or not.
    Senator Coleman. My questions are: What's the minimum 
threshold for requiring a license? In other words, is it any 
amount of material? Is there a threshold for certain quantities 
of material? When does the NRC actually require somebody to get 
a license?
    If you were buying multiple quantities of medical devices 
that had this material in it, would you have to have a license 
from the NRC, or even to purchase smoke detectors in massive 
quantities?
    Mr. Aloise. Well, in terms of other material other than 
smoke detectors it varies by device, by material. There are 
varying amounts and varying limits which would require a 
license, yes.
    Senator Coleman. In 2003, the GAO recommended that the NRC 
spent an accounting for generally licensed material. There was 
also a recommendation for a database for its licenses. Do you 
know if those things have been implemented?
    Mr. Aloise. The NRC tell us they're working on developing 
them.
    Senator Coleman. Still?
    Mr. Aloise. Still.
    Senator Coleman. There was also a finding that the precise 
number of sealed sources is unknown. What does sealed sources 
mean?
    Mr. Aloise. A sealed source is a radiological device that 
could be used in medical equipment or industry, that could be 
used in well logging equipment. And it's about that big, size 
of a cigar, and it's inserted in a piece of equipment.
    Senator Coleman. And as for the number of sealed sources, 
do we know those? Is there any information on that?
    Mr. Aloise. There's no tracking of them. There's no 
precise--I mean, there's hundreds of thousands of them all over 
the United States in use.
    Senator Coleman. Was this the subject of a recommendation 
in the 2003 report to the NRC?
    Mr. Aloise. Yes. We recommended that--regarding licenses, 
that NRC modify and change its regulations to validate that an 
applicant applying for nuclear material was a valid applicant 
before issuing the regulation. This is something some States 
already do. Some States hand-deliver a license to an applicant 
to ensure they're a valid applicant.
    Senator Coleman. The sense I get from my investigators in 
talking to the NRC, was that there was clearly a concern about 
nuclear bombs. Now, that should be a focus, especially because 
of the potential loss of life.
    But the sense we got from the NRC was perhaps almost a--
I'll use the word cavalier approach to the idea of dirty bombs, 
that they just didn't kill enough people and they are 
insignificant--in terms of the scale of things.
    In a post-September 11 world, my concern is that the 
economic and emotional impact of a dirty bomb goes far beyond a 
simple calculation of loss of life and property. Can anyone 
respond to that? Mr. Rhodes.
    Mr. Rhodes. Let me make one point based on the earlier 
panel's discussion of patience. Yes, there are thresholds even 
at the NRC where they'll begin to pay attention. They're 
equivalent to the IAEA thresholds. If we had been patient 
enough, we could have used this process to get as much material 
that would have eventually gotten their attention.
    The reason--if we are just talking about loss of life, if 
we are talking about what are called stochastic and non-
stochastic health effects, the stochastic are who dies right 
away--the non-stochastic are the ones who die right away, and 
the stochastic ones are how many cancers do you have later on.
    If they look at that situation and they say, well, we won't 
have that much leukemia or we won't have that many people dead, 
it'll just be like a car bomb or something, I think they are 
indeed missing your point. Your point is that if I do this on 
the corner of Wall Street at midday, the havoc that it will 
wreak is unavoidable because emergency procedures will have to 
go into effect.
    No one is going to say, yes, something went off, but it's 
not that big a deal. They're going to respond as though all 
events are exactly the same. And I think that's difficult for 
people who are viewing it purely in long-term health effects to 
understand.
    Senator Coleman. And, the same would hold true if you're 
looking at the Nation's Capitol, or the White House. Just the 
psychological impact of saying that we've struck a symbol of 
American authority would have tremendous impact.
    Mr. Kutz. Yes. I would just say this. The Customs and 
Border Protection's reaction to our test was very positive, and 
I think they're proactively looking at solutions to the 
counterfeiting issue. I think ultimately NRC came around to the 
fact that the counterfeiting issue was something they need to 
deal with. But the level of concern and threshold, I just don't 
think that they were thinking----
    Senator Coleman. And I was going to follow up on the 
documents, Mr. Kutz, and I think I mentioned in my opening 
statement that the technology that you used to create those 
documents was not some super-secret, high tech, government-only 
technology. Is it fair to say that a somewhat adept 20-year-old 
who's pretty good with computers could have created the same 
documents you created?
    Mr. Kutz. Yes. We used off-the-shelf software, and we used 
the internet. So it's basically technology anyone could 
achieve. And actually, I was able to go out--you talk about low 
technology, I was even able to go on the internet and find the 
document that we counterfeited. And there are no special 
security features in these documents that make it difficult to 
counterfeit them.
    Senator Coleman. And basically, you could go onto the NRC 
site, you could see what the documents look like, and then 
simply recreate those?
    Mr. Kutz. No. They weren't on the NRC site. You had to 
actually search for other sites. They were on other different 
sites. NRC does not put them on their site, which we certainly 
agree with them on that.
    Senator Coleman. The good news is that Homeland Security is 
saying that within 45 days they will close this loophole. Are 
they working with you on that?
    Mr. Kutz. Yes. They've reacted positively. I mean, they're 
either going to have to have an online capability to validate 
whether a license is genuine or authentic, or some sort of a 
telephone system to call in and validate whether the license is 
legitimate.
    Senator Coleman. Mr. Aloise, I want to go back to our 
second line of defense programs, but it's really our first line 
of defense, which is outside our borders.
    Mr. Aloise. Right.
    Senator Coleman. That's really where this begins. It begins 
if you listen to Governor Kean locking down nuclear material 
abroad. There is still a lot out there, and where there is a 
lot of this material, making sure that it's not smuggled from 
there to somewhere else.
    And one of the concerns is corruption. And that's noted in 
your report. Is that correct?
    Mr. Aloise. Yes.
    Senator Coleman. So how do you deal with that? What can the 
State Department do? How do you deal with the reality that you 
can bribe somebody and somebody could turn a blind eye and 
allow this material through a transit point.
    Mr. Aloise. Well, first of all, everywhere we went on our 
travels, both U.S. officials and country officials raised 
corruption as a big problem. And what DOE and DOD are doing are 
trying to devise systems where the alarm would ring--when it 
rings at the portal, it will also ring at various levels within 
the agencies and within the countries themselves that are 
monitoring the portals.
    It will be multiple levels of officials, multiple levels of 
authorities. So there will be multiple checks, and there won't 
be just one check with the border official at the portal 
monitor.
    Senator Coleman. Just so I understand the technology, if 
you could have one border, say, on the Russian side, and 
another border in another country on the other side, if all of 
a sudden the monitor goes off on one side, a central place can 
actually see that a monitor has been shut down?
    Mr. Aloise. Yes. They'll be able----
    Senator Coleman. And could react to that?
    Mr. Aloise. They're building those kinds of systems. Also, 
they're doing redundant systems. Where they suspect corruption 
is really bad, they'll put systems on one country and on the 
other country so they'll get them at both places.
    Senator Coleman. One of the debates that we're generally 
having is working with foreign companies. For example, our 
Megaports program works with foreign companies and in Freeport, 
works with Hutchison Port Holdings. Rather than work with the 
government, you're working with foreign companies operating the 
terminal.
    Have you looked at that? The sense I got from Commander 
Flynn was that there may be more reliability and an ease of 
operation in working with these foreign companies than there is 
working with foreign countries. Can you respond to that?
    Mr. Aloise. Let me say this first. With all of these 
nonproliferation programs, there is a risk. And the Congress 
has decided to accept that risk because to do nothing is not 
acceptable.
    And in most of these programs, we're relying on the people 
in these other countries to operate and maintain and sustain 
this equipment. And so we've supported these programs in the 
past, we're on record supporting them, and we still support 
them. And I think what you have to do is get the buy-in, as 
Commander Flynn said, of these other countries and companies 
because they all have a vested interest in this.
    Senator Coleman. You've raised some concern about the 
ability of Homeland Security to put in place the radiation 
portal monitors by 2009. I think there's been a differing of 
figures. I have some figures that talked about 740 to date, and 
a plan for about 2,400 by 2009.
    Your concern is you would call their ability to do that 
highly uncertain. Is that correct?
    Mr. Aloise. Right. Right now their deployment rate for 
portal monitors is about 22 per month, and they would have to 
go up to about 52 per month to meet their date based on our 
analysis. And we used their very latest figures from their 
December 2005 progress report.
    Senator Coleman. Is there anything that you can see in 
terms of funding commitment, manpower commitment, or anything 
else that would give you confidence that they could in fact 
double the rate at which they're installing these radiation 
portal monitors?
    Mr. Aloise. Well, our analysis shows that right now one of 
the biggest problems is the delay in getting the funds to the 
contractor. There are 13 seaports where they actually had to 
delay site work to install the equipment because they had not 
gotten their funding yet. They had to lay people off in some 
instances. So the first thing we'd like them to see is get the 
funding out that they already have quicker to the contractor.
    Senator Coleman. Is there anything that needs to be done 
legislatively, or is this simply the bureaucracy picking up the 
pace at which it operates?
    Mr. Aloise. I think it could be done within the 
bureaucracy.
    Senator Coleman. One of the other concerns raised in the 
report was the difficulty in negotiating with port operators. A 
reality here is that folks are hesitant to change a system and 
impact the flow of commerce, because time equals money in these 
operations. Again, it was Commander Flynn who talked about if 
it's quicker to operate in another port or another country, 
you're going to do that. You could go somewhere in the United 
States. You could go to Canada; you could go to Mexico.
    But with this issue of negotiating with port operators, did 
you look at whether in fact there was a legitimate concern that 
construction, screening, putting and installing radiation 
portel monitors, would actually slow down the process and cause 
some negative economic impact?
    Mr. Aloise. In every place we went across various countries 
around the world and all the ports that we went to in the 
United States where this equipment is installed, we talked to 
truck drivers. We talked to seaport operators. No one said to 
us that this equipment, our screening process, has slowed down 
commerce. No one has ever raised that to us. It is a big 
concern, but where this equipment exists, we haven't seen it 
happening.
    Senator Coleman. The concern is oftentimes on the part of 
the private side, the port operators themselves. And as I 
understand the strategy of DHS--and what they're trying to 
accomplish--they're trying to work in a cooperative way. 
They're not putting heavy pressure because they could, in 
effect, put some very heavy pressure and say, hey, unless you 
do this now, you're going to suffer these negative 
consequences.
    Is that fair? Do they have the authority to do that?
    Mr. Aloise. Right.
    Senator Coleman. But they've chosen not to. Do you think 
we've reached a point where in fact they have to be a little 
tougher and a little more aggressive, understanding that the 
concerns about economic impact seem to be somewhat 
questionable? Have we reached the point where we need the 
agency to be tougher and more aggressive and simply say to 
these port operators that this is something we need to do 
because this is a national security issue?
    Mr. Aloise. Mr. Chairman, I think we're at the point where 
we're thinking, we need to think outside the box here. We 
understand why they're negotiating. That makes sense. But 
they're 2 years behind in their seaport deployments, and they 
have to take a different approach.
    Senator Coleman. And 95 percent of the cargo coming into 
this country comes in through the seaports. Is that correct?
    Mr. Aloise. Right. That's correct.
    Senator Coleman. So the good news is certainly at our 
northern and southern borders, we've got good screening, good 
RPMs in place?
    Mr. Aloise. Yes. At the first phase at the northern border.
    Senator Coleman. And in fact, Mr. Kutz, when your team went 
in through the northern border, the alarm was sounded and, in 
fact, folks were stopped.
    Mr. Kutz. Yes. And they followed the procedures that they 
were supposed to.
    Senator Coleman. And yet the material still got through.
    Mr. Kutz. Yes.
    Senator Coleman. And then at the southern border are those 
the boxes containing material?
    Mr. Kutz. Yes.
    Senator Coleman. The southern border also, I think it's 
fair to say that we've made progress at the southern border?
    Mr. Kutz. Made progress.
    Senator Coleman. But again, 95 percent of the cargo comes 
through seaports, and that's where we're significantly behind?
    Mr. Aloise. That's correct.
    Senator Coleman. I hope the message is that we have to pick 
up the pace when it comes to seaports.
    Gentlemen, thank you. It's been very helpful. I appreciate 
it.
    The final witnesses to our hearing today are David G. 
Huizenga, the Deputy Assistant Secretary at the National 
Nuclear Security Administration; Vayl Oxford, the Director of 
the Domestic Nuclear Detection Office of the Department of 
Homeland Security; and Jayson P. Ahern, Assistant Commissioner 
at U.S. Customs and Border Protection.
    As I previously mentioned, the purpose of this hearing is 
to assess U.S. efforts to secure, detect, and interdict 
radiological and nuclear material domestically and abroad. The 
GAO has laid the groundwork for this panel, and identified 
several issues of concern.
    Mr. Huizenga, I'd like to thank you for your stewardship of 
our programs to detect and interdict radiological and nuclear 
material abroad. In particular, and I'm going to talk about 
this in my questioning, the Megaports Initiative is a forward-
looking program that enhances our collective security by 
pushing our borders out.
    Mr. Oxford, even given your short tenure at DNDO, we're 
impressed with your leadership and expertise you have brought 
to the issue of nuclear detection, and appreciate the fact that 
there is an office, a domestic nuclear detection office. I 
think that's one of the advancements, one of the improvements 
that we made that we really haven't talked about but I think 
puts us in a position to be much better at what we need to do 
here.
    And Mr. Ahern, while unacceptable gaps remain at our 
seaports, we do acknowledge your yeoman's work at CBP, and 
specifically your leadership in transitioning CBP from its 
focus on interdicting guns and drugs to interdicting weapons of 
mass destruction. I appreciate your attendance at today's 
important hearing, and I'm anxious to get your response to the 
issues raised by GAO.
    Before we begin, pursuant to Rule 6, all witnesses before 
this Subcommittee must be sworn in. Please raise your right 
hand.
    Do you swear the testimony you are about to give before 
this Subcommittee is the truth, the whole truth, and nothing 
but the truth, so help you, God?
    Mr. Huizenga. I do.
    Mr. Oxford. I do.
    Mr. Ahern. I do.
    Senator Coleman. Mr. Huizenga, we'll have you go first, 
followed by Mr. Oxford, and finish up with Mr. Ahern. After 
we've heard testimony, we'll turn to questions. There's a 
timing system; when the yellow light goes on, finish your 
statement. We'll enter your full statements into the record in 
their entirety.
    Mr. Huizenga, you may proceed.

TESTIMONY OF DAVID G. HUIZENGA,\1\ DEPUTY ASSISTANT SECRETARY, 
            NATIONAL NUCLEAR SECURITY ADMINISTRATION

    Mr. Huizenga. Thank you, Mr. Chairman. And thank you 
specifically for your continued support of these important 
national security matters. I'm pleased to appear before you 
today to share the progress that we made under the National 
Nuclear Security Administration's Second Line of Defense 
program, which deploys radiation detection equipment at 
strategic international locations.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Huizenga appears in the Appendix 
on page 152.
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    I'd like to note first Senator Domenici's and Governor 
Kean's pointed remarks about the fact that we have a first line 
of defense as well, to secure the nuclear material where it is. 
For more than a decade, NNSA has secured nuclear materials and 
weapons at over 100 research, storage, and manufacturing 
facilities in Russia and other countries of the former Soviet 
Union.
    These security upgrades are the first line of defense in 
our government's strategy to deny terrorists access to a 
nuclear weapon or the essential material to make a weapon, the 
fissile material. Backed by strong congressional support and 
commitments made at the 2005 Bratislava summit, we are on track 
to complete these security upgrades by the end of 2008.
    But the focus of today's hearing is on the Second Line of 
Defense program, which forms a key element in the multi-layered 
strategy and system to protect the homeland from an attack 
using a nuclear or radiological dispersal device. Our 
international efforts are centered on the premise that 
confronting the threat of nuclear terrorism as close to the 
source of the material as possible is the most effective means 
to reduce the risk of attack.
    The Second Line of Defense program pursues its goal to 
detect nuclear trafficking by partnering with foreign customs 
and border patrol officials. We provide the host country with a 
comprehensive system, including detection equipment, training, 
and support for maintenance and repair of this equipment. We 
coordinate our efforts closely with other U.S. Government 
agencies, such as the Departments of State and Defense, our 
partners at Homeland Security, as well as international 
partners like the International Atomic Energy Agency.
    The Second Line of Defense program has two main components, 
and I'll address both. First, the Core program. Under the Core 
program, we have worked cooperatively with Russia and their 
Federal customs service since 1998 to secure their 
approximately 350 points of entry and exit against nuclear 
smuggling. We have provided radiation detection systems at two-
thirds of the 120 border crossings, airports, and seaports that 
we've agreed with them to equip. Our Russian partners have 
already completed 120 sites on their own, and will fund 
installations at the remaining border crossings.
    While work in Russia remains one of our top priorities, we 
realize the deployment of radiation detection systems is also 
needed along other potential smuggling pathways in other 
countries. Working with the State Department and other agencies 
to prioritize our efforts, we have expanded the SLD program and 
are now installing or have installed equipment throughout the 
FSU and Eastern Europe. We have identified approximately 230 
sites in 29 countries outside of Russia, and over the next 3 
years plan to complete installation of detection equipment in 
all high priority countries.
    In parallel with providing systematic country-wide 
detection capability, we're also providing maintenance and 
repair for the radiation portal monitors provided by the other 
U.S. Government agencies to 23 former Soviet republics and 
central European countries from the period of 1992 through 
2002.
    As Mr. Aloise pointed out in the recent report, the GAO is 
recommending that these older detectors which can only detect 
gamma radiation be upgraded with up-to-date gamma neutron 
detection capability. We have accepted this recommendation and 
will replace the equipment by the end of 2007.
    I'd like to address one other issue that has come up 
relative to the GAO report, and that is the issue of corruption 
in these foreign countries. The SLD program is specifically 
structured to address this concern and this challenge by 
ensuring, as Mr. Aloise pointed out, that radiation portal 
monitors will be networked, and more than one official will be 
involved in closing out an alarm. We will construct central 
alarm stations, and indeed are working to also connect some of 
these central alarm situations to regional or national centers.
    I'd like to turn now to the other area of Second Line of 
Defense, the Megaports Initiative. In 2003, we established this 
program to provide early detection of illicit trafficking of 
nuclear materials before they enter our territory. We install 
comprehensive radiation detection and communication systems at 
foreign ports to enhance interdiction capabilities of the 
foreign customs authorities.
    The program is designed to scan imports/exports and as much 
transshipment cargo, containerized cargo, as possible while 
posing minimal impact on terminal operations. Agreements with 
host governments require all information associated with 
illicit trafficking of nuclear or radiological materials be 
provided to the U.S. Government.
    We've made steady progress over the last 3 years, 
identifying approximately 70 ports of interest in 35 countries. 
We're operational in the Netherlands, Greece, and Sri Lanka, 
and are conducting a pilot activity in the Bahamas. We will be 
fully operational in Spain in the spring of 2006 and are at 
various stages of design and construction in nine additional 
countries. And we are aggressively pursuing agreements with 
many of the other remaining 21 countries of interest.
    An integral element of the U.S. maritime security strategy, 
the Megaports Initiative complements the efforts of CBP's 
Container Security Initiative. Under an April 2005 memorandum 
of understanding with CBP, we're working closely with our CSI 
partners and have committed to install radiation detection 
equipment at all CSI ports.
    The radiation detection equipment provided under Megaports 
reinforces CBP's targeting, screening, and non-intrusive 
scanning activities. It's not a replacement of it. This is an 
additional added layer of support.
    Earlier, we heard from Commander Flynn that there is a need 
for greater coordination. And I would just like to point out 
that we have, I think, coordination at the highest levels of 
our agencies. I know recently Secretary Bodman had a phone call 
with Secretary Chertoff in advance of the Secretary's trip 
abroad, his Asian trip. And as a matter of fact, Secretary 
Chertoff in his press conference today was talking about the 
partnership between Megaports and his efforts at Homeland 
Security.
    For the record, I believe it's important to make clear that 
we have been working very closely with our partners at Homeland 
Security for some time over the last few years, and will 
continue to do so.
    I'd like to turn briefly to the type of equipment being 
deployed for primary inspections under the SLD program. The 
portal monitors were initially developed to ensure nuclear 
material security at DOE weapons sites. The detectors employ 
plastic scintillators and helium-3 gas, and have been evaluated 
at DNDO's test facility in Nevada, and have proven to be 
operationally effective in harsh and often remote international 
environments.
    That being said, we recognize that the use of this 
technology places additional burdens on secondary inspectors, 
and there's a need to develop equipment that will identify 
radioactive isotopes associated with innocent alarms. We are 
particularly interested in the Advanced Spectroscopic Portals 
being developed and tested by DNDO, and I hope that these 
monitors will be used in secondary inspections at Megaports as 
soon as they're available.
    We have also been working closely over the last 2 years 
with CBP to evaluate the effectiveness of the Integrated 
Container Inspection System, or ICIS, mentioned earlier in the 
hearing. It's being piloted by private industry in the port of 
Hong Kong. This system combines radiation detection with 
container identification and non-intrusive imaging, and we 
support the private sector's efforts to enhance the security of 
maritime trade lanes. We believe that the private sector 
container scanning effort is compatible with the Megaports 
mission.
    To contribute to this partnership, we are prepared to 
provide radiation portal monitors, which we have already 
purchased and are ready to ship, and a communications package 
to transmit alarm data to the host government as well as to the 
CSI officials.
    As the primary agency responsible for international 
deployment of radiation detection equipment, we are working 
very closely with our DNDO partners to shape the global nuclear 
detection architecture. Our work with DNDO falls into the 
following major areas: We're baselining and identifying gaps in 
the global architecture; identifying operational needs that 
drive research and development efforts; we're identifying the 
possible DNDO procurement vehicles, which we may piggyback on 
their efforts so that we don't have to duplicate procurement 
efforts at DOE; and we're also looking at sharing overseas data 
and information with DNDO.
    In closing, I would like to restate that the SLD program, 
or Second Line of Defense program, is dedicated to preventing 
international smuggling of nuclear and radiological material. 
We accomplish this goal by working closely with foreign 
governments and maintaining strong relationships with other 
U.S. Government agencies. We firmly believe that the unique 
capabilities of each department and agency are being leveraged 
to accomplish our common objective of preventing nuclear 
material from reaching the shores of the United States.
    Thank you for your continued support, Mr. Chairman. At this 
point, I'd be happy to answer any questions.
    Senator Coleman. Thank you, Mr. Huizenga. Mr. Oxford.

    TESTIMONY OF VAYL OXFORD,\1\ DIRECTOR, DOMESTIC NUCLEAR 
       DETECTION OFFICE, DEPARTMENT OF HOMELAND SECURITY

    Mr. Oxford. Good morning, Mr. Chairman. It is my pleasure 
to come before you today to address how DNDO is responding to 
the threat of nuclear and radiological terrorism. I would like 
to thank this Subcommittee for its attention to this issue. I'd 
also like to take the opportunity to thank the 180,000 people 
of DHS who are responding daily to the challenges of the post-
September 11 world.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Oxford appears in the Appendix on 
page 163.
---------------------------------------------------------------------------
    Today I will discuss topics related to the use of 
technology to detect nuclear and radiological materials that 
could be used in a terrorist attack. I'll review DNDO's 
accomplishments and some of our program priorities. I will 
touch upon the progress we have made with Customs and Border 
Protection regarding the domestic deployment of radiation 
portal monitors, and how DNDO and DHS as a whole is considering 
innovative ideas like the Integrated Container Inspection 
System, or ICIS, that is being piloted in Hong Kong.
    First let me address some of DNDO's accomplishments since 
its founding. As you know, DNDO was established as a joint 
office in April 2005 to integrate the Department's efforts 
against the nuclear and radiological threat under a singular 
authority, and to coordinate those efforts with relevant 
partners across the government.
    DNDO was assigned the responsibilities to develop a global 
nuclear detection and reporting architecture; to develop, 
acquire, and support the deployment of the domestic nuclear 
component of that architecture; and to fully characterize 
systems' performance before they are deployed. We were also 
asked to establish protocols and ensure that detection leads to 
effective response. Finally, we were asked to conduct an 
aggressive transformational research program to address 
additional architectural gaps.
    In the last year, the DNDO has taken major steps towards 
achieving its mission. We completed the first ever global 
detection architecture that allowed us to identify 
international and domestic vulnerabilities and priorities. We 
have completed additional development efforts on the next 
generation passive detection system that would not only detect 
presence of radiation but will also discriminate between threat 
and non-threat materials.
    We have now completed two high fidelity test and evaluation 
campaigns at our Nevada test site to characterize systems 
performance in next generation passive portals as well as 
handheld mobile and backpack detection systems. Finally, we 
have begun the development of the next generation radiography 
system to deliver imaging systems that will automatically 
detect high density material in cargo.
    The DNDO is also taking steps to improve nuclear detection 
capabilities within our Nation's borders. We have launched the 
Southeast Transportation Corridor pilot program to deploy 
radiation detectors to weigh stations and other sites, and to 
provide training, technical reachback, and operational 
protocols needed at the State and local level to ensure that 
detection technology is being operated properly and that alarms 
are escalated as appropriate.
    We are also launching a Securing the Cities Initiative 
aimed at enhancing protection and response capabilities in and 
around the Nation's highest risk urban areas. We will work with 
State and local officials to develop urban and regional 
deployment and operations strategies, identify appropriate 
detection equipment, establish the necessary support 
infrastructure, and develop incident management protocols to 
respond to a dirty bomb attack. These two initiatives, when 
integrated, form the basis for the DNDO vision for an interior 
layered domestic detection framework.
    Regarding RPM deployment strategy, this Subcommittee has 
expressed particular interest in the progress of RPM deployment 
at U.S. POEs. Additionally, the GAO reports we heard about 
earlier contained recommendations pertinent to DNDO that I 
would like to take the opportunity to address.
    In its report, the GAO made two specific recommendations 
regarding the DNDO. It called for the Secretary of Homeland 
Security, working with the Director of DNDO, in concert with 
CBP and PNNL, to devise a plan to close the gap between the 
current deployment rate and the rate to complete deployments by 
September 2009.
    Second, it cited that once the costing capabilities of 
advanced technology portal monitors are well understood, and 
before any new equipment is purchased, the Secretary of 
Homeland Security will work with the Director of DNDO to 
analyze the benefits and costs of deploying advanced portal 
monitors.
    The DNDO concurs with both of these, and let me address 
them individually. In the first recommendation, we are working 
with CBP to propose a deployment strategy that now results in 
screening of 98 percent of all containerized cargo crossing the 
southern border by the end of this fiscal year; 93 percent of 
all cargo crossing the northern border will be complete by 
2007; and 98 percent of containerized cargo coming into U.S. 
seaports will be complete and scanned by the end of 2007. This 
strategy will result in full coverage of all incoming 
containerized cargo at every port of entry in the United States 
by 2011.
    We also fully concur with the second recommendation, that 
calls for a deliberate process to ensure that funds are used in 
a responsible manner, and that advanced systems with higher 
procurement costs are deployed in cost-effective situations. 
The DNDO testing of these systems at the Nevada test site has 
since validated that systems performance when compared with 
current systems, and demonstrated in some cases a four times 
improvement in performance against threat objects, and a 60-
percent reduction in false alarms created by naturally 
occurring radioactive materials.
    This information is now guiding a joint DNDO-CBP analysis 
in support of a revised RPM deployment strategy that is an 
optimized mix of current and next generation technologies 
balancing our need for better capability and coverage across 
the country as well as their associated costs. Initial results 
of this analysis support the decision to acquire over 600 
detection units in fiscal years 2006 and 2007, including 184 
current generation RPMs and 106 next generation portal systems 
this year, and 131 current generation and 142 next generation 
systems in the year--fiscal year 2007.
    Regarding the integrated cargo inspection system this 
Subcommittee has witnessed in Hong Kong, first of all I would 
like to applaud the private sector for creating such a concept 
for screening international containers. The screening can be 
compatible with the U.S. Government's layered security 
strategy, and is another tool to further our ability to 
identify and address risks. An integrated cargo inspection 
system, one that combines targeting, passive, and active 
detection and information analysis, would be a robust 
contribution to the nuclear detection challenge we face.
    The ICIS pilot serves as a model comprehensive passive and 
active inspection, as well as a model for public/private 
partnership. However, ICIS, as deployed, is not an operational 
system. DHS has sent teams to observe the ICIS pilot, and has 
determined that the technology has potential but still faces 
significant limitations.
    DNDO certainly favors an integrated systems approach where 
at international seaports every cargo container could be both 
passively and actively scanned. This would enable us to detect 
unshielded or lightly-shielded materials with the current and 
next generation RPMs, as well as automatically detect highly-
shielded threat materials using radiography.
    Detector data would then be analyzed by DHS prior to cargo 
transit, and along with ATS, manifest, and detector data, would 
be integrated for enhanced targeting capability. Additional 
targeted inspection could be performed upon arrival at U.S. 
POEs utilizing mobile advanced RPMs and radiography systems.
    Mr. Chairman, this concludes my prepared remarks, and I 
look forward to your questions.
    Senator Coleman. Thank you very much, Mr. Oxford. Mr. 
Ahern.

 TESTIMONY OF JAYSON P. AHERN,\1\ ASSISTANT COMMISSIONER, U.S. 
                 CUSTOMS AND BORDER PROTECTION

    Mr. Ahern. Good morning, Mr. Chairman, and thank you for 
the opportunity to be here today. I'm pleased to join my 
colleagues from DNDO as well as NNSA to discuss an issue of 
prime importance to Customs and Border Protection and to the 
security of our Nation, and that is preventing the smuggling of 
nuclear and radiological weapons into the United States.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Ahern appears in the Appendix on 
page 173.
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    Mr. Chairman, CBP's priority mission is homeland security, 
keeping terrorists and their weapons, including weapons of mass 
destruction, from getting into our country. That means 
improving security at our physical borders and ports of entry. 
And it means extending our zone of security beyond our physical 
borders so that America's ports of entry are not the first line 
of defense against the international threat of terror.
    After September 11, CBP developed and implemented 
unprecedented initiatives, all driven by the understanding that 
the threat still exists and is still very real, and that CBP 
must and will do everything humanly possible to prevent a 
second attack.
    In assessing how far we've come in setting in place the 
mechanisms that protect our country from terrorist attack, I 
believe it's worth noting that before September 11, there was 
not a 24-hour Rule or Trade Act requiring advanced information 
to be transmitted prior to shipment to the United States. 
Before September 11, there were no National Targeting Center, 
where multiple Federal agencies worked together to identify 
both trade and people of risk.
    Before September 11, there were no CBP officers working 
together with our counterparts in foreign countries to identify 
and screen high risk shipments before they're bound for the 
United States. And before September 11, there were no concerted 
public and private sector partnership against terrorism, 
working to improve the security and the efficiency of trade. 
And before September 11, there was no radiation portal monitors 
at our ports to screen cargo containers. And there were only 16 
large-scale x-ray devices in use at our U.S. seaports.
    There is no question that our Nation's 322 ports of entry 
today are far safer than they were before September 11. But at 
the same time, we're all aware that securing our ports and the 
global supply chain is work in progress, and we must do more.
    I'd like to spend the remainder of my time responding to 
your letter of March 8, specifically and very candidly to the 
concerns you outlined in your letter of invitation.
    To begin with, first, the subject of this hearing, and 
that's detection technology. I'm able to report that CBP does 
currently operate 740 radiation portal monitors at our Nation's 
ports of entry, including 190 at our seaports. And RPMs today 
are our most robust radiation detection equipment, allowing us 
to quickly and thoroughly screen for radiation.
    In addition to the large-scale technology, CBP has deployed 
491 radiation isotope identifier devices and 12,500 personal 
radiation detectors. And overall, the RPMs that we currently 
have deployed on the northern and southern border and to date 
at our seaports, 67 percent of all arriving land and sea 
containerized cargo coming into the United States is run 
through the radiation portal monitors. By the end of next year, 
2007, we'll have 621 RPMs deployed at our Nation's top sea 
ports, giving us the ability to screen 98 percent of inbound 
sea containers.
    Beginning next month, CBP will also begin to deploy 60 
mobile RPM systems at our seaports, and these mobile rpms will 
give us the flexibility to screen low volume locations as well 
as real-time screening of high risk containers shipside. We 
expect these RPMs, these mobile RPMs, to be in place by the end 
of this year.
    To date, we have also screened over 80 million containers 
with RPMs, and we've resolved over 318,000 radiation alarms. We 
have resolved all the alarms, and the majority of the alarms 
have been attributed to naturally occurring radioactive 
materials, known as NORMs, and no alarms have been attributed 
to illegal nuclear material coming into this country.
    I would like to briefly comment about the GAO red team 
testing, and that is the attempt of GAO to introduce, smuggle 
into the United States, radioactive materials through two ports 
of entry on the northern and the southern border.
    I believe this was a very good opportunity for us to test 
our systems and our protocols in a real life situation. 
Although our systems worked, and our officers appeared to have 
followed our protocols for radiological alarms, the bottom line 
is the material was allowed in with questionable documentation.
    We have learned, and we're working to strengthen our 
protocols immediately so this does not happen again. We agree 
with GAO's assessment, and we assure that we are working with 
all their recommendations, but particularly on establishing a 
process for validating NRC licenses, and we expect to have a 
process in place within 30 days.
    For the container security initiative, it's important also 
to mention that we've made enormous progress, pushing our 
borders out. As of this morning, just this past Saturday in 
Honduras, the Container Security Initiative is now operational 
in 44 ports, the most recent in Puerto Cortes, and recently 
before that, on March 8, in Port Salalah, Oman.
    Since 2002, CSI, we've added at least one port a month to 
the program. And these 44 ports currently amount for--75 
percent of the maritime cargo containers coming into the United 
States to have an opportunity to be screened for risk. By the 
end of 2007, we'll have officers stationed at 58 ports, 
totaling 85 percent of the container traffic coming to this 
country.
    I'm also proud of our partnership that we have with the 
private sector under the Customs-Trade Partnership Against 
Terrorism. And today C-TPAT has nearly 6,000 certified partners 
from the private sector, including some of the largest U.S. 
importers, working to increase supply chain security from 
foreign loading docks to the U.S. port of arrival. Through C-
TPAT, CBP reviews the security practices of companies shipping 
goods to the United States.
    A year ago we had only 8 percent of the certified members 
validated. Today we have 27 percent done, and we have another 
39 percent underway, so that we'll be at 66 percent by the end 
of this fiscal year.
    I know there's also been concerns about the number of 
validators we have on board, supply chain security specialists. 
Today we have 88 on board; within the last 2 weeks we have 
selected 41 additional validators, and they'll be on within the 
next 30 to 45 days so that they're on board for a May 15 
training class. And by the end of the summer, we'll be at our 
156 target.
    I also would like to talk to you about an additional 
protocol that we've put in place. We have recently entered into 
an agreement with 19 recently retired Customs and Border 
Protection officers and special agents from Immigration and 
Customs Enforcement to have them involved and trained, given 
the exact same training as our supply chain security officers, 
so that they can use their experience in offsetting our teams 
to increase the pace of validation overseas.
    With regard to our targeting systems, CBP, our partners 
within the government, we're also looking to increase the 
targeting capabilities at the National Targeting Center. 
Certainly we look to continue to improve the integration of our 
intelligence through our targeting efforts and the data 
elements we need to make our system more comprehensive and 
accurate.
    Recently MitreTech Systems, an independent consulting firm, 
performed an independent evaluation of CBP's Automated 
Targeting System and targeting methodology. CBP uses ATS to 
identify ocean containers that are high risk for terrorism. The 
assessment identified a number of strengths, including 
recognizing our assets of how highly trained our officers are.
    They also recognized our ability to adjust rules and 
weights to account for priorities, risk, and changes. But they 
also made a number of recommendations, such as the ability to 
have an infrastructure in place to test the simulation of 
proposed rules or mock shipments, and we continue to improve 
under their direction.
    Last, under the Hong Kong ICIS program, I believe it's 
important just to offer my comments in addition to Mr. 
Oxford's. I've had the opportunity to see this concept, and 
certainly it employs technology that integrates into a single 
computer screen the radiation profile and VACIS image, much of 
the same technology we use at our ports today.
    But I believe today the Hong Kong concept is just that, a 
concept, and the effectiveness of this concept has been 
overstated. But nevertheless, it is consistent with our 
strategy to push the borders out, and I believe it does have 
the ability to complement our CSI program. And we're committed 
to partner with the private sector to develop a viable concept 
of operations. And this will take also a considerable amount of 
support from the host country counterparts as well in each 
country we would go to.
    In conclusion, we know that securing America's borders is 
an ongoing and long-term effort, but we can be proud of what 
we've been able to accomplish thus far, and to make America 
safer and our seaports more secure.
    Mr. Chairman, we welcome the oversight of this Subcommittee 
and you personally, and suggestions our colleagues at GAO as 
well as independent reviewers like MitreTech have made to 
improve our programs. We take these recommendations very 
seriously, and work every day to improve the ways we carry out 
our homeland security mission and to keep terrorists and 
terrorist weapons, including weapons of mass destruction, 
nuclear, and radiological weapons, out of our country.
    Thank you for the invitation today, and I'll look forward 
to taking any questions later.
    Senator Coleman. Thank you very much, Mr. Ahern.
    I want to start by acknowledging the clearly substantial 
improvements from where we were on September 11. Today, we have 
the National Targeting Center, C-TPAT, CSI, and we are 
utilizing radiation portal monitors. So there is no question 
that we're safer today than on September 11.
    However, are we safe enough? Have we elevated this issue to 
the highest priority and are we responding accordingly? As I 
said to Secretary Chertoff when he was being confirmed, unlike 
perhaps any other department head, if the head of 
transportation--if there are highway deaths on the highway, 
it's part of the reality of the world we live in, and you don't 
get a lot of feedback. And if there are environmental spills, 
we deal with that; a great concern, but it's the world we live 
in. But in this area, failure's not an option. And so the 
standard is higher, and in part, that's why we've been so 
vigorous in this oversight.
    I just want to, if I can, talk about ICIS for a second. And 
I appreciate the fact that we're hearing that it may serve as a 
model. I was in Hong Kong and I saw the ICIS system. I also 
appreciate the recognition of working with the private sector 
and with foreign entities. I think as a result of some of the 
concerns about the DP World process, about whether it should 
have had a 45-day review, I believe; the law required that, it 
didn't--but I don't know if we ever got to the substance.
    And part of the reality is that if our defense requires us 
to work vigorous, requires us to work with foreign entities in 
some capacity, we do that. We have to take a close look at it. 
But I appreciate the recognition that this is part of the 
reality.
    My concern about ICIS is I hope we push the envelope. 
Clearly, and I think, Mr. Oxford, your comment, it's a model. 
It's not an operational system. The fact that you can do a 
couple lines--and I was there. Every truck rolls through. It 
doesn't stop. It doesn't interrupt the flow of commerce. You've 
got the image. You can check that, then, with a manifest. You 
tie that in with the radiation portal monitor.
    We then have a couple-week period while containers are 
coming over here and perhaps subject to further analysis, which 
I think has been the issue. I've got to believe that with 
computer technology, we'll be able to do some analysis which 
will give us more information.
    But I'm hopeful that we're taking a close look, and that 
there isn't any kind of bureaucratic resistance.
    Let me, if I can, talk about Megaports, and then I want to 
talk a little with you, Mr. Ahern, about ATS and about our 
targeting system. There's been a lot of discussion publicly 
about Megaports deployment in the Bahamas, and with Hutchison 
Port Holdings awarded a sole source contract. They operate the 
port in the Bahamas, don't they?
    Mr. Huizenga. That's correct.
    Senator Coleman. So if you want to operate in the Bahamas, 
you're going to give a sole contract.
    Mr. Huizenga. They're the only people driving those 
vehicles around on their port.
    Senator Coleman. And I would take it that it's your 
judgment that it is in the best interests of this country to 
have a Megaports program, to be working with folks like 
Hutchison and others to make sure that we're putting in that 
extra line of defense.
    Mr. Huizenga. Absolutely. I mean, pushing the boundaries 
out is what this is all about. And it's important to note that 
we reviewed our relationship with Hutchison before we started 
to pursue the contract, and we're convinced that they're a 
company worth working with.
    Senator Coleman. I worry there's a little bit of xenophobia 
here. However, I believe that if foreign countries are 
operating ports, then they should establish an American 
subsidiary.
    Foreign companies operate 80 percent of our ports. It is a 
reality at today's world for the U.S. Government to work with 
foreign companies. Yet I hope we will take a close look, and 
understand what the gaps or concerns may be. I am certainly one 
who believes that Megaports is part of this integrated 
infrastructure and I hope we continue moving forward.
    Can I just clear something up about numbers? We have good 
coverage of our southern and northern borders, somewhere in the 
90 percent. I thought it was stated that we'd have 98 percent 
of our containers coming in from ports.
    Screened for radiation by 2007? Is that correct? The 
question I have is, however, when do you have ``full 
coverage''? GAO says not by 2016. I thought the Secretary said 
by 2009. Can you help me understand the difference? Are we 
committed to this accelerated process that would make the GAO 
number somehow not relevant based on what we intend to do over 
the next couple of years?
    Mr. Ahern. Yes. I would tell you that our projection right 
now for the RPMs for seaports would get us to 621 RPMs by 2007, 
and that would get us to 98 percent of the sea containers 
coming in through the top 22 ports.
    Senator Coleman. Senator Levin is not here, but there was a 
comment about imaging technology. It may have been you, Mr. 
Oxford, who discussed some of the capabilities of the new 
technology. That chart is a scan of a truck carrying garbage 
from Canada into the United States.\1\
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    \1\ See Exhibit 15 which appears in the Appendix on page 440.
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    And perhaps any of you gentlemen can help me. Even with all 
the technology that we have today--you talked about imaging 
systems, high density cargo. I presume that's high density 
cargo right there. How do you know whether there is a dirty 
bomb buried in there? How do you know whether they've got any 
kind of weapon of mass destruction? How do we somehow stop that 
from being a carrier for some weapon of mass destruction?
    Mr. Oxford. Mr. Chairman, that's why when we looked at the 
ICIS system, we look at some of the operational and technical 
limitations. The VACIS system originally was designed to look 
at contraband and other anomalies for customs' other missions. 
What we're looking for in next generation radiography systems 
is to actually have better information content, where we can 
now discriminate between the material that's in that cargo.
    So it's not just the ability to find high density material. 
It's to identify the differences in density so we can look at 
those anomalies and red flag for the operator the material in 
that cargo that you care about. So what you're seeing on this 
image is a current generation capability that has very little 
information content and requires a lot of operational judgment.
    Senator Coleman. Mr. Ahern, the basis for our system today 
is really--the Automated Targeting System. And in terms of what 
we inspect, do we have the chart that shows the various ports, 
the foreign ports? I think it says Le Havre and some others.\1\ 
Is there a chart there that says these are the number of high 
risk cargos? These are the numbers of requests that have been 
made to actually do a screening. I think that's the one.
---------------------------------------------------------------------------
    \1\ See Exhibit 7 which appears in the Appendix on page 371.
---------------------------------------------------------------------------
    A couple of questions. We've got CSI ports, Container 
Security Initiative. And by the way, where they work well, at 
least in Hong Kong, our folks are operating side by side. Is 
that the model throughout all the CSI ports?
    Mr. Ahern. We do find that Hong Kong is one of our better 
footprints for our officers working alongside. We do have that 
in many other locations as well.
    Senator Coleman. But we don't have it in all the locations?
    Mr. Ahern. The side by side officers?
    Senator Coleman. Yes.
    Mr. Ahern. Not in every location.
    Senator Coleman. I mean, to me it is important to work side 
by side. In Hong Kong, I saw how well that operated. There must 
be things we can do to somehow facilitate getting folks to work 
side by side.
    But one of the questions I have is if you look at the 
green, the green are the high risk shipments. Now, I presume 
high risk, is that through an ATS targeting system?
    Mr. Ahern. Yes. That would be.
    Senator Coleman. And then we go to the country and we go to 
Hong Kong, and you can kind of see. And even with my Lasik 
vision here, I can't look at it exactly. But what you have is 
37.2 percent of high risk shipments are examined at Hong Kong. 
And we actually have a higher number that are requested. And 
that decision to actually examine is done then by the host 
country. Is that correct?
    Mr. Ahern. That is correct.
    Senator Coleman. Even with this system, we don't control 
whether it's examined there. Now, those that we've asked--the 
yellow that we've asked to be examined--forget the green in 
which there are lots of high risk. But those between--those 
we've asked to examine in the yellow, do we examine those 
containers then before they're actually unloaded on our shores?
    Mr. Ahern. If they're determined for high risk, they would 
be examined upon arrival in the United States if they're not 
done overseas.
    Senator Coleman. What about all the high risk that are not 
inspected? In regard to Hong Kong, 15,636 are identified high 
risk; only 5,580 are actually examined. What about those 
10,000? Are they also examined here?
    Mr. Ahern. Those would be examined in the United States.
    Senator Coleman. In what way are they examined?
    Mr. Ahern. They would be given as far as the radiation 
screening as well as the NII, physical examination, if 
necessary.
    Senator Coleman. Physical--when you say if necessary, out 
of those other 10,000, how many are actually physically 
examined?
    Mr. Ahern. I would have to give you the precise breakout.
    Senator Coleman. Can you give me a ballpark figure?
    Mr. Ahern. I wouldn't want to provide a speculative answer.
    Senator Coleman. If you look at Le Havre, France, what you 
have here is 1,649 identified as high risk. You only have 244 
actually examined there, 553 not. So the French authorities 
simply made a decision that over half those that we request to 
be examined aren't examined. Is that correct?
    Mr. Ahern. What I'd like to do, if I might, is I know that 
taking a look at the snapshots in time that were used from 
this, February 2005 to February 2006, I know in the early part 
of 2005 that we were not getting the responsiveness that we had 
hoped for in Japan and in France. So if I might, if I could 
actually provide some more detail after this hearing to show 
the progress that has been made in recent months to bring those 
numbers to adjust those bars a little bit more positively.
    Senator Coleman. I'd appreciate it. Because clearly what we 
would like to see is, we'd like to understand, if there's 
resistance from the host country, what are we doing to change 
that? What kind of tools can we use to say, we have a concern, 
and if this is really a partnership, we need you to act a 
little more aggressively. Because it seems to be somewhat 
varied in terms of the nature of the response. And actually if 
something is high risk and we want it to be checked, you would 
expect we wouldn't want to have any variance.
    Mr. Ahern. Absolutely. And I think we can provide some 
information as a follow-up to this hearing to show what it's 
been in recent months, moving towards the goals that we would 
like.
    Senator Coleman. Let me focus on ATS for a second because 
it really is kind of at the root of our system, what we 
identify, and we'll get into all the details here. But we 
essentially, through a range of factors, give cargo a rating, 
and based on that rating we make a determination as to whether 
it's high risk and then once that determination is made, we 
will then determine whether in fact there's some extra review 
accessory.
    The system itself, have we ever conducted any kind of peer 
review? Have we ever done any kind of analysis that 
substantiates the veracity, the accuracy, of this system?
    Mr. Ahern. Yes. That was the MitreTech review that I spoke 
of in my short statement. That outside review actually pointed 
to a lot of things that we had that were strengths of the 
program as well as additional areas we needed to improve upon.
    Senator Coleman. Do you ever do any red team testing where 
the system is actually checked it out. Do you do simulated 
testing? Have you ever gone down there and seen whether you 
could escape and get through this system that we place such 
reliance on?
    Mr. Ahern. With, again, the MitreTech study that was done, 
we have now some protocols that we're going to begin to operate 
within the next month to 2 months to start--do some what they 
call in the sandbox testing for us.
    Senator Coleman. So we're going to do that now?
    Mr. Ahern. Yes.
    Senator Coleman. OK. And I hope we do that now. I mean, 
again, this is the kind of underlying basis or--we're banking 
everything on a system that we've done some studies. We have 
not done the kind of testing that says, OK, is it vulnerable? 
Does it work?
    And if it does--and I applaud, by the way, Customs and 
Border Protection and DHS, in regard to what we saw with the 
radiological material--which is interesting, by the way. I did 
read in the paper they said we'd have that document problem 
fixed in 45 days. I do know your testimony today says 30 days. 
So I'm going to hold you to the 30 days.
    Mr. Ahern. Fair enough.
    Senator Coleman. But I do appreciate it. But I think we--
again, we need to take a look at this.
    My other concern is simply the reality that this is a 
sampling. It's not random. It's targeted.
    Mr. Ahern. Right.
    Senator Coleman. It's a targeting system, but that depends 
on C-TPAT and other programs. You've got relationship with 
shippers and companies like Best Buy, etc., that we put a lot 
of stock in what they're doing without the kind of thorough 
review investigation.
    And so in effect, you've got a lot of folks who are going 
to have a pass. And I think that was in Commander Flynn's 
scenario. They're going to get a pass on any kind of high risk 
based on getting points for relationships that I worry where 
someone could understand that and use that as a way to break 
through that system. That's one of the vulnerabilities we have. 
Is that correct?
    Mr. Ahern. Well, what I would just add to that is that 
without getting into too much of our scoring in an open hearing 
like this, I would remind all of us of the change in protocols 
that we had going back several months ago where we actually did 
cease providing any kind of an advantage at the time of 
manifest filing when we do the initial scoring. And there's not 
any at that point in time for the security screening that goes 
that 24 hour prior to lading.
    Senator Coleman. But the problem even with that is that we 
look at a company and we give it certain credit. But we're 
really not looking at all their operations. We're not out there 
checking to see whether in fact what we believe to be their 
system--we may have looked at one place, but there's not a 
uniform review, certification process that gives us--certainly 
not 100 percent certainty. In fact, I think it's a lot less 
than that. But, I mean, that is the system we have.
    Mr. Ahern. Well, if you're talking about the validations, 
we have a very uniform way of going out and doing the 
validations now. It's much more consistent than it was, again, 
even just several months ago. That's, again, lessons learned 
from a previous GAO report.
    Senator Coleman. Mr. Oxford--let me just finish, if I can, 
with ICIS because one of the benefits of ICIS is at least we 
could have the images of the containers in this chart. Today, 
we don't have images for those containers in Hong Kong.\1\ 
Again, this chart is dated, a moment in time.
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    \1\ See Exhibit 7 which appears in the Appendix on page 371.
---------------------------------------------------------------------------
    But right now we have a system that says of the 15,636 high 
risk shipments examined at Hong Kong, we know that 5,823 are 
actually checked there. We've identified 7,918 that we'd like 
to be checked. We do believe that before they get in, those are 
covered. I still have a question as to the 8,000 to 10,000 
spread which we've identified high risk, whether in fact those 
are checked before they get here and what that means.
    But at least with ICIS, just using that as part of a 
system, we'd at least have a screen. We'd have an image. We'd 
have a manifest. We'd have a radiation portal monitoring of all 
these high risk, which we don't have today. Is that correct?
    Mr. Ahern. That would. And just to put ICIS in its proper 
context as we go forward into the future, I think it is 
appropriate to take a look at. It's very consistent with our 
pushing the border strategy out, and it would be very 
complimentary to the 44 ports where we currently have CSI.
    And when our targeters overseas would get a score for risk, 
one of the first things they should then ask for is, let me 
have the electronic file that is there for this container 
coming in so they can again make an informed decision of what's 
going on.
    But it won't all just be through that protocol. There will 
certainly be a lot of alarms that will be occurring. As I 
stated, with the 80 million containers that we've now put 
through the RPMs, 318,000 have resulted in alarms that needed 
to be resolved. And I would submit to you, and I know there's 
been a lot of discussion by many who've looked at this issue, 
and I would think that the carriers would support the same 
position that I'm going to proffer at this point, any alarm 
needs to be resolved before it's put on a vessel for the United 
States.
    Anything using it for forensic capabilities en route or 
after route within the United States may be interesting to 
have, but you would want to make sure that the alarm is 
resolved before it's put on a vessel for the United States so 
that there's not any concern about something happening en route 
or upon arrival. So that would be a very critical component 
that needs to be added into this process.
    Senator Coleman. Mr. Oxford, last line of questioning. I 
believe you were quoted in one of the articles today talking 
about the red team testing that GAO did and the material that 
at least set off a radiation portal monitor. So the monitors 
were set off. Clearly, from a monitoring perspective, there was 
enough material in there to raise the level of concern. Is that 
correct?
    Mr. Oxford. Yes.
    Senator Coleman. And GAO says that based on their analysis 
and working with a couple of other government agencies, they 
thought this was enough to make dirty bombs. Is that correct?
    Mr. Oxford. That's what they said, yes.
    Senator Coleman. And your comment was it was somewhat 
minimal material.
    My question is this, though--two questions, actually. One, 
you're not discounting the impact of dirty bombs, are you?
    Mr. Oxford. Absolutely not.
    Senator Coleman. And so the testimony of Governor Kean in 
terms of the emotional impact, or Commander Flynn in terms of 
the economic impact, you wouldn't disagree with that, would 
you?
    Mr. Oxford. Not at all. In fact, when you look at our 
Securing the Cities Initiative, we were going to focus a lot in 
the urban areas on a dirty bomb-like attack, and what we can do 
to prevent and immediately mitigate those effects.
    Senator Coleman. And the other concern that I had in this 
regard is, again, without debating how much material was in 
those two boxes, it was the sense from GAO that they could have 
gotten a lot more material without raising any red flags. What 
do we have to put in place to make sure that there are red 
flags so that people can't get radiological material in a level 
enough to build a dirty bomb without anybody being concerned 
about it?
    Mr. Oxford. Well, even though that falls mainly in the 
domain of the Nuclear Regulatory Commission, I think the 
exercises and the ability for CBP to do what they're proposing 
to do, especially for the cross-border activities, certainly 
allows an extra layer of security to be able to look at that 
material.
    It was mentioned in the opening statements that the Energy 
Policy Act that dictated NRC lead a task force, with a report 
due to Congress this August, I think we, as a government, need 
to look hard at the recommendations that come through that 
process to make sure we're all doing more for source security 
within the country as well.
    Senator Coleman. Let me ask the last question then about a 
general concern. We've got a lot of agencies involved in this 
effect. What we had, if you look to that Second Line of Defense 
program, we have a question about whether the State 
Department--the records they had in terms of the devices and 
everything else. We have DOE now. We have Homeland Security. I 
think there may be some other entities.
    Is there a concern that there are too many cooks cooking 
this broth, and that perhaps we need to somehow better 
centralize this? Is there going to be a concern, if something 
goes wrong, that a lot of people are going to be pointing 
fingers and say, there wasn't a single person in charge? 
Because we've been through that dance before. Anybody want to 
respond to that?
    Mr. Oxford. Mr. Chairman, if I could try to take that on 
because I may be one of those people they point at when that 
time comes.
    We have seen within the 11-plus months that we've been in 
existence that we have a daily dialogue now across the inter-
agency that didn't exist on a routine basis in the past. We 
think that was one of the preeminent reasons for why DNDO was 
created, was to create that daily dialogue.
    It does not mean we have to run every program. And we're 
seeing the benefits from having the NNSA people on our staff. 
Mr. Ahern has 11 people from CBP within the DNDO office. It's 
creating this dialogue on a daily basis. And that extends to 
the Department of Defense, the Department of State, the Federal 
Bureau of Investigation, and now we have two NRC people on the 
staff to start working these issues.
    So I think we're making a great step forward in creating 
that cross-talk that was necessary in the past.
    Senator Coleman. I appreciate that. And I would just urge 
that if there's even any inkling among you or folks who work 
with you, any of the other agencies, that somehow we're seeing 
the beginning of some silo effect where people are questioning 
the level of communication and cooperation, I would hope that 
is attended to very quickly because were that to happen, I 
think it would be very problematic.
    Mr. Huizenga. Mr. Chairman, I'd like to echo Vayl's point. 
I really believe we have a significant amount of communication 
right now, and it benefits us because we're able to bring the 
expertise from the different agencies to bear on this common 
problem.
    And, we can share the expertise that we've developed over 
the last decade working in foreign countries, and we can help 
on the CBP's efforts with CSI in order to provide that 
additional layer of radiation detection screening before the 
containers leave the foreign ports.
    Senator Coleman. I thank you. We will have a hearing on 
Thursday. We'll focus more on ICIS, focus more on C-TPAT and 
CSI. But this has been very helpful, and I do thank you for 
your testimony.
    With that, this hearing is now adjourned.
    [Whereupon, at 12:25 p.m., the Subcommittee was adjourned.]


 NEUTRALIZING THE NUCLEAR AND RADIOLOGICAL THREAT: SECURING THE GLOBAL 
                              SUPPLY CHAIN

                              ----------                              


                        THURSDAY, MARCH 30, 2006

                                     U.S. Senate,  
              Permanent Subcommittee on Investigations,    
                    of the Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:03 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Norm Coleman, 
Chairman of the Subcommittee, presiding.
    Present: Senators Coleman and Levin.
    Staff present: Raymond V. Shepherd, III, Staff Director and 
Chief Counsel; Brian M. White, Professional Staff Member; 
Joanna Ip Durie, Detailee, ICE; Mary D. Robertson, Chief Clerk, 
PSI; Leland B. Erickson, Counsel; Mark L. Greenblatt, Counsel; 
Steven A. Groves, Counsel; Cindy Barnes, Detailee, GAO; Elise 
J. Bean, Staff Director/Chief Counsel to the Minority; Laura 
Stuber, Counsel to the Minority; Hanni Itah, Intern; Kathy 
Kraninger (HSGAC, Collins); and Henry Abeyta (Energy, 
Domenici).
    Senator Coleman. This hearing of the Permanent Subcommittee 
on Investigations is called to order.
    I know that Senator Schumer is on his way. I am very 
pleased to see my good friend and close colleague, Senator 
Graham, here today. Both Senator Graham and Senator Schumer 
have really taken a lead on this issue of container security, 
and have recently visited Hong Kong. As part of our discussion 
today, we will be talking about the ability to screen 100 
percent of containers and an operation in Hong Kong. Both 
Senator Graham and Senator Schumer, have just returned from 
Hong Kong and I thought it would be very worthwhile for this 
Subcommittee to hear from them abut their trip.
    Senator Graham, I am going to turn it over to you before my 
opening statement. I anticipate Senator Schumer should arrive 
shortly. If he is not here, I will give my statement, but I 
would like to give you the opportunity to begin first. I know 
both of you are busy.
    I welcome the Ranking Member. Senator Levin, I indicated 
that I was going to give both Senator Graham and Senator 
Schumer the opportunity to talk a little bit about their 
experience before our opening statements.
    Senator Levin. That is fine.
    Senator Coleman. I know they have to go on their way.
    Senator Schumer is finally here, and I am very pleased to 
see him. I also indicated that both of our colleagues have 
taken a very strong interest in the whole issue of port 
security, container security, and personally visited Hong Kong 
recently to look at one of the systems there.
    Senator Schumer, what I am going to do is I am going to 
have you and Senator Graham speak before we do our opening 
statements. As soon as you are done--I know that you are in the 
middle of markups and other things, we will certainly excuse 
you at that time, but I do want to thank you for being here 
today.
    With that, Senator Graham.

TESTIMONY OF HON. LINDSEY GRAHAM, A U.S. SENATOR FROM THE STATE 
                       OF SOUTH CAROLINA

    Senator Graham. Thank you, Mr. Chairman. You are right, we 
just returned from Hong Kong and China, the Mainland, and my 
body is somewhere between there and here, so I will try to make 
this brief and to the point.
    In terms of leadership, I know Senator Schumer has been 
talking about port security for a long time, and Senator Levin 
has been talking about national security matters every time we 
meet, in Armed Services he is talking about these things. Mr. 
Chairman, your bill is sort of a model, and that is how I got 
involved, by talking with you and the gentleman from Hutchison 
behind us. You kind of set us up.
    I have Charleston port in South Carolina, and we are 
looking at locating a new port. I guess the Dubai Port World 
experience has sort of woken up the country a bit, and let us 
take advantage of what was an unfortunate event, but it did tap 
into some concern out there about how our ports are operated, 
who should own the terminals and are we where we need to be as 
a Nation? In that regard, the whole experience could be 
positive. Senator Coleman, I want to be a partner with you and 
Senator Schumer, and Senator Levin, and others to try to get 
this right.
    The Hong Kong experience was very exciting. We met with the 
Hutchison people, and we viewed a system called ICIS. I think 
you have already been there. One of the things we have learned 
from this whole Dubai experience, that most Americans did not 
realize that most of the cargo coming into our country is 
coming in basically uninspected. We have a screening program of 
sorts, but the technology to look into each cargo container and 
find out if it is something we want or something dangerous to 
us as a Nation seems to be developing rapidly. The only thing 
not developing rapidly is our government's ability to deal with 
port security. Maybe from this whole episode and your bill, and 
other pieces of legislation, the government can catch up to the 
private sector.
    Here is what was so exciting, is that the technology that 
Senator Schumer and I had the pleasure of viewing, seems not 
only to be technically good, but commercially sound, that you 
can screen cargo at the biggest port in the world without 
bringing our commerce to a halt. What we are lacking is 
infrastructure within out government to take those images and 
analyze them to make sure that the container does not carry 
contraband or weapons of mass destruction or other things that 
would hurt Americans.
    As a Nation, I believe it will be political malpractice for 
us not to come together as Republicans and Democrats and put 
the infrastructure in place to take this promising technology 
and spread it worldwide. We can do it in partnership with the 
private sector. That was what was so exciting. This is not 
another government program of many layers. This is allowing us 
to tap into private sector innovation where we could partner 
with the private sector, let them lead the way in screening and 
inspection, and we will have some infrastructure in place at 
the Federal level to make sure we know the results of these 
screens, to make sure the cargo is safe to come into our 
country.
    One final thought. This has to be done worldwide, and it 
has to be done with the private sector taking the lead, and we 
are trying to do it with other nations. The Bahamas event is 
sort of the wrong model. No one in the United States wants to 
take over the sovereignty of the Bahamian Government or any 
other government. We want a partnership, sort of like we have 
with airlines, where governments can work in collaboration with 
our government and the private sector, to make sure that 
commerce is secure for us all, because if there is a terrorist 
attack on our shipping lanes or at any port in the United 
States, or any major port, the ripple effect would be 
devastating to the world at large. So we have a chance to 
collaborate with nations that have ports with their borders, 
and make this a win-win.
    That is what I am looking for, a marriage between the 
private sector, our government and the world at large, to make 
sure that we know what is coming to our shores, because the one 
thing I have learned from this whole episode, after talking 
with you and others, Mr. Chairman, is this is probably the weak 
link in the national security chain. The good news: We can 
solve the problem if we work together and we get ahead of it.
    With that, I appreciate the opportunity to be before your 
Subcommittee, and look forward to working with you and others 
to solve the problem.
    Senator Coleman. Thank you, Senator Graham. In your time in 
Congress, both in the House and here, you have been a champion 
on national security issues. I greatly appreciate you bringing 
your passion, your intellect, and certainly one thing the good 
Lord gave you in much bounty, and that is good common sense, 
bringing it to this discussion. It is much appreciated, and I 
look forward to partnering with you.
    Senator Schumer.

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

    Senator Schumer. Thank you, Mr. Chairman. I want to thank 
you for your leadership on this issue. Just the report that was 
issued the other day should be a wake-up call to everybody 
through your Committee, your Subcommittee. I want to thank, of 
course, my good friend, Carl Levin, for his leadership as well.
    This is an issue whose time is due, and the whole whirlwind 
about the Dubai Ports can have some good, and the good is that 
we really do tighten up port security, and the good news, I 
think all of us are aware, and particularly Lindsey and I on 
our visit to Hong Kong, is that it can be done. It can be done 
without impeding commerce, and it can be done without much 
government expense, and this is all very good news.
    First let me say our trip to the Hutchison Whampoa Terminal 
in Hong Kong just knocked my socks off. First, it is as large 
as could be. I thought we had big ports in New York, but they 
are dwarfed compared to the Hong Kong port in size, but also in 
terms of efficiency and modernity and so many different ways.
    But second, their system of security, of checking each 
container, not 5 percent, not 10 percent, not 50 percent, but 
100 percent of all the containers, for nuclear and other 
detrimental materials is just incredible, and they do it 
without slowing down commerce at all. In fact, our Customs 
people told us their biggest problem is that the containers are 
checked so quickly, that sometimes they have a rough time 
catching up with them because they are already at sea by the 
time they get information on the check. That is something that 
has to change, but it is an easily solvable problem.
    I have not seen anything in the United States--and I have 
studied port security that compares to what we saw in Hong 
Kong, and that is a shame. It is a shame that China and Hong 
Kong could have better port security than we here in the United 
States, and the system that we have seen--and I know you have 
been enthusiastic about and champion, Mr. Chairman--should be 
our standard.
    As you know, they first create an image of every 
container's content that can be sent and reviewed by Customs 
officials in real and near-real time to ensure not only what is 
in there, but that if there is, say, a lead box that might 
contain something that is bad, they will come up with that, 
too. That has always been my great worry since I introduced 
legislation years ago to require scanning of containers for 
nuclear materials. The way they figured this out is they have 
three different check levels, and when the three match up, you 
know something is wrong and you pull the container. And maybe 
in that lead container or that imperceivable container will be 
nothing bad. Well, so be it. Better to be safe than sorry.
    The other bit of good news is the cost is amazingly low. It 
costs, I learned on our trip, about $2,000 to send a container 
from Hong Kong to the United States. That, by the way, is very 
cheap as well. It is one of the reasons we have so much more 
commerce, because this man, whose name I forget--sounds like--
McLean. Mr. McLean, who developed these containers really did 
the world a service. So it costs only $2,000 to send a 
container across the ocean, Pacific Ocean. It is probably a 
little less for the Atlantic. Guess how much it costs to do 
this? About $6.50. Now maybe it will be a little more in ports 
that are less efficient. Hong Kong is the world's largest port. 
Let's say it is $20. One percent, adding $20 to the cost of a 
$2,000 container to make sure that it does not contain material 
that might be terribly dangerous to us, makes eminent sense.
    So what I think--and I know I have talked to you, Mr. 
Chairman, Senator Graham, some of the others--we could mandate 
this on every container that comes into the United States, 
mandate a system like this be used. Could not do it 
immediately, but over a reasonable period of time. The 
technology could be adapted to each port. We saw how they are 
adopting it in Bermuda, where they would not have a long line 
like this, but they actually have a truck where the detectors 
go by the containers instead of the containers go through a 
sort of toll booth. It would not cost the government a nickel.
    Now, there would be some government costs, because the 
scanning is done here in the United States. You just send it by 
broadband, somebody sitting in a Customs office, maybe in New 
York City--that might be a good location for such an office----
    Senator Graham. Or in Charleston. [Laughter.]
    Senator Schumer. But somewhere in the United States could 
just scan this with the expertise, send the OK right back. 
Broadband allows us to do things that were unimaginable 10 
years ago. So we would have to hire some more Customs 
inspectors, but when you think of all the people we see at the 
airports who are government employees, this is a small cost for 
port security, which is much wider open than air security.
    So the work of this company, Hutchison Whampoa, which is 
the largest port operator in the world, has proved DHS wrong. 
This can be done. It is an example of what should be done in 
the private sector, and we should be as aggressive as they are 
in making sure that everything is screened, and require it to 
do it.
    My nightmare, Mr. Chairman, has been, ever since September 
11, that somebody somehow smuggles a nuclear weapon into one of 
our cities, not just a dirty bomb, but a real nuclear weapon. 
If, God forbid, that were to happen, there would be enormous 
loss of life, the economy would be disrupted, and our whole way 
of life would probably change, the wonderful way of life we 
have here in America. It is worth a little extra effort and a 
few extra dollars to make sure that does not happen.
    I look forward to working with you, Senator Levin, Senator 
Graham, to make that a reality as soon as possible.
    Senator Coleman. I do not know if there has been a more 
zealous and passionate advocate for this kind of security than 
you, and for obvious reasons, representing New York State, 
representing the World Trade Center area, and I know a very 
personal loss to you. I appreciate your continued passion and 
focus, and look forward to working with you.
    Senator I am going to excuse our colleagues. Senator Levin, 
anything you want to add?
    Senator Levin. I just want to thank both Senator Graham and 
Senator Schumer for all they have done in the Senate, most 
recently for their trip to China. It was very important to all 
of us that you raised the issues that you did with the Chinese 
about currency manipulation--that was the one we followed the 
most closely--but also for your taking the time then to go to 
Hong Kong and to inspect that technology.
    I know our Chairman has done the same thing, so we have a 
Chairman who is on the job on this issue, and I am going to be 
working with him, and look forward to working with both of you.
    I would just make one point, which is not directly, 
perhaps, related to the technology issue, but as the Chairman 
and I both know, 11 million containers come in by sea, but 11 
million containers come in by truck, and so this technology is 
critically important to all border States, not just to States 
that have ports, and in addition, we have a couple of million 
containers by train which come in. So this involves the safety 
of all Americans, but directly involves many more States than 
just the States that have seaports.
    Senator Coleman. Colleagues, thank you.
    Senator Schumer. I would just say, just from my look there, 
it seems to me that the technology could easily be adopted for 
land and train as well as port, and we would have to do that, 
because terrorists look for our weakest pressure point.
    Senator Graham. Mr. Chairman, if I may add, this trip was 
everything you said it would be. That is what got me to go to 
the port, is through our conversation you suggested while we 
are over there. It was, as Senator Schumer said, astounding 
what the private sector is doing.
    And one brief commercial for South Carolina. There is a 
program called Project Seahawk that has been in the budget now 
for 3 years that Senator Hollings started. We have 40 different 
law enforcement agencies at the Federal, State and local level, 
working out of one building in Charleston, South Carolina, 
sharing information about port security by turning to their 
left or to their right, to talk to people. My goal is to make 
sure that program thrives and survives, and everybody in the 
country can duplicate this model of talking to each other at 
every level of government. It would add a lot of security to 
our ports and other places.
    Thank you for what you are doing, it is very important.
    Senator Coleman. I thank you for your leadership, and I 
look forward to working with you. Thank you very much.

              OPENING STATEMENT BY SENATOR COLEMAN

    Senator Coleman. Today we will conclude our two-part 
hearing on neutralizing the nuclear and radiological threat and 
securing the global supply chain. On Tuesday, we extensively 
discussed the threat of nuclear or radiological terrorism. The 
consensus was clear: The threat is real and we are not doing 
enough to prevent it.
    Commander Flynn, who testified before us on Tuesday 
specifically outlined a stark scenario of a dirty bomb 
transported to the United States via a maritime container. 
However, this is not simply a worse-case scenario. One of our 
witnesses today will testify how 2 years ago, Palestinian 
suicide terrorists evaded port security in Ashdod after being 
smuggled in a secret compartment within a container from Gaza. 
Ten Israelis were killed and 16 others wounded after they 
intercepted the terrorist before they reached their target. It 
is suspected that the suicide bombers were intending to blow 
themselves up near the tanks of hazardous material after 
inspectors found unexploded grenades within the secret 
compartment.
    Experts in the industry believe it is just a matter of time 
before terrorists break security measures at a port of entry, 
most likely with a dirty bomb. These hearings are designed to 
prevent that from happening.
    Global trade is one of the pillars of our Nation's economy. 
American national security is inexorably linked to economic 
security. Governments across the world must ensure that the 
supply chain is secure, but must also do so without impeding 
the flow of commerce. More than 90 percent of global trade 
moves in ocean-going containers, and over 10 million containers 
enter the United States annually.
    The Congressional Budget Office, at my request, studied the 
economic consequences of an attack on the Ports of Los Angeles 
and Long Beach.\1\ CBO found our Nation's gross domestic 
product would decline by about $150 million per day for each 
day these two ports are closed, and that the annual cost of 
closing these ports would escalate to nearly $70 billion. While 
CBO did not analyze the cost to human life and property of such 
a terrorist attack, the economic impact of closing the ports 
could be comparable to both the attacks of September 11 and 
Hurricane Katrina. We cannot afford the devastation these 
findings imply. We must secure our supply chain before we pay 
the high price of an attack, and seek the appropriate balance 
between two often-competing priorities: Security and speed.
---------------------------------------------------------------------------
    \1\ See Exhibit 9 which appears in the Appendix on page 373.
---------------------------------------------------------------------------
    Former Customs and Border Protection Commissioner Bonner 
had the vision to address this grave threat and balance these 
two priorities--security and speed--after the September 11 
attacks. This balancing act resulted in the creation of two of 
the most prominent Homeland Security programs--the Container 
Security Initiative (CSI), and the Customs-Trade Partnership 
Against Terrorism, or C-TPAT. CSI effectively pushed our 
borders out by placing CBP officers in foreign ports to inspect 
containers before they reach our shores. C-TPAT exemplified a 
true public/private partnership.
    These ideas alone are laudable--but due to the sheer 
magnitude of the challenge of securing the global supply chain, 
we must continue to improve upon these promising initiatives.
    As Chairman of the Permanent Subcommittee on 
Investigations, I have pursued a bicameral and bipartisan 
investigation into supply chain security for almost 3 years. I 
have worked extensively with our Chairman, Chairman Collins, 
and am proud to have several of my findings and recommendations 
included in the GreenLane Maritime Cargo Security Act, which I 
know will be the subject of a hearing next week, and I 
certainly applaud Chairman Collins' leadership on this issue.
    Following our hearing last May and the two excellent GAO 
reports, I was pleased to see CBP and Commissioner Bonner 
acknowledge these findings and work to improve these programs. 
I am pleased to report today that CSI and C-TPAT have made 
substantive progress in the past 10 months, and are well on 
their way to becoming sustainable security programs.
    With that said, considerable work lies ahead. These initial 
programs were only the first step in a constantly evolving 
process. We must urgently move to the next level of security--
especially since trade is only forecast to continue its rapid 
expansion.
    In preparation for this hearing, the Subcommittee wrote an 
extensive report that analyses the global supply chain. The 
Subcommittee staff's findings are troubling. In short, 
America's supply chain security remains vulnerable to the 
proverbial Trojan Horse--America's enemies could compromise the 
global supply chain by smuggling a weapon of mass destruction 
(WMD) or even terrorists, into this country.
    Again, these frightening scenarios are not the work of 
Hollywood writers. Last year, on two separate occasions, dozens 
of Chinese immigrants were smuggled through the Port of Hong 
Kong into Los Angeles using maritime shipping containers. These 
incidents, coupled with similar episodes abroad, demonstrate 
the vulnerability of the global supply chain.
    The 9/11 Commission confirmed these vulnerabilities, 
stating, ``Opportunities to do harm are as great, or greater, 
in maritime or surface transportation.''
    Over the course of its three-year investigation, 
Subcommittee staff has identified numerous weaknesses in 
America's programs that secure the global supply chain. A brief 
overview of these problems illustrates the challenges 
confronting these efforts.

     In CSI, the Subcommittee found that only a de 
minimis number of such high-risk containers are actually 
inspected. In fact, the vast majority of high-risk containers 
are simply not inspected overseas. To make matters worse, the 
U.S. Government has not established minimum standards for these 
inspections.

     The Subcommittee found that an overwhelming 
proportion of participating companies in C-TPAT receive 
benefits prior to having their security profile validated. Only 
27 percent of the participating companies have been subject to 
a validation. Therefore, 73 percent of companies have not been 
subjected to any legitimate, on-site review to ensure that 
their security practices pass muster.

     The targeting system employed by the U.S. 
Government to identify high-risk shipping containers entering 
U.S. ports is largely dependent on what some have phrased ``the 
least reliable'' form of data for targeting purposes, which 
includes cargo manifests and bills of lading. Moreover, the 
Subcommittee has found that this targeting system has never 
been tested or validated, and may not discern actual, realistic 
risks.

    I will certainly speak to Deputy Secretary Jackson about 
that this morning.
    The staff report makes several recommendations to enhance 
CSI, improve C-TPAT, and reform the automated targeting system.
    But I would like to briefly focus on the initiative that I 
personally observed in Hong Kong, and that my two colleagues 
just talked about.
    In December, I traveled to Hong Kong to examine the world's 
largest port. In addition to the impressive CSI team, and 
observing the close relationship between Hong Kong Customs and 
our CBP, I examined a promising screening concept piloted by 
the Hong Kong Container Terminal Operators Association. In Hong 
Kong, containers are screened with both x-ray and radiation 
detection equipment.
    Effectively screening containers with both an x-ray and a 
radiation scan is the only definitive answer to the perplexing, 
and perhaps most important question that we are going to be 
examining today, ``what is in the box?''
    However, in fiscal year 2005, only 0.38 percent of 
containers were screened with a non-intrusive imaging device, 
and only 2.8 percent of containers were screened for radiation 
prior to entering the United States. Overall, CBP screens or 
examines only 5.4 percent of containers with what they call a 
non intrusive imaging (NII) machine, and less than 40 percent 
with radiation portal monitors (RPM). By any standard, any 
test, I believe that this is a failing percentage. We cannot 
afford to fail when it comes to public safety.
    These numbers are low because to date, the Federal 
Government adopted a risk-based approach with the explicit goal 
of screening only high-risk containers.
    Now, while this approach is fundamentally sound, the system 
used to target high-risk containers has yet to be validated or 
proven to accurately identify high-risk containers. Moreover, 
the validity of the intelligence used to enhance this system's 
targeting ability is increasingly in question.
    So I think we need to both enhance our targeting capability 
and use technology to enhance our ability to increase 
inspections, again, without impeding the flow of commerce. I 
believe the Hong Kong concept holds great promise.
    In Hong Kong, this system allows all incoming containers to 
be screened upon entry to the port without impeding the flow of 
commerce. In essence, the terminal operators, a private sector 
entity, have demonstrated that 100 percent screening can be a 
reality. The processes and policies to implement such a system 
are obviously quite significant. However, I believe the 
challenges that remain can be overcome, and I plan to work 
collaboratively with the Department of Homeland Security to 
solve these challenges.
    It is also important to note that screening 100 percent of 
containers does not mean that 100 percent of images will be 
reviewed, or that our current risk-based approach is not the 
right one. This image is merely another piece of information, 
and more importantly, the system ensures that each container is 
screened for radiation, and that is important. In addition, if 
an event does occur, we would have the capability to go back 
and identify the container involved in the incident, and thus 
preserve our trade lines. We cannot afford to shut down all our 
ports and stop global trade, nor can we afford the likely 
outcome of a catastrophic event would have on our supply 
chain--U.S. Government mandated 100 percent screening.
    Implementing this system will add another layer of security 
to the supply chain and demonstrate a true public-private 
partnership. We, the U.S. Government, should embrace this 
private sector initiative that increases our screening ability 
without impeding the flow of commerce. The task is too great 
for government alone. Industry and government need to work 
collaboratively, and move forward on programs and technologies 
to secure trade. Instead of security being a cost of doing 
business, it must become a way of doing business.
    The bottom line is this: We are safer now, we are safer 
today than we were yesterday, but we have to ask the question 
continuously, are we safe enough? The question then becomes: 
How do we get there? In the words of the hockey legend, Wayne 
Gretzky, ``A good hockey player plays where the puck is; a 
great hockey player plays where the puck is going to be.'' In 
other words, we cannot safeguard a post-September 11 America by 
simply using pre-September 11 methods. If we think that 
terrorists are not plotting their next move, then we are 
mistaken. We must find where the gaps are in our Nation's 
homeland security, and close them before an attack happens. 
This is the only way to guarantee our security.
    To move in this direction, we need to implement 100 percent 
screening measures and we need DHS to validate that our 
automated targeting system effectively identifies high-risk 
containers. Currently, about 5 percent of all containers coming 
into the United States are actually inspected. By any test, 
this is a failing percentage, and we cannot afford to fail the 
public when it comes to security. We must secure our supply 
chain before we pay the high price of an attack. And this is 
what we hope to address today.
    Senator Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Mr. Chairman, thank you for all you are 
doing in an area of critical importance to the United States. 
You have focused this Subcommittee's attention on a critical 
national security problem, and the Nation will be more secure 
as a result of your initiative, and we are grateful for it.
    Each year, as I mentioned a moment ago, about 11 million 
shipping containers enter U.S. seaports. Another 11 million 
containers enter the United States by truck, and 2 million by 
rail. Translating that to my home State, each week over 50,000 
commercial trucks carrying containers cross from Canada into 
Michigan. Detroit is the number one entry point in the whole 
country for containers carried on trucks. Port Huron, Michigan 
is the number four entry point in the whole country. The vast 
majority of these containers are never inspected, and the 
challenge facing our country, as the Chairman has outlined, is 
what to do to address the national security threats that are 
posed by these containers.
    The Subcommittee staff has conducted a bipartisan and 
bicameral investigation into U.S. Government programs designed 
to secure the global supply chain. The Subcommittee staff 
report makes recommendations with regard to key security risks 
facing our Nation, including the trash which is coming into the 
United States in containers that cannot be effectively 
examined.
    The Subcommittee staff report confirms that a minimal 
number of containers are currently inspected, either 
domestically or overseas. The Subcommittee report found that 
Customs teams at three ports in France, Japan, and the U.K., 
refer a very low percentage of high-risk shipments for exams.
    Another disturbing finding of the staff report is that the 
automated targeting system, ATS, the backbone of Customs 
security assessments, does not work with any assurance. Customs 
uses ATS to assign a risk score to each shipping container 
bound for the United States. The staff found that the ATS 
scoring system has never been audited or validated to establish 
its effectiveness. Moreover, the data shows that ATS scores 
result in such a large number of containers being designated as 
high risk, that U.S. Customs officials stationed at the CSI 
ports often fail to request that each of the high-risk 
shipments be examined.
    The C-TPAT program presents a different set of problems. C-
TPAT confers a range of benefits on participants, many of which 
result in faster shipments for them. When C-TPAT first started, 
it conferred these benefits on all participating importers 
immediately upon receiving their application to join the 
program and prior to ensuring that the participant was meeting 
the program security standards. After the Subcommittee hearing 
in May 2005 questioned that approach, Customs changed its 
practice. Customs now reviews the security information of a C-
TPAT applicant before allowing the applicant into the first 
tier of the program, which is an important change in the 
program.
    The Subcommittee staff also notes, however, that the 
validation process being used by Customs examines only one 
supply chain for each program participant, even for companies 
that use multiple supply chains. To get a more realistic 
analysis of each participant's security practices, the 
Subcommittee report recommends that Customs examine more than 
one supply chain at more than one supply point.
    As I mentioned, the Subcommittee report also addresses a 
key security issue which affects my home State of Michigan and 
a number of other States, which is the importation of 
containers carrying trash. Since 1998 Canada has shipped 
hundreds of thousands of trash containers across U.S. borders. 
According to the Department of Homeland Security's Inspector 
General's Office, in 2004 alone, Canada shipped approximately 
100,000 containers of trash into Michigan. In addition, another 
10,000 containers of trash crossed through nine other ports of 
entry on both the northern and the southern borders. During 
that period, Customs officials uncovered a number of instances 
in which Canadian trash containers carried more than just trash 
into the United States. The Inspector General has determined 
that from 2003 to 2004, Canadian trash containers brought into 
the United States illegal drugs, medical waste, and illegal 
currency.
    Trash containers pose inherent difficulties in terms of 
supply chain security because it is difficult to trace the 
source and content of trash cargoes with any confidence. Even a 
trash importer with the best intentions is unable to monitor 
what is being transported in particular trash containers. The 
result is an unreadable x-ray scan, and I put a copy of that x-
ray scan up on that chart over there, and you can see that it 
is unreadable because of the density of the cargo and its lack 
of uniform content. With other cargoes it is possible to know 
the content and to trace the origin, midpoint and ending point 
of the journey of the cargo, and then to take steps to monitor 
and ensure the security of the supply chain. Until a similar 
system is established for the supply chain of trash importers, 
the Department of Homeland Security must take additional 
precautions before allowing trash containers to enter the 
United States, and until those precautions are taken and shown 
to be effective, we ought to end the importation of Canadian 
trash. They've got plenty of room to bury their own trash.
    We should not be accepting any security risk to import 
Canadian trash. Current technology, as I indicated, cannot 
produce a usable x-ray image of a trash cargo because of the 
density and anomalous nature of that cargo. While other 
material such as concrete or bricks are equally as dense, they 
are uniform, and therefore, readily inspectable, and also, 
those products contribute positively to our economy. Their 
introduction into the flow of commerce provides building 
materials, helps create new jobs. Concrete and bricks pose 
lower security risks, since unlike trash, their supply chains 
can be monitored and made secure. In contrast, Customs would 
likely show that the security risk of trash and the cost 
associated with reducing that risk far outweigh any conceivable 
economic benefit.
    A few years ago, Mr. Chairman, as you know--and you have 
been extremely helpful on this issue and we appreciate it--the 
security problems associated with trash containers crossing 
U.S. borders without effective screening technology, led me, 
along with Senator Stabenow and Congressman John Dingell, to 
ask the Department of Homeland Security's Inspector General's 
Office to review the effectiveness of the screening methods. 
The Inspector General's disturbing report, released in January 
of this year in an official-use-only version, identifies flaws 
and vulnerabilities with current methods to screen containers 
entering the United States.
    The Subcommittee, in its report, has decided to release 
other official-use-only material today, and the report that I 
just referred to by the Inspector General should now also be 
made available, and I intend to do so.\1\
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    \1\ See Exhibit 16 which appears in the Appendix on page 491.
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    The Department of Homeland Security's Inspector General 
noted that improvements need to be made in the inspection 
process, and that the Commissioner should conduct a risk 
analysis and develop minimum requirements for selecting and 
inspecting trucks carrying trash.
    Based on its investigation, the Subcommittee staff report 
makes the following recommendations, which I strongly endorse. 
Ban trash imports. Until it can be ensured that the supply 
chain of a trash importer is secure, we should not allow trash 
containers to enter the United States. The DHS should 
immediately adopt the Inspector General's recommendations to 
conduct a risk analysis, develop minimum requirements for 
selecting and inspecting trucks carrying Canadian trash if they 
are going to ever be allowed. Until these steps are taken and 
we have total confidence in the security of these containers, 
they should not be allowed. In the meantime, we ought to have 
an immediate moratorium on allowing trash containers into the 
United States.
    I thank the Chairman for all he has done to direct the 
staff of the Subcommittee to look at all of the problems in 
this report, particularly for the one which I have just spent a 
few moments on, which represents an unusual and particular 
security risk to the United States, which is the import of 
Canadian trash. Again, thank you for your leadership, Mr. 
Chairman, and I have reduced, believe it or not, the length of 
this statement, and I would ask that the full statement be 
incorporated in the record.
    Senator Coleman. Without objection.
    [The prepared statement of Senator Levin follows:]

                  PREPARED STATEMENT OF SENATOR LEVIN

    Each year, about 11 million shipping containers enter U.S. sea 
ports, another 11 million containers enter the United States by truck, 
and another 2 million by rail. Each week, 52,000 commercial trucks 
carrying containers cross from Canada into Michigan. Detroit is the 
number one entry point in the whole country for containers carried on 
trucks; Port Huron is the number four entry point. The vast majority of 
these containers are never physically inspected. The challenge facing 
our country is what to do to address the national security threats 
posed by these containers.
    The Chairman is to be commended for focusing this Subcommittee's 
attention on this critical national security problem. The hearing held 
earlier this week concentrated on the specific problem of stopping the 
illegal transport of nuclear and radiological materials across U.S. 
borders. Today's hearing focuses on the two key programs which, in the 
words of the Customs and Border Protection of the Department of 
Homeland Security, are designed to ``push out our borders'' and inspect 
containers before they reach our shores. These programs are the 
Container Security Initiative (CSI) and the Customs Trade Partnership 
Against Terrorism (C-TPAT). Both programs were the subject of a 
Subcommittee hearing last year. Today's hearing and Subcommittee staff 
report continue that oversight effort.
    The Subcommittee staff has conducted a bipartisan and bicameral 
investigation into U.S. government programs designed to secure the 
global supply chain. The Subcommittee's three year investigation has 
included document requests and letters from the Subcommittee, staff 
assessments of ten ports, and numerous meetings with both foreign and 
agency officials. The report released today identifies improvements 
needed in the key Customs programs, to address such problems as low 
inspection rates of high risk containers, the security of shippers' 
supply chains, and the effectiveness of the Automated Targeting System 
(ATS) used to identify high-risk containers. The Subcommittee staff 
report also makes recommendations with regard to a key security risk 
facing our nation: trash coming into the U.S. in containers that are 
not effectively examined.
    The Subcommittee staff report confirms that a minimal number of 
containers are currently inpsected either domestically or overseas. At 
foreign CSI ports, 0.38% of containers were screened with either x-ray 
equipment or a physical exam, and only 2.8% of containers were screened 
with a radiation portal monitor. When U.S. and overseas data are 
combined, the data shows that Customs examines just 5.4% of containers 
either physically or with an x-ray, and uses a radiation portal monitor 
to screen less than 40% of incoming cargos. The Subcommittee report 
found that Customs teams at 3 ports (France, Japan, and the U.K) 
referred a disturbingly low percentage of high risk shipments for 
examinations.
    Another disturbing finding of the staff report is that the 
Automated Targeting System (ATS), the backbone of Customs' security 
assessments, does not work as it should. Customs uses ATS to assign a 
risk score to each shipping container bound for the United States. The 
Subcommittee staff found that the ATS scoring system has never been 
audited or validated to establish its effectiveness. Moreover, the data 
shows that ATS scores result in such a large number of containers being 
designated as high risk, that U.S. Customs officials stationed at CSI 
ports often fail to request that each of the high-risk shipments be 
examined. If ATS designations are identifying too many containers for 
examination and U.S. Customs officials using the system are forced to 
apply their own criteria to select which cargos should actually be 
inspected at foreign ports, the current ATS is not functioning as 
intended. It needs to be either immediately refined or replaced since 
it is the backbone of the system.
    The C-TPAT program presents a different set of problems. C-TPAT 
confers a range of benefits on participants, many of which result in 
faster shipments. When C-TPAT first started, it conferred these 
benefits on all participating importers immediately upon receiving 
their application to join the program, and prior to ensuring the 
participant was meeting the program's security standards. After the 
Subcommittee hearing in May questioned this approach, Customs changed 
its practice. Customs now reviews the security information of a C-TPAT 
applicant before allowing the applicant into the first ``tier'' of the 
program, which is an important improvement. The Subcommittee staff 
report also notes, however, that the validation process being used by 
Customs examines only one supply chain for each program participant, 
even for companies that use multiple supply chains. To get a more 
realistic analysis of each participant's security practices, the 
Subcommittee report recommends that Customs examine more than one 
supply chain at more than one supply point.
    The Subcommittee staff report also addresses a key security issue 
affecting my home state of Michigan, the importation of containers 
carrying trash. Since 1998, Canada has shipped hundreds of thousands of 
trash containers across U.S. borders. According to the Department of 
Homeland Security Inspector General's office, in 2004 alone, Canada 
shipped approximately 100,000 containers of trash into Michigan, an 8 
percent increase over 2003. In addition, another 10,000 containers of 
trash crossed through 9 other ports of entry on both the Northern and 
Southern borders. During that period, U.S. Customs officials have 
uncovered a number of instances in which Canadian trash containers 
carried more than just trash into the United States. In fact, the DHS 
Inspector General has determined that, from 2003 to 2004, Canadian 
trash containers have brought into the United States illegal drugs, 
medical waste, and illegal currency.
    Trash containers pose inherent difficulties in terms of supply 
chain security, because it is difficult to trace the source and content 
of trash cargos with any confidence. Even a trash importer with the 
best intentions is unable to monitor what is being transported in 
particular trash containers each day. With other cargoes, it is 
possible to know the content and to trace the origin, mid-course and 
ending point of the journey of the cargo, and then to take steps to 
monitor and ensure the security of the supply chain. Until a similar 
system is established for the supply chain of trash importers, DHS must 
take additional security precautions before allowing trash containers 
to enter the United States.
    In addition, current technology cannot produce useable x-ray images 
of a trash cargo, due to its density and lack of uniform content. This 
chart shows the x-ray image produced by a trash container at a Michigan 
border crossing. While other materials, such as concrete or bricks, are 
equally as dense, they are uniform and easily inspected. These products 
also contribute positively to the U.S. economy. Their introduction into 
the flow of commerce, for example, provides building materials and 
helps create new jobs. Concrete and bricks also pose lower security 
risks, since, unlike trash, their supply chains can be more easily 
monitored and made secure. In contrast, the security risk of trash 
cargos and the costs associated with reducing that risk far outweigh 
any conceivable economic benefit.
    Two years ago, the security problems associated with trash 
containers crossing U.S. borders without effective screening technology 
led me, along with Senator Debbie Stabenow, and Congressman John 
Dingell, to ask the DHS Inspector General's office to review the 
effectiveness of Customs' screening methods. The Inspector General's 
disturbing report, released in January of this year in an ``official 
use only'' version, identifies flaws and vulnerabilities associated 
with current methods to screen containers entering the United States. 
The Subcommittee has decided to release other official use material 
today; this report should also be made available.
    Based upon its investigation, the Subcommittee staff report makes 
the following recommendations, all of which I strongly endorse:

      Ban Trash Imports. Until U.S. Customs can ensure that the 
supply chain of a trash importer is secure and develops protocols 
ensuring adequate inspection of trash containers, Customs should not 
allow trash containers to enter the United States.

      Adopt Moratorium. Banning trash imports is the right 
answer to protect U.S. security. If a ban is not imposed, at a minimum, 
DHS should immediately adopt the DHS Inspector General's recommendation 
to conduct a risk analysis and develop minimum requirements for 
selecting and inspecting Canadian trash containers. Until those steps 
are taken, Customs should place a moratorium on allowing trash 
containers into the United States.

      Impose inspection Fees. If a trash import ban is not 
imposed, Congress should enact into law the provisions recently adopted 
by the U.S. Senate to impose a fee on international shipments of trash 
to pay for a more rigorous inspection regime to protect U.S. citizens 
from security risks currently associated with trash containers.
    I thank the Chairman for taking a close look at the problem of 
Canadian trash being imported into this country. As the DHS Inspector 
General has pointed out, it is a serious security risk for the country. 
I also commend the Chairman for his leadership in tackling the complex 
national security threats associated with container security in 
general.

    Senator Coleman. Senator Levin, I want to thank you for 
your focus on this overall issue, but in particular, the laser-
like focus you have put on this trash issue. I think that is 
what is needed if we are going to affect change. If we are 
going to make something happen, you need that. I want to pledge 
my continued cooperation and assistance because you are trying 
to do the right thing. So I want to thank you.
    Senator Levin. Thank you, Mr. Chairman.
    Senator Coleman. I would like to welcome the Hon. Michael 
P. Jackson, Deputy Secretary at the Department of Homeland 
Security. Mr. Jackson, I sincerely appreciate your being with 
the Subcommittee this morning, and look forward to hearing your 
testimony on DHS's efforts to bolster our supply chain 
security. As you are aware, pursuant to Rule 6, all witnesses 
before this Subcommittee are required to be sworn. I ask you to 
please stand now and raise your right hand.
    Do you swear the testimony you are about to give before 
this Subcommittee is the truth, the whole truth, and nothing 
but the truth, to help you, God?
    Mr. Jackson. I do.
    Senator Coleman. Thank you. I just want to say one thing, 
Mr. Jackson. I really do appreciate you being here. I know the 
full Committee will be having a hearing on the GreenLane bill 
that Chairman Collins has authored and you will be 
participating in that hearing. Our job is to do oversight, and 
I indicated early on--and I have been involved in this for a 
while now--we are safer today than we were on September 11, we 
are safer today than we were yesterday. But the reality is, the 
nature of this issue is such that we cannot rest on our 
laurels, and so our job is to keep looking at the soft 
underbelly. If you just look by way of example at what is 
happening in Iraq with IEDs, it is almost a cat and mouse game. 
We get a little better and they get a little better. I think it 
would be a great mistake for us to assume that somehow they are 
not getting better, that they are not seeing what we are doing, 
and so that is the challenge and the purpose of what we are 
doing here today.
    I do want to thank you because you have been very helpful, 
and it is much appreciated by this Subcommittee.

     TESTIMONY OF MICHAEL P. JACKSON,\1\ DEPUTY SECRETARY, 
                DEPARTMENT OF HOMELAND SECURITY

    Mr. Jackson. Mr. Chairman, thank you for having me, and, 
Senator Levin, thank you for being here and for having me as 
well. I am very grateful for the work of this Subcommittee and 
very respectful of the work of this Subcommittee, and I am 
delighted to be here to help you understand that DHS is very 
much focused on the issues that you have been focused on.
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    \1\ The prepared statement of Mr. Jackson appears in the Appendix 
on page 181.
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    Secretary Chertoff has repeatedly spoken about the 
importance of risk-based analysis. In our world we have to find 
the highest risks and apply prudential balance. As you said in 
your opening remarks, Mr. Chairman, that we have a balance 
between security and mobility. We can make a better balance. We 
can have better security. We can make that equation iteratively 
stronger, and that is exactly what our commitment to do is.
    I want to assure you that just as this Subcommittee has 
been focused on that matter, so to is the Department. I am 
going to tell you that I personally am committed to imposing a 
sense of urgency and supporting a sense of urgency about these 
matters, just as your Subcommittee work has done for us as 
well.
    I will not try to go over a lot of facts and figures to 
reiterate what you have said, which is an important point. We 
have made transformational change in the security of the global 
supply chain in our Maritime World Security Program since 
September 11. We will spend this year at the Department of 
Homeland Security approximately $2.6 billion on maritime 
security efforts across the Department. If the President's 
fiscal year 2007 budget is enacted, we will have spent some 
$9.6 billion in this area in 4 years, fiscal year 2004 to 2007.
    Earlier this week colleagues of mine from the Department, 
and from the Department of Energy, talked in more detail about 
some of the programs that you have already raised, and I shall 
not repeat the testimony there. I will try to supplement that.
    What I will say is this really is an alignment. We need you 
and your strong report, Republicans and Democrats together with 
the Administration, to strengthen security on a continuous 
improvement basis. We also need our partners in the private 
sector to do just that too, and I am very grateful--you will 
hear from several of them today, and I am very grateful for the 
role that they have played, especially since September 11, in 
helping us do this transformational work in the marine world. 
So there is lots to do still, lots to do that we can do. In 
fact, we must be institutionally disciplined, just as you said, 
to keep this focus one step ahead of the bad guys. The area 
that we are focused in the maritime domain on most 
particularly, most urgently, is, of course, the weapons of mass 
destruction and preventing weapons of mass destruction from 
being intruded into the country from the maritime domain.
    Our approach to security is a layered and evolving and 
continuously strengthening system. It is layered in ways that 
help us collectively through multiple mutually reinforcing 
tools diminish the risk that we associate with any specific 
failure at a specific point. So if you look at one layer, that 
is not the measure of how we can collectively bring security to 
the system. We got to take each of the weakest links in our 
layers and strengthen each of them iteratively, but we have to 
step back a little bit, and that is where I am going to try to 
talk today mostly, and say, where are the layers that need the 
most focus? What is it that we have that we can improve 
slightly to good advantage, and where do we have to dig deeper 
and really make more fundamental change?
    It begs the obvious, but it is worth stating that this 
system we are talking about is a global system, and it is one 
that is driving our interdependent global economy. So what we 
have to do here requires the cooperation of multilateral 
government-to-government conversations. It requires the 
cooperation of domestic and foreign corporations. It requires 
the cooperation of technology partners to make the systems and 
tools that we will be talking about.
    With whom should we partner and how? A fair question. But 
there is no question that we do have to make these partnerships 
with the private sector particularly in this global maritime 
domain.
    Some of the first generation of layered security will give 
way to second generation tools. We will be able, in effect, to 
stand down certain type of tools and replace them with wholly 
new tools, and some of these tools will be iteratively 
strengthened in essentially the same groove, in essentially the 
same pattern, in essentially the same mode.
    Let me just try to put into context where I would like to 
drive by trying to outline eight buckets of activity that we 
need to think about. Essentially, to outline our security there 
are four major moving parts or four components to our layered 
security: Vessel security, personal security, cargo security, 
and port facility security. So those four layer areas, we have 
programs in each. Then you have to divide it foreign and 
domestic. I think Rob Bonner was masterful at pushing the 
borders out early after September 11. I was at the time Deputy 
Secretary of the Transportation Department, and admired Rob's 
work, and having come to the Department of Homeland Security, I 
have enjoyed the benefit of the work that CBP has done in this 
area, and the Coast Guard has done in this area.
    Most of the Federal programs in these eight buckets then 
can be clumped in some way or another. I would like to focus 
today on two particular areas that present significant 
opportunities for improving security. First, improvement 
regarding DHS's targeting of containers of highest risk, and 
second, related to this in this first bucket, tools to inspect 
containers, so improvement of the targeting, and improvement of 
the tools used to inspect.
    And then a second area, I would like to talk for a bit just 
about deployment of the Transportation Worker Identification 
Card, the TWIC card. Both of these tools are areas I think of 
high opportunity for us.
    Securing our borders requires us to dig deeper into what 
the Secretary is calling Secure Freight Initiative, which is an 
opportunity to look not only at better targeting, but enhanced 
inspection tools. CBP's automated targeting system is probably 
more effective than it gets credit for, and I am not so 
disappointed in that because all of the nuances of the system 
are not public matter. The components of it are a complex 
series of algorithms designed to help us select containers of 
high risk, and it includes data that is fed to us, essentially 
scraped electronically from the waybill, and also a large 
history file that allows us to pull up our inspections, our 
history of movements of individuals who are moving containers 
into the country. So these two parts of the ATS system are what 
makes it work.
    Now, I want to say this is a first generation tool. Here is 
an area where we need a second generation tool, and if I could, 
I would just like to outline an idea that we are aggressively 
pursuing at DHS on what a Secure Freight Initiative might look 
like to help us dig deeper and plumb more sophisticated ways to 
get better targeting information, to enhance the ATS 
capabilities.
    The supply chain is riddled with data about the pre-history 
of any inbound container movement that we do not collect. We 
have no visibility into them we can't manage. It is resident 
not only in the ocean carriers, but in everyone who has touched 
a particular movement, the pre-history of that movement. In a 
short nutshell summary, what I think we need to do is mine that 
pre-history of every container movement to the maximum extent 
that is prudent and possible and that can be harmonized with 
the art of what works without imposing excessive burden, but we 
can do better. From the time an order is placed, the 
fulfillment of the order takes place and a container is sealed. 
It moves through the supply chain with intermodal movement, 
truckers, customs brokers, others having information about 
this. We can find a model I think to gather this, plus the 
waybill information that we currently have, and get a much 
richer pattern analysis for our targeting, our profiling of 
this container.
    How would we do this in a global environment? I think what 
we have to do is look for a fundamentally different layer or 
business model on top of what we have. Let me try to describe 
it this way. If I can take on my left hand, and say, here are 
the governments, not just our government that needs this data, 
but I would argue that all governments that are involved in the 
international supply chain, moving containers across the globe. 
They need information about the security and a better knowledge 
of what is in them. On my right hand we have all the actors who 
touch this, essentially all private sector entities, some of 
whom are directly regulated by us, and others with whom I 
believe could be indirectly brought into an appropriate mix.
    What I think we need is some intermediary institution, 
which I would like to see the industry work with the government 
to help create. I would be happy for DHS, and we will step 
forward and fund methods that would create such intermediary 
institutions, the hardware, the software, the institutional 
tools necessary to do this. But this data repository or data 
fusion center could gather information about movements in the 
global supply chain, and then could direct them to the 
government that needs that information. In effect, the data 
warehouse becomes a repository for information, and the 
government has a call upon that repository and drives that data 
in a real-time way into its own risk profiling analysis.
    I have talked to multiple governments in the last 9 months 
about their interest in helping us try to find a more globally 
based and industry-centric partnered way to manage this data 
aggregation infusion. I believe there is strong interest in 
several of our strong partners involved in supply chain 
security to experiment in this area. I believe that industry 
can be helped to build this type of functionality. It cannot be 
done overnight. We cannot be too excessive or draconian in what 
we ask for. We have to work through issues about preservation 
of the privacy of confidential business information. We have to 
ask for what is reasonable. We have to look for what is 
possible, but what is reasonable and what is possible in the 
richness and density of this information will change and grow 
over time, and we need a new system, a more global system and a 
somewhat more powerful business model, I believe, to do that, 
just to do that.
    So when your Subcommittee staff appropriately looked at 
ATS, the punch line was, we need better, stronger. I am in 
agreement with that. CBP is in agreement with that. Secretary 
Chertoff is in agreement with that.
    What we would like to suggest that this concept of secure 
freight can help create a much more powerful multiplier that 
takes the information, flows it into our ATS systems ultimately 
for the pattern analysis work that we would do, but can more 
powerfully and more quickly, honestly fuse this data.
    Let me just say one thing about technology. There is 
nothing in what I have just described that is technologically 
impossible. The U.S. Government, however, is not the world's 
best technology integrator. What we need to do is find ways to 
work with the private sector to create a more nimble, more 
market-driven capability to do the initial aggregation. We 
would have to sit there with them side-by-side with government 
people, ideally with a multilateral team of auditors, 
inspectors and helpers. But we can, I think, with the proper 
incentives and support, financial and otherwise, create this 
capacity that just does not exist, and it will not take our 
lifetime to make this happen.
    Let me switch to a second part of the secure freight idea, 
and it is this powerful idea that, Mr. Chairman, you have seen, 
and that your two colleagues spoke about eloquently this 
morning, of the pilot in Hong Kong. This week, Secretary 
Chertoff is in Hong Kong to look at this pilot himself, to kick 
the tires on it. But I would tell you, after extensive 
discussions with industry about the ICIS pilot and its 
underlying technology, and its underlying business concepts, 
that I find myself highly optimistic that this pilot can point 
the way to a collaborative network that can significantly 
enhance CBP's capability physically to inspect a large number 
of containers from points worldwide.
    Again, I think this needs a little unpacking, so if I could 
take this one just one more layer. We should not either overly 
praise what is there, not ignore the fantastic opportunity that 
is in front of us. On the one hand this is a pilot. The data is 
not being used, as I understand it, operationally to manage 
security in the work stream that is existing right now. It 
offers tremendous promise to do exactly that, and after 
consultations on this topic, CBP has begun the comprehensive 
review of a large brace of this data to try to integrate this 
to our own targeting information, our own profiling information 
through the ATS system. So we will be able to say, here is a 
container of high risk. Let's look at these images. Let's see 
if this helps reconcile it or if it gives greater concern, and 
then we have to drive protocols that would allow us to inspect 
the things that need inspecting in a more physical and labor-
intensive inspection.
    But right now let's make no mistake, this is not an 
operational security tool. It is, however, I think, a 
transformation demonstration of the industry's commitment to 
put their own dollars to bear on improving security. They have 
agreed in Hong Kong to tax themselves for the purpose of 
improving security, and we should praise this and partner with 
these types of opportunities to take this type of system and 
make it an operationally more aggressive and solid tool.
    I agree with what has been said. There are some export 
control issues why we might not want to put all of our 
technology abroad in the world, but most sensitive parts of 
that have to do with the screening algorithms, the software. If 
we, in effect, globally network the images, as Senator Schumer 
was discussing earlier, we could keep the software, the 
analytical tools, protected appropriately, and do a much more 
substantial look at all of the high-profile containers with 
this type of additional tool. We could also randomly inspect 
more containers, and we could, obviously, and would want to, 
reconcile any alarm from a radiation monitor.
    Right now the alarm is, in effect, turned off. It gathers 
data, but it shows no real-time alarm for us to reconcile. So 
we want to take what is very strong here, which I think is the 
industry's commitment to spend, their willingness to improve, 
their desire to partner with us, in fact, their--I am going to 
say--their aggressive creativity in putting together an 
opportunity like this. We have had some very substantial 
conversations with industry. I just report to you that after 
the Secretary gets back, we intend to try to bring this to a 
focus and see a path ahead. It is an area where we would want 
to come back to this Subcommittee over time, and work with you 
on exactly how we see that path unfolding.
    I would just conclude with saying one quick thing about 
TWIC. If we talk about containers, and we talk about the port 
physical security, we talk about the vessels, we talk about the 
people, in the area of the personnel, we have to implement the 
Transportation Worker Identification Card program. It is too 
late, we have dithered too long. And I am here today to tell 
you that on Friday of this week, the Transportation Security 
Administration will publish a request for qualifications, 
seeking firms who are appropriately experienced and interested, 
to help us deploy certain components of the TWIC Program. This 
step tomorrow will be the first step towards operational 
deployment of the TWIC program as contemplated by Congress and 
contemplated by our Department. This deployment will include 
accelerated and parallel rulemaking work both by TSA and the 
Coast Guard, and it will include a procurement needed to help 
launch the operational program.
    Secretary Chertoff has instructed his team to get this done 
as quickly as possible, and I can tell you personally that the 
pedal is pressing the metal.
    Further details will be forthcoming as part of the 
rulemaking and procurement action, but this tool will add a 
valuable layer to our security needs.
    I think I will stop there. I apologize for the length of my 
opening remarks, but I am grateful for the opportunity to have 
this dialogue with you.
    Senator Coleman. Thanks, Secretary Jackson. I am actually 
uplifted to hear of the forward movement on the Transportation 
Worker ID Program. One of the great concerns I have is the 
current situation today where we do not know who is handling 
the product, and I think we are perhaps uneven in that 
situation, perhaps on the East Coast a little better than the 
West Coast, whatever it is, but this is an area in which we 
have to move forward. It is critically important. We can have 
the tightest global supply chain, and yet when the cargo is in 
our ports and we do not have clear control of who is there and 
who is picking it up and what they are doing with it, that 
entire system, it is only as strong as the weakest link. And 
what you have identified is a weak link, and so I find it 
gratifying to hear that the pedal is to the metal on that one, 
and moving forward.
    Let me just briefly talk, if I can, about the ICIS Hong 
Kong system. I want to make it clear, I do not think this is 
the cure-all, the silver bullet. I have no interest in ICIS. I 
am not sure if any parts are made in my State. I do not think 
so. It just seems to me that the challenge I have is when my 
constituents ask, is it technologically feasible, to have all 
cargo containers run through a radiation portal monitor. When 
my constituents ask that and I say, yes, and in fact, we do it 
in one place in the world, but we do not do it here, that is 
not a good answer.
    So I look at this as being partners. You have done a very 
good job of really talking about the layers and this is not 
being used operationally. In fact, Senator Schumer said the 
system runs so quick as those containers go through as they are 
entering the Hong Kong Port, we are not checking each and every 
one of them. We have the image. We are seeing it going through 
a radiation portal monitor, which by the way, we do radiation 
portal monitoring of every car going through the San Ysidro 
land border crossing, about 50,000 cars a day in our land 
border crossings.
    Mr. Jackson. Yes.
    Senator Coleman. So it appears to me that we know we can do 
it, so let's figure out how to do it quickly. That is my--you 
can see my colleagues, their reaction. So when you say highly 
optimistic, the way I understand it, I do not think any of us 
are saying this is the system and we need to implement this and 
it is going to solve all our problems. There are still a number 
of issues in the supply chain. But again, we have checked, in 
effect, 100 percent screening, and perhaps more important is 
that it is happening over there. That is another concern. If we 
screen it here and, God forbid, we even get it here and a 
device goes off here, it is still going to shut down our ports.
    Mr. Jackson. Yes.
    Senator Coleman. On the other hand, we need to--and I think 
the genius of what CSI is about and C-TPAT is about is we have 
pushed our borders out. So I hope then, and what I am hearing, 
is certainly a willingness and a commitment to look at all of 
these options.
    The fundamental underpinning of this is ATS, the system 
that we use to identify high risk shipments. Our report raises 
a number of issues, and you just touched upon some today. 
Clearly, we have to strengthen this system. A concern that what 
we have right now is we have bills of lading and manifest 
data--and I think it would be fair to say, even you said, that 
is not the best data. There is a lot of stuff that goes on 
before that we just do not know about.
    I take it that it is technologically feasible today, from 
the time something is manufactured, let's say Target or Best 
Buy has a facility somewhere in China. They can put it in a 
container there, and I take it we have the technology today to 
determine whether that container is ever opened. Is that fair?
    Mr. Jackson. I don't think there is a production technology 
that has reliably demonstrated that container has not been 
penetrated. There are technologies that have been focused on 
the doors. There have been technologies focused on the seals 
alone, but, frankly, you can pop the doors by the hinges, or 
you can drill a hole into a container. So what we are driving 
towards, where we have to be, is all six sides penetration 
monitoring and exception reporting, which could be real time. 
That is not Buck Rogers really, but it is not on the shelf 
today in a way that the industry would find, I think, something 
they would think is commercially viable.
    Senator Coleman. I need to understand this because I do not 
want the good to be the enemy of the perfect right here.
    Mr. Jackson. Right.
    Senator Coleman. The whole range of technology that allow 
us to say whether something has been entered. There is GPS to 
tell us where something is, whether it has moved outside. In 
fact, I just have to say that one of my frustrations on this 
Subcommittee when we were looking at Katrina is the government 
folks are saying things were lost in the supply chain. FedEx 
does not tell us that. So are we hesitant to move forward 
because we do not have a perfect system at this point in time?
    Mr. Jackson. No, I don't think it's that. I think our S&T 
Division is, at DHS, doing some extensive scientific and 
operational testing of these types of technology. The industry 
itself is doing that work as well. I think the component parts 
of the technology solution can be assembled, and then what you 
are talking about is a networked solution. It's a very 
intensive capital investment to create the networked solution. 
Without the network, you don't have the useful data in a time 
sensitive fashion, it is not as strong. So how you aggregate 
the technology, how you network the data feed, how you build it 
into an operational paradigm that makes a difference, these are 
all the component parts that have to be stitched together.
    But I don't think it is unreasonable for you to press on 
this area, and we're pressing ourselves in this area.
    Senator Coleman. One of the concerns we have about the 
targeting system is some would say that it hasn't been fully 
tested. We haven't done a red team test and tried to find a 
hole in the system, which is what we did with the GAO report, 
and smuggled two dirty bombs into the country. Can you give me 
a sense of your confidence in ATS today, and whether in fact we 
are in the process of doing the kind of testing that would at 
least raise the confidence level of some of us on this side of 
the bench?
    Mr. Jackson. It's our job to help you raise your confidence 
level, and we want to give you the information to do so, and we 
want to make a system that will make you feel like it is 
something that is as good as it can be.
    I believe it is a strong and powerful tool. I do not 
believe it is a perfect tool. It is transformationally better 
than what we had on September 11, and I believe to take it to 
the next step, you can work in two grooves. You can work to do 
the type of peer review, peer analysis that you have called 
for, and which our Inspector General has suggested. We are 
doing that. We have a firm--I think your staff has been 
briefed--that is under way with just such an effort today.
    The idea of red teaming, that is an inherently solid thing 
that ought to be part of our ConOPS for all of our modes in 
transportation security. So we are doing more there. We can 
take that tool and make it stronger.
    What I was saying earlier about secure freight is that 
there are inherent limitations if we limit ourselves to the 
data that comes in by virtue of just a waybill. When you make 
that move from gathering just this data, which is readily 
available and electronically submitted, to fusing data from 
multiple other vendors, you have to take a different step, and 
I think, take on a different business model. Again, I do not 
think that this is something that is out of the realm of 
possibility in the near term to make real. I want to be able to 
say when I have left my job in 3 years, that we left this 
system behind, it is working, it is humming, it has made a big 
difference.
    So that's the sort of timeframe, in my mind, that I think 
we should be thinking. It's not decades to do this. It won't be 
months, but it's not forever.
    Senator Coleman. Let me just follow up with this question 
about my firm belief that we have to do the inspection before 
it reaches our shore. I have a chart here that we used the 
other day. This chart shows out of all the targeted containers 
\1\--we identify through ATS-containers that are high risk, we 
then make requests to have them examined, and then we get a 
percentage of those requests complied with, higher in some 
areas such as Hong Kong, less as in other areas like LeHavre, 
France. What can we be doing to make sure that when we request 
a container be inspected, that the host government, the host 
country, do the inspection?
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    \1\ See Exhibit 7 which appears in the Appendix on page 371.
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    Mr. Jackson. I think we just have to be very firm. What I 
was told about this particular set of data is that we have made 
progress on the two bars that are lower on that chart since 
that data point was taken. But, again, this is something we 
just have to work on a case-by-case basis with each government. 
We have to show them that this is a compelling priority for us, 
and it's not going to be easy in every circumstance, but I 
think we have to be determined, and we can.
    We will use multiple ways to help make that work. The 
Megaports Initiative puts technology overseas to help in some 
of these cases. Our own people there, deployed in the right 
way, can make a big difference. It is a partnership, and like 
all young partnerships, this one is still evolving, but I think 
growing stronger, and to me, is an impressive foundation.
    Senator Coleman. Thank you, Mr. Secretary. Senator Levin.
    Senator Levin. Thank you, Mr. Chairman. Thank you, 
Secretary.
    Mr. Jackson. Yes, sir.
    Senator Levin. I want to just pick up where the Chairman 
left off in terms of the requests that are made to foreign 
governments. You say we have to show them a compelling reason 
for them to carry out the kind of inspections or the need for 
that. Why is that not automatic? Why do we have to ask them 
anything? We just tell them we are not going to accept the 
container.
    Mr. Jackson. We can do that, and that is the ultimate 
lever, and I believe we should be absolutely willing to drop 
that lever.
    Senator Levin. Is there a reluctance to just say, ``Unless 
you folks carry out these kinds of inspections, that we are 
just not going to allow it in?''
    Mr. Jackson. No, I don't think there is a reluctance. There 
is not an institutional instruction order or demand that that 
not happen. In fact, I would say there is some strong 
leadership incentive to say, ``We've got a 24-hour rule. It's 
working. Don't load.'' So I believe we can do more of that.
    Senator Levin. I am not satisfied with that answer. It 
seems to me it ought to be an automatic, just simply say--let 
me go to Tokyo, let me just give you the numbers in Tokyo. I do 
not know if that is on the Chairman's chart or not, but in any 
event, let me use these numbers. It is kind of hard to follow 
them without them being on a chart, but here goes. Our 
automatic targeting system identified 5,600 high-risk 
containers at the Port of Tokyo. This is from February 2005 to 
February 2006, 477 exams were requested by the CSI personnel, 
and then 430 exams were conducted by Tokyo officials, so about 
10 percent of them, roughly, were not examined.
    Now, first of all, I am not sure I followed your answer as 
to why it is after we identify 5,600 high-risk containers, 
there is only about 9 percent that lead to a request for an 
exam. I did not quite follow your answer on that one. Maybe I 
ought to ask you that one first and then lead up to the fact 
that the Tokyo officials did not carry out the exams on 10 
percent after we requested them to do so.
    Mr. Jackson. Let me start with one point that I think is 
most important, which is all of the containers that are 
identified as high-priority containers will be----
    Senator Levin. Is that the same as high risk?
    Mr. Jackson. High risk, yes, sir, sorry. High risk--you 
actually have the nomenclature right, I didn't--will be 
inspected either abroad or in the home port at home when it 
arrives.
    I agree, and we all agree, that it is better to push as 
much of that out as far as possible. I'm going to have to just 
tell you that we actually do that screening inspection for all 
of the ones that are the high-priority containers.
    Your question, it is a good question, is a fair question, 
it is an operationally important question, is how do we get it 
pushed out farther?
    Senator Levin. No, that is not my question, but let's go 
back to what you said. How do you know that all of those 
containers are in fact inspected when they get here?
    Mr. Jackson. They track each of these, and they reconcile 
them through CBP, and they keep records of--there's a score on 
the algorithm, and when that score is triggered, those 
containers are targeted for inspection and must be inspected. 
We inspect 100 percent of all those high-risk containers.
    Senator Levin. So those 5,600 high-risk containers 
identified at the Port of Tokyo, are all inspected, either 
there or here?
    Mr. Jackson. Yes, sir.
    Senator Levin. And you've got data which you could show us 
to confirm?
    Mr. Jackson. I'm assuming we could show you the CBP audit 
trail on these issues.
    Senator Levin. Would you do that, so we can follow how----
    Mr. Jackson. I would be happy to walk through that.
    Senator Levin. OK. I do not know why they are not all 
examined overseas. What is the reason for that?
    Mr. Jackson. Senator, I am going to have to plead that I 
would like to get back with you with a more complete answer. 
Let me give you a very partial answer. Part of this is a limit 
on the resources that we are asking another government to bring 
to bear to do our work. If we know we have this safety net, 
which is we are going to inspect 100 percent of all these 
containers, we do engage in, I believe, operationally a triage 
process, which is, in effect, to say if we are absolutely, 
positively worried about one that we think must be inspected, 
we ground it. If we can get them to inspect it and clear it, we 
clear it and allow it to come forward.
    I am confident that on a port-by-port basis there are 
circumstances about the scheduling of staff, the equipment 
that's available for screening, radiological screening and 
VACAS type of screening, that impose limits on this. I would 
hypothesize that there are, I'm going to say, institutional 
barriers in some cases that we need to work. So all of those 
levers, this is why your support for ICIS is important too. If 
we have the technology there, and we can run things through and 
look, then we are in much better shape.
    Senator Levin. All right. Who do you think should bear the 
burden, the cost of that inspection? Should it be the buyer or 
the seller basically?
    Mr. Jackson. Yes.
    Senator Levin. What is the deal, 50-50? Just real quickly. 
I am going to run out of time.
    Mr. Jackson. The shipper ends up paying the cost of moving 
goods throughout the system, and how we allocate it, we are 
going to end up having to talk through that equation.
    Senator Levin. That the shipper should, the shipper being 
the seller--the seller and his shipper should pay that cost?
    Mr. Jackson. Whoever is receiving these goods, who is 
paying for the container to be moved is going to pay the ocean 
carrier, the dredge move, the manufacturer that closed the box 
and ships it over to you.
    Senator Levin. We will have to leave that one, because I 
think it is an important question, but we are not going to 
resolve that here. Now, 10 percent of the 477 exams that were 
requested by our people were not conducted by Tokyo officials. 
My question is, why should it not be automatic? We make that 
request. It has got to be done or else it cannot be shipped. 
Why not just tell them that?
    Mr. Jackson. Can I unpack that example, and get you back a 
detailed answer about what happened there?
    Senator Levin. Well, you can, but let me just say, well, 
that is true with almost all the ports, so it is not just what 
happened there. I am not picking on Tokyo. This is true with 
all the ports. And I think our Chairman pointed out, and this 
chart points this out, that I think our Subcommittee staff 
found that 18 percent overall of the requested exams are not 
carried out. That is high-risk containers where it is a very 
small percentage that we are asking----
    Mr. Jackson. They are not carried out overseas, but they 
are conducted when the container arrives.
    Senator Levin. I know, but these are ones where we 
specifically ask the officials in that overseas port to do it, 
and in 18 percent of the cases they do not. This is a part of a 
part of a part. These are the highest risk of the highest risk.
    Mr. Jackson. I would like to get some better data for you, 
sir.
    Senator Levin. OK. My question is, why don't we just make 
that automatically a precondition of shipment. Folks, if you do 
not do it there, we are not going to accept it in our ports. 
That is the question, OK?
    Mr. Jackson. We would probably have to then manage the 
protocols that would define what we would ask for with a 
greater degree of granularity than we do today if we are going 
to make exit/entry around the ask.
    Senator Levin. We have a declaration of principles with 
every single country where a CSI port is established. Why not 
make that one of the declarations of principles?
    Mr. Jackson. I would have to look at the declaration. I 
haven't read that, sir.
    Senator Levin. OK. Just yesterday the GAO provided the 
Subcommittee with preliminary results of a report that they are 
working on with regard to ATS, where the GAO also confirms what 
the Subcommittee staff report says, that ATS is ineffective. 
Are you familiar with the GAO report to this Subcommittee?
    Mr. Jackson. I have not read it, sir.
    Senator Levin. I want to save a minute for the trash issue, 
but I want to just give you an article from the Detroit Free 
Press of March 29, which shows that the inspectors are waving 
through long lines of trucks without inspection in order to 
speed up the process, and that they are doing this on the 
instigation of their supervisors.\1\ I will not ask you to 
comment today unless you are familiar with it. If you are----
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    \1\ See Exhibit 14 which appears in the Appendix on page 436.
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    Mr. Jackson. I'm not, but I would be happy to look into it.
    Senator Levin. If you would do that for the record.\2\
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    \2\ See Exhibit 19 which appears in the Appendix on page 465.
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    Now, I will take my last minute on the trash issue. Current 
technology, and maybe no technology, can produce useful and 
usable images of trash cargo. It is too dense, it is too 
anomalous. You have seen the x-ray image, which I put up there 
before, which was taken at a Michigan border crossing.\3\ You 
just cannot see the contents of the container because x-rays 
cannot penetrate the contents because of its density.
---------------------------------------------------------------------------
    \3\ See Exhibit 15 which appears in the Appendix on page 440.
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    At Tuesday's hearing, our Chairman, Senator Coleman, showed 
the same picture to Mr. Oxford, who is head of the DHS's 
domestic nuclear detection office, and asked him whether he 
could tell whether there was a dirty bomb in the trash truck. 
Mr. Oxford stated the current picture showed very little 
content and that they are working on the next generation of x-
ray machines.
    If your head of the DNDO says that x-rays cannot adequately 
show what is in a container--which is obvious to us, just look 
at the picture--why not just simply tell the Canadians, 
``Folks, there is a security issue here for us. We cannot 
determine with any credibility or confidence what is in these 
trash trucks without unloading every trash truck and inspecting 
it. You are going to have to end these shipments until there is 
such technology, and by the way, you guys have more land in 
Ontario than we do in Michigan.'' This is not the only State 
affected. There are, I think, three other States, including New 
York, where trash is shipped from Canada or Mexico into our 
country.
    That is my question of DHS, why not just simply say, ``We 
cannot effectively inspect. Until that is doable, you are going 
to have to bury your own trash.''
    Mr. Jackson. Sir, we have not reached the conclusion that 
that measure is a requirement. We have, however, taken this 
issue, which you've been a very eloquent advocate for, for 
which I am personally grateful, and we have launched a process 
that will be very shortly completed, the first step of which is 
due by May 1, which is an analysis of the technical and 
operational means that we have. You are right about this image. 
We can do radiation detection work. We can do physical 
inspections. We do that. We follow these trucks to the dump on 
a random basis, and literally crawl through the slime with them 
to do this work. We have multiple different layers of 
operational controls here. We have no perfect technology----
    Senator Levin. It is not a perfect one. There is not one 
which is anywhere near perfect. I mean the pictures are 
useless. You are not going to inspect every truck at the dump. 
If you follow one out of 500 you are doing well probably. The 
radiation cover is just one of the many problems. So the bottom 
line is what I said, there is no effective way of inspecting. 
There is a security issue in this. Would you agree with that?
    Mr. Jackson. There is a security vulnerability.
    Senator Levin. In May you are going to let us know whether 
or not we should tell the folks----
    Mr. Jackson. In May we are going to come back and we are 
going to unpack that security vulnerability with more detail, 
and tell you the types of options that we think can be put in 
place against the problem, and I am happy to make sure that we 
come up and brief you as soon as the first work is done. That 
will be followed by a requirements document and production of 
exactly how you would manage this process, pay for it, and 
operationally deploy the tools needed to do that, and we will 
keep you in that process all the way.
    Senator Levin. Two questions. Make sure it happens 
promptly, and, number two, make sure one of the options there 
is just stop it until we have an effective technology. I want 
you to include that option. Will that be included?
    Mr. Jackson. I'll promise to make sure that the option is 
added to the list of options.
    Senator Levin. Mr. Chairman, thank you for your support and 
your patience.
    Senator Coleman. Thank you, Senator Levin.
    I am actually going to do a quick 5-minute follow up 
because I want to pursue what I ended with and you focused on, 
and that is the discrepancy between those containers that are 
identified as high risk, those where requests were made and 
those actually examined. You have a significant number that are 
identified as high risk for a range of reasons, could be drug 
smuggling or whatever. Then we make the request, which is a 
lesser number, and then after we make the request, ultimately, 
some are examined. I concur with Senator Levin, if we make a 
request, if we believe something is problematic, we should just 
say it is not coming here unless we take a look at it.
    I appreciate your telling the Ranking Member that you would 
show us the audit trail. I have to say, Mr. Secretary, that 
neither this Subcommittee staff nor the GAO has to date seen 
any audit trail. In my Chairman's letter, I specifically 
requested that, and we have yet to see anything that 
demonstrates there is an audit trail. So we have heard the 
testimony from you and others saying, yes, we identify things 
as high risk and we inspect them here.
    I appreciate your recognition that it really should be 
inspected somewhere else before it comes into our ports, 
because, God forbid, we miss something and something happens at 
the time we open the box, our commerce will be shut down. But 
beyond that, we really do request to see that audit trail. If 
there is not one, then we have to recognize that and deal with 
it. But I can tell you that as we sit here today, neither this 
staff nor the GAO has seen any evidence of an audit trail, and 
we find that particularly disturbing.
    One other question with C-TPAT, because one of the things 
we do--and we touched on it briefly--is this public-private 
partnership. We agree that we need to work with foreign 
companies that run ports around the world and in this country 
if we are going to be secure. That is the reality; is that 
correct?
    Mr. Jackson. Correct.
    Senator Coleman. We need to work with private companies. 
And in fact, Senator Levin, in the whole ICIS, the program in 
Hong Kong, includes no Homeland Security grants. In fact, the 
private sector said, we are going to do this because we are 
concerned about what happens if something goes wrong. But one 
of the concerns even with the C-TPAT program, which is this 
partnership with the private sector where folks get points, is 
that C-TPAT members receive free passes from some screenings if 
we think it is secure enough. On the other hand, we have a 
significant number of companies that we have not been validated 
to determine their system is secure. Can you tell me how many 
companies involved in the C-TPAT that we have actually 
verified?
    Mr. Jackson. We have 5,800 companies enrolled in C-TPAT 
right now, and 27 percent of those companies have had a 
completed validation.
    Senator Coleman. Have you thought about using a third 
party, bringing someone else in just to pick up the numbers?
    Mr. Jackson. Yes, sir, I have. It is an option that I have 
asked CBP to come back and give us details on. I am personally 
quite open to the third-party intermediaries. The government 
has to own the security function. The government has to be able 
to manage that, but I am not closed at all to the idea that 
there might be multiple ways to accelerate our validation 
process here, and strengthen it.
    Senator Coleman. And, again, we are talking about a 
partnership. We do not have to do it all by ourselves, and if 
we simply cannot do it, then I would hope we would reach out 
and work with some others so we can bring that number up.
    Can you tell us today the percentage of cargo containers 
that are at least screened for radiological material, those 
that go through a radiation portal monitor? Do you have numbers 
on that?
    Mr. Jackson. I do. This is in the U.S. ports, we screen 
with RPMs, radiation portal monitors, before they leave the 
port. Right now it's 67 percent of the exiting containers being 
screened, and we have a deployment plan that will bring that to 
98 percent by December 2007.
    Senator Coleman. The follow-up question, again, with the 
belief that it is best to screen before they get here, what is 
your vision--do you have a vision that says 100 percent 
screening at some point in time before they get to U.S. ports?
    Mr. Jackson. I think it is difficult always to throw the 
100 percent screening, because just as this 98 percent 
screening, the marginal investment to get that last 100 percent 
guarantee is probably not worth that same lay-down. We could 
use, for example, on that last 2 percent, a very high 
proportion of random inspections using hand-helds, and I think, 
therefore, crunch that 98 number up higher, but maybe not to 
100.
    Similarly, on the problem abroad, first, why I am so 
committed to explore the ICIS business model is, from the major 
load-out ports that are moving cargo our way, this is an 
opportunity to accelerate and strengthen in a meaningful way 
our capacity to screen abroad. But there are many smaller ports 
where this degree of scrutiny may not be cost effective, or 
where we may simply not be able to get the government or the 
terminal operators to play along with that. So can we get a lot 
done? I believe that there is a real prospect of doing just 
that. I am hesitant to make a firm commitment, say, yes, let's 
drop the hammer and say 100 percent everywhere by this date.
    Senator Coleman. In the end I understand that.
    Mr. Jackson. The overseas part.
    Senator Coleman. I think the best vision, that is, push out 
the borders and then do things like Megaports, and work with 
companies like Hutchison in the Bahamas. I know some of my 
colleagues, and I had concerns about the CFIUS process. I 
believe we need to do 45-day reviews, and I thought the law was 
broken when we did not do a 45-day review for the DP World 
situation. On the other hand, I am seeing reaction here that 
you see the word ``foreign'' and all of a sudden that is bad. 
What would be bad is if we do not work with other entities, we 
do not work with corporations, we do not work with other 
countries, and we try to do it all ourselves.
    Mr. Jackson. Right.
    Senator Coleman. Then we will fail.
    Mr. Jackson. That is exactly right, sir.
    Senator Coleman. What I would hope though is that we would 
have this focus on pushing it out and see, if not 100 percent, 
let us significantly improve the numbers that we have now that 
Senator Levin and I am concerned about. The ICIS prototype 
shows us it can be done.
    Mr. Jackson. I want to just leave one other thing on the 
table with you that I think is a cause for considerable 
enthusiasm and optimism on the radiation screening. You heard 
from Vayl Oxford earlier this week to talk about our next 
generation of advance spectroscopic portals, so called ASP 
systems. This is an area we are spending half a billion dollars 
this year at DNDO. I am very pleased at the quick start-up, 
and, frankly, grateful for the comments from your Subcommittee 
on some of their initial work.
    I think we can move to a much more effective tool in this 
area, and we can layer on top of that some pattern recognition 
software that would allow us to be more effective in looking at 
the image before us. We can look at tools like throwing up 
false images for our inspectors so that they can be tested, 
probed and pushed, and we can grade them and watch them and 
monitor their capabilities for doing this. Technology here 
offers some very near-term windows for major improvements. So 
as we think about how to take an ICIS type business model, we 
have this overlay of an intense investment that the Congress 
and the Administration have committed to this area, where we 
will get a much more meaningful tool. Sometimes we will be 
able, just on the basis of knowing the source, to be able to 
shoot that one through and say, yes, that is what should be 
coming from the background radiation associated with what we 
have in the waybill and other information about that load.
    Senator Coleman. I appreciate that. My concern is that I 
hope we take advantage of that.
    Mr. Jackson. Yes, sir.
    Senator Coleman. I mentioned the Katrina hearing. It was 
extraordinarily frustrating for me to sit up here and listen to 
government officials talk about things being somewhere in the 
pipeline, when the 21st Century technology of not just FedEx, 
but small companies, can tell you exactly in the pipeline where 
that carburetor is, where that pair of shoes that you bought, 
and this is one area which government cannot afford to be 
operating in the 20th Century when industry is operating in the 
21st Century. So I applaud the vision, and I just hope that you 
can push the bureaucracy really hard, so that we are not stuck 
with 20th Century technology when we have 21st Century security 
needs.
    Mr. Jackson. Yes. It's an urgent priority and it is a 
constant push to try to prioritize men and women who are doing 
1,000 important things, to do 1,001, but this one is something 
that is very much on the Secretary's radar screen, it's very 
much on the Coast Guard's, the CBP's, the DNDO's. Our team is 
focused on this.
    Senator Coleman. And we appreciate that and appreciate your 
appearance here.
    Mr. Jackson. Thank you.
    Senator Coleman. Thank you, Mr. Secretary.
    I would now like to welcome our final panel of witnesses to 
the hearing: Christopher Koch, President and CEO of the World 
Shipping Council here in Washington, DC; Gary D. Gilbert, the 
Senior Vice President of Hutchison Port Holdings of Oakton, 
Virginia; and, finally, John P. Clancey, the Chairman of Maersk 
Incorporated of Charlotte, North Carolina.
    Clearly, the purpose of this hearing is to examine the 
current status of global supply chain security and analyze ways 
we can improve that security. An integral partner in securing 
the supply chain security is the private sector, and I was 
pleased that the Secretary made specific mention of that today. 
You are the companies that manufacture the goods, import the 
products, ship the containers, and operate the ports. And 
without your invaluable assistance, our government efforts 
would be far less successful. So I appreciate your attendance 
at today's hearing, and I look forward to your perspective on 
supply chain security.
    Before we begin, pursuant to Rule VI, all witnesses before 
this Subcommittee are required to be sworn. I would ask you to 
please stand and raise your right hand. Do you swear the 
testimony you are about to give before this Subcommittee is the 
truth, the whole truth, and nothing but the truth, so help you, 
God?
    Mr. Koch. I do.
    Mr. Gilbert. I do.
    Mr. Clancey. I do.
    Senator Coleman. Thank you, gentlemen.
    We have a timing system here. When the light turns from 
green to yellow, if you can sum up. Your written statements 
will be entered into the record in their entirety. We are just 
going to go from my left to right, and we will start with you, 
Mr. Koch, first, followed by Mr. Gilbert, finish up with Mr. 
Clancey, and then we will have some questions.
    Mr. Koch, you may proceed.

   TESTIMONY OF CHRISTOPHER L. KOCH,\1\ PRESIDENT AND CHIEF 
           EXECUTIVE OFFICER, WORLD SHIPPING COUNCIL

    Mr. Koch. Thank you, Mr. Chairman. Thanks for the 
opportunity to be here today. My testimony is somewhat lengthy, 
and I will just summarize it in the following manner.
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    \1\ The prepared statement of Mr. Koch appears in the Appendix on 
page 187.
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    The overall strategy and objectives that the Department of 
Homeland Security is using to try to address this challenge is 
something that we believe is fundamentally sound. It is the 
implementation that can be consistently enhanced and refined, 
and we appreciate the Subcommittee's review of how that can be 
done most effectively.
    For maritime security strategy to be looked at, there is a 
vessel piece, there is a people piece, there is a port piece, 
and there is a cargo piece. And, obviously, today's hearing is 
focusing really on the cargo piece.
    Your questions to the witnesses, or at least to me today, 
also asked for comment on our views on foreign investment, and 
I would like to start with that. Ninety-seven percent of the 
containerized cargo coming in and out of the United States is 
carried by companies that are foreign owned or controlled. The 
vast majority of the cargo handled through U.S. ports is 
handled by marine terminal operators that are, in fact, foreign 
owned. This is an industry, even though it is a critical 
national infrastructure, that is clearly basically run by 
foreign-owned companies.
    These companies, represented by people like Mr. Clancey and 
Mr. Gilbert, are working very hard to be partners with the U.S. 
Government, to come up with good solutions in this regard. And 
so to answer the Subcommittee's question, my view on foreign 
investment is that it is an essential part of the smooth 
functioning of the American economy. We would hope that the 
American Government would reach out and work to develop 
partnerships with these actors, particularly as you look to 
things like ICIS, as I will get to later. If we are really 
going to embrace that concept, we have to understand that the 
people operating those post terminals where that equipment is 
going to be are going to be foreign terminal-operating 
companies, including companies like Dubai Ports. So we really 
have a strategic question to ask ourselves: Are we comfortable 
with this or not?
    My hope is that this Subcommittee and the Congress would 
say that they are comfortable under the right terms, making 
sure that can be done.
    Let me turn now to the cargo issue. The strategy of the 
government is something we fully support and think is very 
important, and that is to do the cargo risk assessment before 
vessel loading, and if there's any cargo that is deemed high 
risk, it should be addressed before it is put on the ship and 
brought to the United States. That is the proper security 
strategy for the government to embrace. The strategy has 
various pieces in it that buttress this. As you have pointed 
out, Mr. Chairman, there is the screening for risk, there is 
CSI, and there is C-TPAT. But the overall objective is to 
inspect any container we have a question about. We use 
container inspection technology that includes both the NII type 
equipment, which produces the kind of image that Senator Levin 
was pointing to earlier, and also radiation scanning equipment. 
The present objective is to use NII or full devanning 
inspection of any container there is a security question about, 
and radiation scanning of all containers.
    Now, ICIS is a very attractive concept, but it is not yet 
an operating system. It presently doesn't analyze or check the 
data generated about the boxes itself. What is encouraging 
about it is that the pilot appears to be demonstrating that the 
quality of the information that is generated by this technology 
is something that can have great use. But there needs to be an 
understanding about the assumptions of how this would actually 
work.
    If the assumption is that this technology is going to, in 
fact, be used to actually inspect every single container, you 
have to put it in context to understand the difficulty with 
that. Presently, we understand it takes 4 to 6 minutes for a 
trained CBP expert to look at one of these images and come up 
with an analysis of it. If you apply that to a container ship 
holding 4,000 containers, that is about 14 days' worth of work 
for a single individual.
    We understand the concept as being one that can expand the 
tools available to the government to inspect any container 
before vessel loading at a foreign port where you have a 
question about a box--not that every box is going to have to go 
through the inspection process. But it's these kinds of 
questions that need to be thought through as this concept is 
considered and it is rolled out. As I said, it is a tool, but 
to make it part of an operating system, Customs and DHS have to 
sit down and figure out how they're going to use this tool, how 
the data's going to be transmitted, how the protocols are going 
to be established, and how to develop the cooperation and 
receive the permission of foreign governments.
    There will be nuisance alarms that get set off repeatedly 
with this techology. How are those going to be resolved? By 
whom? All are very important questions, and we would urge that 
the concept not be rolled out with the assumption that we will 
consider those things after the containers have been loaded on 
the ship and it's sailing for the United States, because that's 
the wrong time to figure those things out.
    You've also asked the question about what we think the 
priorities are going forward to enhance maritime security. I 
would start with basically four.
    The first is, which has already been touched on today, the 
World Shipping Counsel believes that we should improve the data 
used for risk assessment by CBP's Automated Targeting Center. 
The carrier's bill of lading and the current 24-hour rule were 
a very good start. They do clearly have good value, but they 
are not adequate by themselves, and we should improve that.
    Second, the TWIC card should be rolled out. It was very 
good news to hear Mr. Jackson today stating that there will be 
a Federal Register notice tomorrow that's going to start that 
process. It's probably the most important thing that can be 
done to improve U.S. port security in the immediate future.
    Third, we fully support a priority examination and analysis 
of the ICIS project and the technology and how it can be 
integrated into the basket of tools that the government has to 
improve maritime security.
    And, fourth, to continue to do what Customs is doing to 
enhance C-TPAT, enhance CSI, and build closer, more cooperative 
relationships with foreign governments and the rest of the 
trading partners working in these supply chains.
    The U.S. Government cannot do this by itself. It needs the 
assistance of foreign governments, and it needs the assistance 
of the rest of the people working in the supply chain, and 
those relationships are understood by the Coast Guard, who's 
working with the foreign governments, and carriers and terminal 
operators. And it's understood by Customs, and that needs to be 
nourished, as they are doing.
    And, finally, we would simply again repeat our hope that, 
in looking at these issues and in passing legislation, that the 
Congress resists the temptation to in any way restrict foreign 
investment or to otherwise impair the growing, constructive 
relationship that is in place right now between members of the 
industry and the U.S. Government to solve what is clearly a 
very difficult challenge for all of us.
    We are transporting this year probably between 11 and 12 
million containers into the United States. That's an enormous 
challenge just from a commerce perspective to handle this 
volume efficiently. You have been to L.A.-Long Beach. You've 
seen the volume going through there. Without the continued 
investment and commitment of these present companies in this 
business, the U.S. economy will have a very serious difficulty 
just handling cargo.
    So what has happened over the last several weeks has been 
perhaps turned into a good wake-up call. How can we do 
something constructive to improve maritime security? And we are 
certainly prepared to work with this Subcommittee and you, Mr. 
Chairman, in any way possible to see that is what results from 
all of this.
    Senator Coleman. Thank you, Mr. Koch. Mr. Gilbert.

    TESTIMONY OF GARY D. GILBERT,\1\ SENIOR VICE PRESIDENT, 
           HUTCHISON PORT HOLDINGS, OAKTON, VIRGINIA

    Mr. Gilbert. Chairman Coleman, Senator Levin, we are very 
honored to be here to give our perspectives on the vital issue 
confronting the risk of nuclear smuggling and supply chain 
security.
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    \1\ The prepared statement of Mr. Gilbert appears in the Appendix 
on page 205.
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    Chairman Coleman and Senator Levin, we are very pleased to 
be here to talk about nuclear smuggling and supply chain 
security. I want to thank you personally for coming out, for 
your leadership, as well as your staff. Three of them are 
here--Ms. Kathy Kraninger, Brian White, and Ray Shepherd--on 
the many trips they've made to see firsthand what is happening 
in supply chain security.
    HPH has been in the maritime business for 139 years 
originating the first registered company in Hong Kong in 1866, 
the Whampoa Dock Company. HPH is the global leader in the 
container terminal operations handling 51.8 million containers 
in 2005. We are located in 42 locations in 20 countries, and 
approximately 40 percent of the containers coming into the 
United States were either loaded or transshipped through an HPH 
facility.
    To date, HPH operates no ports within the United States. 
Given that fact, you might wonder why our company would be 
interested in partnering with the U.S. Government on a maritime 
security agenda.
    First, we share the shock and outrage that all Americans 
felt on September 11 and realized the world had changed on that 
fateful day.
    Second, as the world's largest marine terminal operator, we 
know that we may be just a single terrorist incident away from 
having our whole global system fail.
    To a large extent, the modern global logistics system is a 
result of the revolution in transportation that has gone 
unobserved by most Americans. I have witnessed firsthand the 
fruits of hundreds of billions of dollars of investment to 
construct an intermodal transportation system that is 
efficient, reliable, and low cost for its users. As chairman of 
the Corporate Security Committee of HPH, I also know that the 
system is vulnerable to being exploited or targeted by 
terrorists. Should an attack lead the United States to close 
the ports even for a short period of time, the consequences to 
my industry and those who rely upon it would be devastating.
    The potential for the cargo container to be exploited for 
an act of terror has been borne out 2 years ago in Israel in a 
sparsely reported event that took place 3 days after the train 
bombings in Madrid. On March 14, 2004, two Palestinian suicide 
bombers were intercepted before they reached their intended 
targets of several fuel and chemical storage tanks in the port 
of Ashdod. The Palestinian militants killed themselves along 
with 10 Israelis, and wounding 18 others. They reportedly 
evaded the security at the port facility's gate by being 
smuggled from Gaza in a container outfitted with a secret 
compartment and an arms cache--the first majority where 
terrorists both exploited a container to get to their target 
and that their target of choice was a port facility.
    Our industry is so vulnerable to disruption. The terminal 
you visited, Hong Kong International Terminal, has a combined 
input of about 7.5 million containers. To support that kind of 
throughput, the facility operates 24 hours a day, 7 days a 
week, 365 days a year. Each day, upwards of 10,000 trucks drive 
through the gates of that terminal. A 96-hour closure--and we 
have them from time to time for typhoons--strands tens of 
thousands of containers, backing them up for upwards of 100 
miles back into China.
    But our Hong Kong terminal as well as our other 41 
terminals around the world can be seriously affected by 
closures elsewhere in the system. Our system got a flavor of 
that in October 2002 when a labor dispute on the West Coast of 
the United States led to a 10-day closure of the ports. 
According to Robert Parry, president of the Federal Reserve 
Bank of San Francisco, the estimated cost to the U.S. economy 
was $1 billion a day for the first 5 days and rising to $2 
billion each day after. Major retailers like Target Stores from 
your State became deeply concerned that their merchandise might 
not reach their shelves for the holiday season. Over 100 major 
container ships were stranded at the port outside of Los 
Angeles, causing major disrupts and delays. I suspect this 
should be a real wake-up for us in looking back at history.
    We expect that a breach may be involved in a dirty bomb, 
which will lead the United States and other States to raise 
their port security alert to its highest level while 
investigators work to sort out what happened. Such an incident 
would pose an unprecedented challenge for our operations that 
we have invested and to prevent an incident to work closely 
with government authorities to restore smooth operations should 
the system of prevention fail.
    Earlier this week, you received testimony from Commander 
Stephen Flynn. HPH has known Commander Flynn since the year 
2000. While he was serving in the U.S. Coast Guard, he spent 
time studying container operations in our facilities in Hong 
Kong. Commandeer Flynn at the time was deeply concerned about 
the rising threat of terrorism and the danger it posed to our 
industry. Sadly, like so many of the rest of our industry, we 
did not pay him much heed. After September 11, we listened to 
Commander Flynn with new respect, realizing along with the vast 
majority of Americans that the world changed forever that day 
and we could no longer treat security as an afterthought. We 
became one of his students versus his teacher, and we looked 
very closely at the layered approach to security, that being 
the ISPS Code, inspecting high-risk containers at ports of 
embarkation, location and tamper evidence monitoring, imaging, 
and radiation detection.
    We believe a layered strategy recognizes that there is no 
silver bullet to this security and statistically five 60-
percent measures when placed in combination will raise the 
overall probability of success to 99 percent.
    HPH has put in place the first layer, the ISPS Code. In the 
very beginning, we knew that the two initiatives, that with CBP 
as well as the ISPS Code, did not solve our problem of the 
Trojan Horse. As a result, we worry that CBP may be 
overestimating their ability to accurately assess true risk in 
the industry, because we believe CBP relies on the primary 
screen of commercially supplied ocean bill of lading/manifest 
data. And as Secretary Jackson said, it is an excellent first 
step, and we should be looking forward to the second step.
    As a result, only 1 percent of all U.S.-bound containers 
are actually looked at at the port. The United States, I 
believe, and the international community should strive to 
construct a ``trust but verify'' versus relying just on 
manifest information.
    We have been the lead also in the deployment of radiation 
detection equipment in the U.K. in Felixstowe as well as 
deployment of the NNSA program in Rotterdam, and most recently 
in Freeport, Bahamas.
    At HPH we believe it is possible to configure our 
facilities to support as much high percentage of verifications, 
and this would come from deploying non-intrusive inspection 
equipment to examine containers arriving in overseas loading 
ports to the United States.
    When we started the ICIS program, we looked at operating 
within two of the busiest container ports in the world. 
Beginning in 2005, every truck entering two of the main gains 
at Hong Kong International Terminal and Modern Terminal has 
passed through portal screening technology, and a database of 
over 1.5 million images has been stored. Key to this pilot is 
truly the industrial engineering aspect. Many people have 
discussed here that we are not using them as a radiation alarm 
or as a scanning tool. We believe that if we could keep the 
boxes moving versus leaving them to rest, then we could 
evaluate significantly the NII images with speeds up to 15 
kilometers 24 hours a day. The pilot is now being evaluated, I 
am pleased to say, by DHS/CBP, and they have under review 
20,000 containers at this present time.
    It was brought up about the illegal aliens that came out of 
Shenzhen, China, into the port of Los Angeles. If this 
infrastructure had been deployed 50 miles north, those illegal 
aliens would have been found. I am pleased to say, though, they 
were found by the ISPS Code because of the CCTVs and the 
training of the longshoremen in the facility.
    The present focus on ports is long overdue, and we believe 
that the Congress and the American people need to focus on 
achievable goals and not become overwrought by their worst 
fears. But we do believe a ``trust but verify'' policy, 
partnering with foreign overseas terminal operators, like my 
company, that are prepared to come together with an industry 
Coalition of the Willing. We had that coalition of the willing 
before some attacks that were in the press, but we feel we can 
pull that back together again. In fact, the four major 
container terminal operators loading 80 percent of the 
containers moving around the globe are headquartered in Hong 
Kong, Denmark, Dubai, and Singapore.
    Since September 11, our company has invested over $200 
million to elevate the security in worldwide facilities. John 
Meredith is exercising, I believe--our CEO--private sector 
leadership on something that he believes to be one of our times 
most urgent global priorities.
    Mr. Chairman, I was profoundly moved by the discourse 
between Governor Kean and Senator Lautenberg on Tuesday when 
they discussed just when is an issue a priority. We believe 
this is a global priority and a true issue of priority. Thank 
you very much.
    Senator Coleman. Thank you very much, Mr. Gilbert. Mr. 
Clancey.

   TESTIMONY OF JOHN P. CLANCEY,\1\ CHAIRMAN, MAERSK, INC., 
                   CHARLOTTE, NORTH CAROLINA

    Mr. Clancey. Thank you, Mr. Chairman. As you may know, 
Maersk is one of the largest liner shipping companies in the 
world, serving customers all over the globe. With a fleet 
numbering more than 500 container and 1.4 million operated 
containers, the A.P. Moller Group employs 70,000 people in over 
125 countries ships.
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    \1\ The prepared statement of Mr. Clancey appears in the Appendix 
on page 212.
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    In the United States and in North America, Maersk Inc. 
represents A.P. Moller's activities with approximately 12,000 
Americans working in our terminals and our offices throughout 
the country. The businesses we operate today include liner 
shipping, terminal operations, logistics, warehousing and 
supply chain operations, and other activities related to the 
movement of freight.
    Maersk has been actively involved in maritime security 
issues for many years. Our commitment to security is captured 
by the watch words for the company: ``Constant Care.'' The 
security of our containers and the integrity of our 
transportation network are essential to our operations at 
Maersk. As a worldwide company involved in many places here and 
abroad, we are constantly aware of the problems of security and 
safety.
    For many years, cargo moved fluidly through our ports and 
facilities, but certainly that changed with the advent of 
September 11.
    Mr. Chairman, in your letter of invitation, you requested 
that I address certain specific matters.
    Let me begin by commenting on Maersk's perspective on U.S. 
Government programs related to maritime and port security. Many 
Federal Government programs are successful. but neither the 
government nor private industry can achieve maritime security 
unilaterally. It requires joint efforts. Maersk participates in 
the Maritime Security Program, which we believe provides a 
cost-efficient way for U.S. interests to be guaranteed, while 
at the same time providing benefits to liner companies. In 
addition, we have entered into a variety of U.S. Government 
programs and pilot projects. For example, we were the first 
enterprise-wide transportation company to be validated by C-
TPAT.
    Maersk also participates in the Super Carrier Initiative, 
one of approximately 25 ocean carriers working with U.S. 
Customs and CBP in this area.
    Another area of our work with the government involves the 
issue of employee identification cards, and I was pleased to 
hear from Secretary Jackson that we're finally moving forward 
on that.
    But we realize that is not enough to make the maritime 
operations within this country secure, so Maersk has 
intensified our own efforts through the establishment of a 
comprehensive security policy and a strategy in this regard.
    In short, we agree that maritime security here and abroad 
can be improved, and we are working cooperatively to achieve 
this objective, both in partnership with the government and 
through our own efforts. We have some concerns that government 
programs not be commercially punitive, duplicative, or 
inconsistent, or add unnecessary levels of bureaucracy, and 
that's why the partnership is so important.
    You inquired about the use of radiation detection 
equipment, which has been well spoken and addressed this 
morning, at seaports and the possible impact to our operations. 
We have had success in working on this matter with CBP, and we 
strongly support it.
    A third area of inquiry relates to foreign ownership of 
U.S. terminals. Congressional concern obviously was highlighted 
with the activities and the possibility of Dubai Ports 
acquisition in the United States, and also the role of 
investment in marine terminals in the United States.
    A marine terminal operating company typically holds a long-
term lease from a public--local or State--port authority to 
manage the unloading and loading of containers in a marine 
facility. It is a specialized, highly competitive, low-margin 
business whose tools--a dock, a crane, and a parking lot--are 
in the hands of American union labor and American management.
    The shipping industry has always been highly globalized and 
highly competitive. Billions of dollars in foreign investment 
from the Japanese, South Koreans, Danish, British, Chinese, and 
others in this country have led to the success of our ability 
to grow and expand international trade. For example, Maersk 
alone in the last 3 years has invested $3 billion in U.S. port 
projects, and we continue to look at other opportunities. 
Today, foreign-owned companies are running the majority of U.S. 
marine terminals, as Mr. Koch addressed.
    Port authorities prefer large, profitable, predictable 
volumes that can only be guaranteed by liner companies, so 
liner-affiliated, foreign terminal operators are the top 
priority.
    Second, liner companies prefer handling their own landside 
operations because it is the most expensive component of our 
entire activity chain.
    Terminal operators today operate with lease agreements 
typically awarded and administered by the local governments. 
There has been no evidence that foreign-controlled companies 
are less secure, or in any way less compliant with security 
regulations, or in any way less cooperative with the U.S. 
Government, particularly on security issues.
    Mr. Chairman, your letter also raised the potential impact 
from a terrorist element smuggling a weapon of mass 
destruction. I think enough has been said about that this 
morning, but certainly we are concerned and we believe that 
more can be done.
    Mr. Chairman, finally you asked about specific maritime 
security recommendations. In general, I would encourage 
policymakers to evaluate potential programs with an eye toward 
trade reciprocity. As a carrier that operates in 125 countries 
around the world, I've had the experience to see and experience 
instances in certain ports where it is sometimes a little bit 
difficult and sometimes very difficult to get them to comply 
with suggestions. So bilateral agreements, we believe, are 
mandatory if we are going to be successful, particularly as you 
want to move towards 100 percent inspections.
    Thank you very much.
    Senator Coleman. Thank you very much, Mr. Clancey. I would 
mention this Transportation Worker Identification Card is a big 
deal. And maybe it was you, Mr. Koch, who said that it is 
probably the most significant thing that can be done right now 
to enhance the security of the global supply chain. So I was 
also pleased that we heard the Secretary mention that.
    Let me talk a little bit about foreign ownership first. I 
have some other specific questions, but I wanted to touch upon 
that first. Mr. Clancey, Maersk, you have an American operation 
of an international company. Mr. Gilbert, you have an 
international company that I do not think runs terminals in the 
United States, but you are centered right here. Maybe Mr. Koch 
should answer this or maybe you all can.
    Would there have been anything--just going back to DP 
World, Dubai--would there have been anything that would have 
precluded either economically or operationally from the DP 
World having an American company, an American operation that 
would have been subject to vetting by Homeland Security? It 
probably would have raised, I think, a level of confidence. Is 
there anything that would have precluded that or made that 
difficult to happen? We never got to that point.
    Mr. Koch. Other than Congress? And that was the issue. 
Really, I think Dubai Ports would have been happy to structure 
that arrangement to put everything that was in the United 
States in a U.S. corporate structure, as long as, obviously, 
its ownership interest could be protected. I think they would 
have been happy to do that. It just got--those kinds of 
suggestions came up too late to be factored into what became a 
very active, political issue.
    Senator Coleman. Anybody else want to respond to that?
    Mr. Clancey. We have operations very similar to that. One 
is Maersk Line Limited that operates ships for the U.S. 
Government. It is a stand-alone company with clearances, and 
the chairman of that company is the past commander of NATO. 
They have corporate governance. They have rules and procedures 
to manage that business as a stand-alone American controlled 
business, and each year it has examined and validated, and it 
has always been successful.
    Senator Coleman. Mr. Gilbert.
    Mr. Gilbert. In our case, sir, all of the ports that we 
have in those countries are incorporated in those countries, so 
in Panama, let's say we have 1,608 employees. It's a registered 
company in Panama, but the majority of the shares that are held 
of that company, in the parent company of HPH. That is repeated 
in either the Bahamas or Poland or Netherlands of the U.K. It 
is a question of they are almost exclusively with the country 
nationals of that country.
    Senator Coleman. I will ask Mr. Koch and Mr. Clancey this, 
because it has to do with the Freeport, Bahamas operation. Part 
of the Megaports strategy is to work with foreign companies. In 
fact, it is actually easier to work with foreign companies 
rather than the foreign country. It is easier to get the level 
of cooperation, less diplomatic hoops to jump through. Mr. Koch 
and Mr. Clancey, is there anything that you are aware of in the 
proposed Megaports situation? We would be working within the 
Bahamas, in Freeport, with a Hutchison operation, where they 
would be involved in the Megaports Initiation defense. Is there 
anything from a security perspective you think would be 
problematic about that?
    Mr. Koch. Mr. Chairman, I am not aware of anything that's 
problematic, and one of the things that's encouraging about 
that particular project is that it examines how you can do the 
radiation scanning on what remains in the United States an 
open, unsolved problem, which is, how do you do radiation 
scanning on boxes that are going onto trains?
    The present radiation scanning system in the United States 
is most easily implemented for boxes going out a gate, and that 
is fairly easy to set up the screening. There's a lot of cargo 
that leaves U.S. ports via on-dock rail. The Port of Tacoma, 
for example, has been struggling with this. The project in the 
Bahamas is testing and using a technology that can be put on 
container handling equipment that maybe can answer the question 
of how to efficiently screen containers being moved onto on-
dock rail and could also help maybe be applied in the United 
States as well.
    Senator Coleman. Mr. Clancey.
    Mr. Clancey. I don't see any problems whatsoever. Our only 
concern is the real-time use of that information, that the 
instant that it's scanned, within a very short period of time 
before that container is fluid in our yards, that we're told 
it's a ``no go.'' We can't make those decisions. We simply 
can't call the shipper and say, ``We're not going to move your 
container because we have a concern.'' But if the government 
and Homeland Security can develop a message, working with 
Customs, to give us immediate alerts, we don't see any issues 
at all.
    Senator Coleman. I am not going to ask you, Mr. Gilbert, 
since you got a dog in that house.
    Mr. Gilbert. Could I make a comment on the technology 
though, sir?
    Senator Coleman. Please.
    Mr. Gilbert. NNSA brought in a technology that does a 
primary scan and a secondary scan with an isotope. We have 
taken and put this operation where we have dropped the alarm 
down to the bottom. We have approximately, at this present 
time, about 25 percent rate of alarms. And then we do a 
secondary scan. The first scan goes at seven kilometers, the 
second scan at three kilometers. And we have, because with the 
containers at risk, we have a very good scan. Whereas, in Hong 
Kong, we've turned the alarm bells off because this is a proof 
of concept, but we have stored the images as well as the 
radiation signatures, and they are available on our disk.
    Senator Coleman. One of the questions I have, maybe it is a 
question about technology, one of the concerns--and I think the 
figure was 4 to 6 minutes. I forgot who raised that. I think 
Mr. Koch. You talked about how it takes 4 to 6 minutes for a 
trained expert to actually analyze the image, and say what is 
in there. Looking to the future, my sense would be that 
computer programming using different algorithms would be able 
to cut that substantially. Is there anything on the horizon 
with this technology?
    Mr. Koch. We understand that a number of people are working 
exactly on that, but it does require matching an understanding 
of the contents of the container with the image though, which 
is going to require systems integration. Hopefully, that could 
be done. On some commodities, let's say it's a light commodity 
like apparel or footwear, anomalous images are probably very 
easy to identify if there is something here that causes a 
question. On high-density cargoes, auto parts, machine parts, 
things like that, it's going to be a difficult and more serious 
challenge. But we know, in talking with SAIC and other vendors, 
that they are working assiduously on trying to develop software 
that could be used by the government in a reliable way.
    Senator Coleman. Because the issue here really is security. 
That is our concern. Yours is security but also speed. You have 
to make a profit, and those things that slow it down become 
problematic. Through some technology, such as ICIS, speed has 
not been compromised. I just do not want the bureaucrats to 
come back and say it takes 4 to 6 minutes when I have to 
believe that you have some computer technology that will allow 
you to do analysis very quickly. The key here again is to 
highlight those things that are high risk should be scanned at 
a minimum.
    Mr. Clancey, you talked about the bilateral agreements that 
work in other countries. Senator Levin's question, and then my 
follow-up question, what if the United States simply said to 
folks in Japan, or in Hong Long, or LeHavre, or somewhere else, 
``We are not allowing stuff to go out if it has been identified 
high risk without there being some further level of review.'' 
Would that present any economic problems, any issues with that?
    Mr. Clancey. I think that if you had the scanners, if we 
had a system that we were comfortable with, and if we had the 
ability to interpret the data in real time and Customs reaches 
a conclusion that there's an issue here. I've worked and lived 
in a lot of countries around the world. I think that if the 
shipment was held for 1 hour, 2 hours, or 6 hours, it wouldn't 
be an issue.
    Senator Coleman. Mr. Koch.
    Mr. Koch. In listening to the conversation between 
yourselves and Mr. Jackson, I was struck by the question of 
whether or not there is some ambiguity on the term ``high 
risk.'' There are certainly some things that Customs is going 
to really want to take a close look at and inspect the 
container, where it's probably perfectly OK to do that in the 
U.S. port, if it's contraband, for example, if it's drugs, if 
it's those kinds of things.
    If, on the other hand, the government actually believes 
that there's a high risk that this box contains a terrorist 
potential, that should never be allowed to be loaded onto a 
ship and be brought to the United States.
    So I think the term ``high risk'' is used to describe a 
whole list of things that get triggered in their automated 
targeting system, some of which clearly require inspection in 
the foreign port, and some of which are probably perfectly OK 
to let in, and then you refuse to release the box at the U.S. 
port until it's gone through the inspection process. I think 
maybe some analysis in coming up with a clear definition of 
``high risk'' might handle----
    Senator Coleman. My problem is I am a former prosecutor, 
Mr. Koch, and I have a kind of philosophy that bad guys tend to 
hang out with bad guys, and if somebody is in the drug and 
human trafficking business, and I offered him another $50,000 
or $100,000 to transport this other piece of cargo, I do not 
think there would be any moral fiber that would say, I should 
worry about that. And that is why if it is high risk, I think 
we got to take a look at it.
    Mr. Koch. I don't think there's an ocean carrier out there 
that would object to the U.S. Government saying, ``Do not load 
any box the U.S. Government thought was a high-risk box.''
    Mr. Clancey. If I could add to that, Mr. Chairman, just so 
that you have a frame of reference to discuss this with your 
colleagues. In the peak, that's the busiest time of our year, 
each day thousands of boxes are rolled, and the roll means 
they're left behind. They're left behind because there's no 
space on the ship. So physically it's very easy to do, and 
sometimes it's a matter of policy.
    Senator Coleman. Mr. Clancey, you said at one point you 
believe we are doing good things but believe more can be done. 
And my last question before I turn to the Ranking Member is, 
what more can be done? What are we not doing we should be 
doing? And I would like each of you gentleman to address that.
    Mr. Clancey. I think that speed and velocity is terribly 
important. I mean I was not only pleased with Secretary 
Jackson's comments, I was surprised. But I think it is that 
type of speed execution that is terribly important. There's a 
lot of things being looked at, maybe there's 100, but there's 
probably 5 or 10 you could prioritize, implement, and even if 
they're not 100 percent perfect at this time, put them in 
place.
    Senator Coleman. And I would like to work with you further 
for you to identify those 5 or 10. We would like to know what 
the private side is saying and then see if government can move 
forward.
    Mr. Gilbert.
    Mr. Gilbert. Sir, I think one of the things that came out 
of DP World was the education of the American people, but some 
way, I think that went astray a little bit to fear-mongering as 
well. I think that this dialogue that you are having right now 
about where we are with foreign ownership, I think that needs 
to be explored more. And the public-private partnership is 
what's going to come from that, but if there's a fear side to 
having a public-private partnership with those that have 
headquarters in Denmark or Singapore, then that's going to be a 
very difficult thing.
    We are going to continue to put money into security because 
it is good for our industry, and the leader of our company 
believes that as an industry leader, that we must do that. But 
we need that to be embraced and worked with as we go forward in 
these pilots. Thank you, sir.
    Senator Coleman. Mr. Koch.
    Mr. Koch. I would agree with Mr. Gilbert and Mr. Clancey's 
comments. The only things I would add is in terms of 
priorities, first, the focus again on ICIS. How can it be 
integrated as another tool in the toolbox? That obviously means 
working with Customs very closely on developing acceptable 
operating protocols and agreements with foreign governments, 
because this is international trade and we can expect foreign 
governments to expect reciprocity. We can't just expect 
everybody in the world to do what we want in their ports 
without us being willing to do the same thing in our ports for 
our export cargo.
    Second, the TWIC, we are looking forward to seeing this 
move forward.
    But third, again, to emphasize that it is important in our 
view to improve the data used for cargo risk assessment. Our 
strategy today is based on risk assessment, and the data being 
used is good but it is limited. The Secure Freight Initiative 
that DHS has spoken about as a next-generation strategy, is 
exceptionally ambitious as described, involving great 
quantities of data from great quantities of people, potentially 
going to third party commercial sources before being used by 
the government. That's a wonderful vision, and it's a great 
vision, but it's a very ambitious agenda. We would hope that 
the government would not wait until that is ready to be rolled 
out before we take the next generation of improvement.
    Frankly, today, our customers give the government no data 
that can be used in the before-vessel-loading screening 
process, and we think that ought to be addressed because there 
are too many holes that could be easily closed by either the 
customer's entry data being provided, just as the carrier's 
entry data is provided, or other data elements that perhaps the 
government would want. That data should be given to CBP 24 
hours prior to vessel loading, so that the strategy we have 
embarked upon of doing the risk assessment before vessel 
loading can be matured into something that we could all have 
more confidence in.
    Senator Coleman. Very helpful, Mr. Koch. Thank you.
    Senator Levin.
    Senator Levin. Thank you, Mr. Chairman.
    I think one of you made reference to the percentage of 
American ports that are operated by foreign companies. Was that 
you, Mr. Koch?
    Mr. Koch. It's a substantial majority of the terminal 
operations being run by companies that are foreign-owned 
companies, yes.
    Senator Levin. What percentage of the terminal operations 
are owned by foreign companies in Japanese ports?
    Mr. Koch. I don't know the answer to that.
    Senator Levin. What would your guess be?
    Mr. Koch. The majority will be Japanese. I remember when--
--
    Mr. Clancey. 100 percent are Japanese.
    Senator Levin. I think that is----
    Mr. Clancey. But that's something the U.S. Government has 
been involved in for a long time.
    Senator Levin. Been involved in allowing that?
    Mr. Clancey. Trying to break that monopoly.
    Senator Levin. Yes, but we have not, have we?
    Mr. Clancey. We have not. That's the only country in the 
world probably where the monopoly hasn't been broken.
    Senator Levin. What are you guys going to do about that? Do 
you believe in foreign trade, foreign ownership--Mr. Koch, you 
are the head of the World Shipping Council. Are the Japanese 
part of that?
    Mr. Koch. Yes, they are.
    Senator Levin. What do they say when they are told, hey, 
you guys do not allow foreign ownership at your ports?
    Mr. Koch. They went through an experience several years ago 
with the Federal Maritime Commission pursuing that quite 
aggressively, and several years ago, when I worked for Mr. 
Clancey and we were all at Sealand together, we worked very 
hard to try to get into the Japanese ports, and it's a 
difficult problem.
    Senator Levin. Why do we tolerate it? Why do you tolerate 
it? Why don't you kick them out of your council?
    Mr. Koch. I think the shipping lines that are members of 
the council are responsible operators.
    Senator Levin. We talk about aggressive, but it is hitting 
your head against the wall if it does not succeed, and I find 
this such a one-way street. It is so typical of trade, as far 
as I am concerned. We look at our trade imbalance. Part of it 
is obviously caused by reasons of cheaper labor and a lot of 
other things, but part of it is just caused by closed markets 
to us, and if you want to hold up foreign ownership of ports as 
being part of a global economy, or port facilities here as 
being part of a global economy, it seems to me unless the 
private sector joins our government in trying to open up the 
Japanese or any other country that closes their market to us, 
it is going to continue to be a far different situation than a 
two-way street in trade.
    I do not know what more I can add on that subject, other 
than to tell you I am not particularly sympathetic in terms of 
the foreign ownership issues until all the countries who do 
trade with us, particularly these countries that have huge 
balances with us, positive trade balances with us, live by the 
same rules we do.
    So you can pass that angst along, and add it to a long 
list.
    Mr. Clancey. Yes, Senator, but it's also true that almost 
every other country in the world allow foreign companies to 
operate their ports and----
    Senator Levin. How about the Chinese?
    Mr. Clancey. Yes.
    Senator Levin. So what percentage of Chinese port 
facilities are owned by foreign interests? Do you know offhand?
    Mr. Clancey. Foreign investments, I'd say 30.
    Mr. Gilbert. Well, if you consider Hong Kong----
    Senator Levin. No, skip Hong Kong. Are you including Hong 
Kong, Mr. Clancey?
    Mr. Clancey. No, I'm not including Hong Kong.
    Senator Levin. You think it is 30 percent outside----
    Mr. Clancey. I would say that of the container activities 
between the Singaporeans, ourselves, Europeans, a lot of 
private capital venture funds, maybe 25 to 30.
    Senator Levin. And how about South Korea, are they open?
    Mr. Clancey. Yes.
    Senator Levin. So a significant percentage of their 
facilities would be owned by foreign interests?
    Mr. Clancey. Not a significant amount, but there's no 
limitations.
    Senator Levin. And no practical limitations either, OK. 
There is not barriers which are----
    Mr. Clancey. No.
    Mr. Gilbert. What has happened, Senator, is a number of 
countries have gone and privatized their ports because they're 
looking for private capital to come in. If you look at all of 
the investment that's gone into Korea in the past, it had been 
U.S. investment that turned into DPW investment when that was 
sold, significant investment from Hong Kong and significant 
investment from Singapore.
    If you look at the U.K., all of their ports are privatized. 
We operate about 60 percent of it in the north, and P&O Ports, 
now DPW, operates in the south. And that goes around the globe. 
Actually, capital goes where it's treated well, and in 
privatizations it is treated well.
    Senator Levin. How about Dubai in the Emirates, are their 
ports privately--their operations are owned by foreigners too?
    Mr. Clancey. Correct.
    Mr. Gilbert. I would point out though, Senator, an 
interesting fact, that when Jebel Ali, the biggest port in the 
Middle East, was----
    Senator Levin. Where is that?
    Mr. Gilbert. In Dubai. Was constructed, for the first 10 
years an American company ran that facility. And I know that 
because I was the first port director of that facility. And 
then they learned how to run their own facilities, and then 
they took them over, and in the past 2 years, have been 
expanding greatly into terminal operations.
    Senator Levin. Are they currently owned by a foreign 
interest in Dubai or the Emirates?
    Mr. Gilbert. I believe they are all owned by Dubai Port 
World now. If we go to other places such as Salalah, Denmark, 
A.P. Moller has a big facility there, and we have just bought 
one in Oman as well, SLR.
    Senator Levin. Twenty-four million containers come into the 
United States each year, 11 million by sea, 11 million by 
truck, 2 million by train, according to the figures I have 
used. I assume those are all filled containers?
    Mr. Koch. For ocean, the inbound trade is generally filled, 
yes.
    Senator Levin. And how about going out?
    Mr. Koch. A lot of air.
    Senator Levin. A lot of empty containers?
    Mr. Koch. A lot of empties.
    Senator Levin. What percentage of the containers that leave 
the United States leave empty, by sea?
    Mr. Koch. I believe there's about 7 million export 
containers, and I believe between 6\1/2\ and 7 million. I can 
check that figure for you.
    Senator Levin. That go back loaded?
    Mr. Koch. Loaded.
    Senator Levin. So half are loaded, half of them empty.
    Mr. Koch. The carrier will have to reposition the empty 
from here back to Asia to pick up a load, so that you always 
have to maintain equipment balance.
    Senator Levin. But would you say that of the 11 million 
coming by ocean into the United States, perhaps half go back 
somewhere empty?
    Mr. Koch. Probably not quite that high, but it's certainly 
a large percentage.
    Senator Levin. Forty to 50 percent?
    Mr. Koch. Forty percent is probably getting close.
    Senator Levin. Would you know the figure by truck? Would 
any of you have an idea by truck?
    [No response.]
    Senator Levin. OK. I think, Mr. Koch, you said it would be 
wrong for Congress to restrict foreign investment in any way in 
our port facilities. Do you consider that the law that we have 
on the books currently, which requires a 45-day formal 
investigation where there is an allegation that a transfer 
could affect the national security of the United States, do you 
consider that to be an inappropriate restriction?
    Mr. Koch. No, sir.
    Senator Levin. Mr. Gilbert, you talked about ICIS, and I am 
interested as to whether or not there is any other similar 
technologies being developed, or is ICIS kind of by itself 
there?
    Mr. Gilbert. It was an engineering and proof-of-concept 
study, and we have told all the vendors that just as we build 
cranes and buy cranes, that we don't have a specific vendor. So 
we think that if this is accepted, that images as well as 
radiation screening, then we will have the start of a market 
that many vendors will come into, both lowering the cost and 
increasing the capabilities and ability to do better scans and 
better radiation detection.
    Senator Levin. So those others at that point will be able 
to utilize those technologies? They are not patented or not----
    Mr. Gilbert. The key is that the radiation portal can be 
pretty much interchanged. The one on the scan, the uniqueness 
of the vendor that has provided to us, is able to open a 
shutter and close a shutter as a truck moves through. So they 
have that pretty much now as a prototype that others have not 
done. Once that somebody knows there's a market for it, they 
will be building it quickly.
    Senator Levin. You think then there will be competitors?
    Mr. Gilbert. We absolutely will request competitors for 
sure.
    Senator Levin. Mr. Gilbert, there have been allegations 
about the relationship between your company and the Chinese 
Government. Is there any relationship, and if so, what is it?
    Mr. Gilbert. We are a publicly traded company, and we have 
been since we started as the No. 1 company in 1866, with a 
hand-over and reversion in 1997. We became part of a SAR, and 
the whole Hong Kong----
    Senator Levin. What is an SAR?
    Mr. Gilbert. The Special Administrative Region of China.
    Senator Levin. OK.
    Mr. Gilbert. And the Hong Kong Exchange fell within that. 
An interesting side, we have HPH is talked about, but actually, 
HSBC, the first director of HPH went to HSBC, the bank, and 
they're there. We've got a particular note because of the fact 
that we have a lot of investment in China, but we have no 
government shares in our company whatsoever.
    Senator Levin. So the government has no connection to your 
company?
    Mr. Gilbert. Well, we certainly are good citizens in every 
country----
    Senator Levin. I know that, but in terms of ownership or 
control.
    Mr. Gilbert. There is no ownership or control, sir.
    Senator Levin. Thank you. My time is up. Thank you very 
much. Thank you all.
    Senator Coleman. Thank you, gentlemen. It has been a very 
informative, very helpful panel, and we are very appreciative, 
so thank you much.
    With that, this hearing is adjourned.
    [Whereupon, at 12:25 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              

                  PREPARED STATEMENT OF SENATOR AKAKA

                             March 30, 2006

    Thank you, Mr. Chairman. I commend you for holding this series of 
hearings on the critically important issue of securing our global 
supply chain.
    As you know, cargo security is especially important to my state of 
Hawaii because we receive 98 percent of imported goods via the sea. Any 
interruption in sea commerce would have a staggering impact on the 
daily lives of the people in Hawaii.
    We must do everything possible to ensure supply chain security 
while enabling and not impeding trade. This balancing act is critical--
with no room for error. Programs such as the Container Security 
Initiative (CSI) and the Customs-Trade Partnership Against Terrorism 
(C-TPAT) are part of that balancing act.
    CSI and C-TPAT have improved global supply chain security, but have 
not yet perfected supply chain security. Our vulnerabilities remain 
high, and there are considerable areas for improvement. These programs 
use voluntarily submitted information to focus scarce screening 
resources and target high-risk shippers and cargo. While all cargo is 
reportedly screened, only five percent is targeted for inspection.
    Both the Government Accountability Office (GAO) and the Department 
of Homeland Security's Inspector General have reported glaring 
weaknesses with Customs and Border Protection's (CBP) targeting 
methodology and execution. This targeting methodology, which forms the 
backbone of our present inspection process and plays a critical role in 
combating nuclear and radiological smuggling efforts, must be improved.
    To strengthen our targeting efforts, CBP must also ensure the 
nation's intelligence community is sharing counter-terrorism 
information to strengthen targeting methodologies. Although the number 
of ports participating in CSI and C-TPAT continues to grow, the number 
of CBP inspectors has not risen correspondingly. Because of CBP's 
inability to fully staff some ports, 35 percent of shipments are not 
targeted and, therefore, not subject to inspection overseas. GAO 
pointed out nearly a year ago these staffing imbalances and shortfalls.
    But, Mr. Chairman, it is not only GAO who has expressed concern 
over staffing. I've been contacted by the National Treasury Employees 
Union (NTEU) because of their concern over a decrease in staffing 
levels. Without a sufficient number of trained inspectors, how can we 
expect our borders to be protected? More troubling, the President's 
Budget for fiscal year 2007 requests an increase of only $32 million 
and 21 full-time employees for all CBP operations at ports of entry. 
This stands in contrast with other human capital initiatives within the 
Department, including a $41.7 million or 133 percent increase for 
funding MaxHR, the new personnel system at DHS. I question the 
Administration's commitment to address these critical staffing problems 
within CBP.
    As I've discussed before, I am also concerned about the potentially 
duplicative programs in the newly established Domestic Nuclear 
Detection Office (DNDO) and the National Nuclear Security 
Administration in the area of radiation detection technologies. These 
technologies must used effectively within the framework CSI and C-TPAT. 
Detection technologies must also be effective at detecting and 
deterring nuclear or radiological materials while also expediting the 
flow of commerce. The new DNDO runs the risk of becoming another layer 
of bureaucracy on a crowded organizational chart, duplicating 
technologies being developed elsewhere in the federal government, and 
siphoning off scarce science and technology funds from other programs. 
Thank you, Mr. Chairman.

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