[Senate Report 106-156]
[From the U.S. Government Publishing Office]



106th Congress                                                   Report
                                 SENATE
 1st Session                                                    106-156

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



 
                   CUSTOMS AUTHORIZATION ACT OF 1999

                                _______
                                

               September 10, 1999.--Ordered to be printed

                                _______


    Mr. Roth, from the Committee on Finance, submitted the following

                              R E P O R T

                        [To accompany H.R. 1833]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Finance, to which was referred the bill 
(H.R. 1833) to authorize appropriations for the United States 
Customs Service for fiscal years 2000 and 2001, and for other 
purposes, having considered the same, reports favorably thereon 
with an amendment and recommends that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
 I. Introduction......................................................2
        A. Purpose and Summary...................................     2
        B. Background and Need for Legislation...................     2
        C. Legislative History...................................     7
II. Explanation of the Committee Amendment...........................10
        A. Title I--Authorization of Appropriations for United 
            States Customs Service for Enhanced Inspection, Trade 
            Facilitation, and Drug Interdiction..................    11
            1. Section 101--Authorization of Appropriations......    11
            2. Section 102--Cargo Inspection and Narcotics 
                Detection Equipment for the United States-Mexico 
                Border, United States-Canada Border, and Florida 
                and Gulf Coast Seaports; Internal Management 
                Improvements.....................................    12
            3. Section 103--Peak Hours and Investigative Resource 
                Enhancement for the United States-Mexico Border, 
                the United States-Canada Border, Florida and Gulf 
                Coast Seaports, and the Bahamas..................    14
            4. Section 104--Agent Rotations; Elimination of 
                Backlog of Background Investigations.............    15
            5. Section 105--Air and Marine Operation and 
                Maintenance Funding..............................    16
            6. Section 106--Compliance with Performance Plan 
                Requirements.....................................    16
            7. Section 107--Transfer of Aerostats................    17
            8. Section 108--Report on Intelligence Requirements..    17
            9. Section 109--Authorization of Appropriations for 
                Program to Prevent Child Pornography and Sexual 
                Exploitation of Children.........................    18
        B. Title II--Customs Management..........................    18
            1. Section 201--Term and Salary of the Commissioner 
                of Customs.......................................    19
            2. Section 202--Internal Compliance..................    19
            3. Section 203--Report on Personnel Flexibility......    20
            4. Section 204--Report on Implementation of Personnel 
                Allocation Model.................................    21
            5. Section 205--Report on Detection and Monitoring 
                Requirements along the Southern Tier and Northern 
                Border...........................................    21
        C. Title III--Marking Violations.........................    22
            1. Section 301--Civil Penalties for Marking 
                Violations.......................................    22
III.Vote of the Committee............................................23

IV. Budget Effects of the Bill.......................................23
 V. Regulatory Impact and Other Matters..............................25
VI. Changes in Existing Law Made by the Bill, As Reported............25

                            I. INTRODUCTION


                         A. Purpose and Summary

    H.R. 1833, as amended by the Committee, would authorize 
appropriations necessary to improve Customs' ability to 
interdict drugs and other contraband while improving the entry 
and processing of legitimate commerce at our Nation's ports. 
The Committee amendment would also implement certain reforms in 
the internal management of the Customs Service, as well as 
require reports on certain personnel management reforms that 
are intended to provide the basis for future improvements in 
the allocation of Customs Service personnel and oversight of 
the agency's management by the Committee on Finance.

                 B. Background and Need for Legislation

    Chairman Roth initiated a comprehensive review of the 
Customs Service's operations at the outset of the 106th 
Congress to assess Customs' implementation of the Customs 
Modernization and Informed Compliance Act of 1993 (``Mod 
Act''). The objective was to ensure that Customs is adequately 
prepared to address the challenges of rapidly expanding global 
commerce.
    The review began with the identification by Committee staff 
of a number of areas for investigation. Committee staff 
identified those areas based on input from the Customs Service, 
the trade community, the General Accounting Office, 
representatives of Customs Service inspection personnel, law 
enforcement associations, and the Treasury Department, as well 
as the staff of the Committee on Appropriations regarding the 
funding of certain automated programs. In response to requests 
from Committee staff, the Customs Service arranged briefings on 
the various topics identified in the working draft of the 
Committee's outline, covering each of the areas proposed for 
investigation.
    Those initial efforts led to a final outline of areas 
designated for further inquiry, together with specific 
questions for the Customs Service in each of those areas. The 
Chairman and the Ranking Member, Senator Moynihan, jointly 
forwarded the final outline to Commissioner Raymond Kelly for 
the Customs Service's response. The outline focused on concerns 
raised with respect to the Customs Service's commercial 
operations, the agency's performance of its enforcement 
responsibilities, and the agency's internal management, 
particularly with respect to internal affairs.
    That effort, and the Customs Service's initial responses, 
led to a series of three hearings. The hearings focused on the 
three basic areas identified for further inquiry--commercial 
operations, enforcement, and internal management.

                  changing role of the customs service

    Testimony before the Committee reflected the changing 
nature of the Customs Service's functions since customs 
officers were first authorized to collect duties on goods in 
1789. While the collection of duties remains important, the 
Customs Service's role in facilitating legitimate commerce has 
grown with the increasing integration of the U.S. and world 
economies. In an era in which U.S. manufacturers depend on 
``just in time'' delivery of component products to maintain 
their international competitiveness, the Customs Service must 
enhance its ability to move legitimate trade through the 
Nation's ports to the loading docks of U.S. manufacturers, 
service providers, and retailers simply to allow the American 
economy to keep pace with the changing international economic 
environment.
    In addition, Customs bears the primary responsibility for 
implementing U.S. trade agreements at the border. While 
liberalizing trade in goods, services, and investment, trade 
agreements like the North American Free Trade Agreement 
(``NAFTA'') and those concluded as part of the Uruguay Round 
create new and more complex rules of the road for importers and 
exporters, such as new country-of-origin and marking rules, new 
tariff rates, and changes in the classification and valuation 
of goods entering the U.S. market. The ability of the Customs 
Service to provide timely guidance to the trade and transport 
communities that depend on such guidance to complete their 
transactions has become at least as important as the agency's 
revenue collection functions. Indeed, that guidance is 
essential to ensure timely compliance by the trade community 
and the efficient collection of duties.
    At the same time, testimony before the Committee also 
reflected the challenges facing Customs on the enforcement 
front. The Customs Service must balance its role in the 
facilitation of trade with its broad responsibility for 
enforcing the U.S. customs laws, the interdiction of drugs and 
other contraband, and the enforcement of U.S. food safety, 
consumer protection, environmental, child labor and 
intellectualproperty laws, among others.1 In 
addition, Congress has recently directed the Customs Service to expand 
its anti-terrorism programs, improve the reporting of trade statistics, 
enhance regulatory audit and laboratory services, open new ports of 
entry, and expand services at existing ports. According to testimony 
before the Committee, all told, Customs enforces over 400 laws for over 
40 U.S. agencies.
---------------------------------------------------------------------------
    \1\ The breadth of Customs' enforcement responsibility is reflected 
in the diverse legislation for which the agency bears either primary or 
partial responsibility for enforcement. Beyond its role in the 
enforcement of the U.S. trade laws contained in Title 19 of the United 
States Code, the Customs Service is now responsible for enforcing 
provisions of, inter alia, the Controlled Substances Act, the Export 
Administration Act, the Endangered Species Act, the Poison Prevention 
Act of 1970, the Wool Products Labeling Act, as well as legislation 
implementing the NAFTA, the Uruguay Round Agreements Act, and other 
trade agreements.
---------------------------------------------------------------------------

                 Challenges Facing the Customs Service

    In brief, the Committee's hearings underscored the fact 
that Customs is facing these mounting challenges without the 
resources necessary to achieve the objectives set by Congress. 
The strongest evidence of that fact lies in statistics that 
reveal a dramatic increase in the volume of trade that Customs 
must move through the Nation's ports, while constrained by real 
decline in its resources.
    Over the last 10 years, new trade agreements, lower trade 
barriers, and the prolonged expansion of the U.S. economy have 
resulted in the unparalleled expansion of U.S. trade, both 
inbound and outbound. Trade between the United States and 
Canada, for example, has doubled since the signing of the U.S.-
Canada Free Trade Agreement a decade ago, from $194 billion in 
1987 to $387 billion in 1997. Overall, the Customs Service 
expects that imports through U.S. ports will grow 50 percent 
over the next 5 years, from $761 billion to $1.1 trillion. 
Those figures imply a 10 percent annual increase in the number 
of commercial entries Customs will face at U.S. ports of entry.
    While the volume of trade has grown, the threat from drugs 
and other contraband, including the importation of explosives 
or other weapons of terror, has not subsided. While drug use in 
the United States has declined slightly in the past 10 years, 
the interdiction of illegal narcotics remains the single most 
difficult enforcement challenge facing the Customs Service. If 
anything, smuggling operations have become more sophisticated 
as Customs has enhanced its drug interdiction efforts through 
comprehensive programs like Operation Brass Ring, which has 
focused on interdiction at all U.S. borders with successful 
follow-up investigations. Such efforts have led to a 
significant payoff in increased seizures and arrests, but have 
also resulted in efforts by drug smugglers to find more 
sophisticated routes to bring their illegal wares to U.S. 
borders.
    Despite the steady expansion of Customs' responsibilities, 
the growth in legitimate international trade, and the growing 
sophistication of smugglers, Customs' budget declined over $100 
million dollars in real terms over the last 5 years. What that 
means, in practical terms, is that Customs, on a typical day, 
examines 1.3 million passengers, over 338,000 vehicles, 40,000 
trucks or containers, 2,440 aircraft, and 547 vessels with 
approximately 10 percent fewer resources than it had 5 years 
ago. On that same day, Customs will have seized 3,654 pounds of 
narcotics, $1.2 million in illegally transported U.S. currency, 
$18,000 worth of arms and ammunition, $455,000 in vehicles and 
other commercial merchandise stolen or used in the commission 
of a violation of the customs laws. It will have made 64 
arrests, 87 narcotics seizures, 12 currency seizures, and 139 
other enforcement seizures of conveyances, arms and ammunition, 
commercial merchandise, child pornography, and other 
contraband. Again, all that with 10 percent fewer resources 
than it had to perform its functions five years ago.

            Implementation of the Customs Modernization Act

    Customs has maintained a relatively high level of service 
to persons and cargo entering the United States despite the 
decline in its resources. That has been largely due to reforms 
introduced by the Customs Modernization Act (or ``Mod Act,'' as 
it is popularly known), which was passed together with 
legislation implementing the North American Free Trade 
Agreement, and due to reforms introduced by then-Commissioner 
of Customs George Weise.
    Those reforms led to a major reorganization of the agency 
made effective in 1995 that removed layers of bureaucracy and 
focused the agency on core processes that are its primary 
functions. The reorganization, first formulated in a path-
breaking program known as, ``People, Processes, and 
Partnerships,'' was designed to take advantage of the 
provisions of the Mod Act that imposed a greater burden 
forensuring compliance on the importing and exporting community. By 
shifting its focus toward account-based processing for major U.S. 
importers maintaining a strong internal compliance program, Customs 
could shift greater resources to front-line inspection and enforcement 
activities.
    The philosophy behind the reorganization also reinforced 
the enforcement activities of the agency. According to 
testimony before the Committee, by expanding its work with the 
trade and transport community through such programs as the 
Business Anti-Smuggling Coalition, Customs was able to cut off 
contraband at its source in foreign ports and increase the 
efficiency of its own enforcement and interdiction efforts.
    The expansion of Customs' responsibilities and the growing 
volume of trade, combined with the real decline in resources, 
however, has begun to erode seriously Customs' ability to 
handle the daily volume of entries at U.S. ports of entry and 
its enforcement responsibilities. Testimony before the 
Committee underscored the extent to which increased vigilance 
and inspection, together with the lack of available resources 
during peak hours, has significantly disrupted commerce and the 
livelihood of many along both our northern and southern 
borders.
    Customs and Immigration and Naturalization Service under-
staffing is now reported to be the number one cause of 
congestion at the border. Despite significant investments in 
new infrastructure at land border crossings on both the 
northern and southern borders, the infrastructure goes unused 
for lack of personnel to open additional traffic lanes during 
peak hours. On that point, both government and private sector 
witnesses before the Committee agreed. Current resource 
constraints are forcing Customs to make choices between trade 
facilitation and enforcement activities on a daily basis. Lanes 
open for commercial traffic often must be closed when a seizure 
takes place in order to provide staff to handle the work 
related to the seizure.

          Addressing the Challenges Facing the Customs Service

    According to the current Commissioner of Customs, Raymond 
Kelly, the key to meeting Customs' many responsibilities is to 
increase the efficiency of Customs' resources through a 
significant investment in new technology and through innovative 
means of cooperation with other agencies and with the business 
community. Investments in technology may take two forms--
investments in information technology that would facilitate the 
processing of commercial traffic while enhancing enforcement 
efforts, and the application of new non-intrusive methods of 
searching vehicles and cargo, principally through the use of X-
ray technology.
    Testimony from both government and private sector witnesses 
emphasized the perilous state of the outdated Customs Service 
data processing systems and the need for implementation of a 
new system known as the ``Automated Commercial Environment'' or 
``ACE.'' The witnesses underscored that the currently used 
Automated Commercial System (ACS) relies on technology almost 
two decades old and is now obsolete and seriously overburdened. 
In the past year alone, system failures have diminished 
Customs' ability to provide service to the trade on several 
occasions. Testimony before the Committee indicated that as the 
volume of transactions processed by ACS continues to increase, 
so too will the number of service brown-outs, potentially 
culminating in a catastrophic systems failure in the not so 
distant future. The testimony focused on the need to ensure 
that Customs was capable of meeting the needs of the importing 
and exporting community. Perhaps the most powerful testimony 
before the Committee underscored the extent to which U.S. 
industry relies on ``just in time'' delivery of parts and 
components, many of which are imported from abroad, as a means 
of reducing inventory costs and maintaining international 
competitiveness. Without improvements in Customs' ability to 
handle the increased volume of entries through improvements in 
its data processing abilities, Customs will increasingly become 
an impediment to the ability of U.S. companies to operate on a 
``just in time'' basis and an obstacle to American 
competitiveness.
    As testimony before the Committee bears out, however, 
investments in technology are unlikely to address all of 
Customs' problems or even to improve efficiency if they are not 
coupled with an adequately trained workforce capable of 
employing such technological improvements. Plainly, the acute 
problems experienced during peak hours at land entry points 
along the northern and southern borders also require either the 
reallocation or employment of additional personnel.
    The testimony before the Committee bore out the need for 
expanded inspection personnel at ports of entry along both 
borders and along Florida and gulf coasts. At the same time, 
serious questions have been raised by recent General Accounting 
Office studies regarding Customs' ability to determine its 
baseline inspection personnel needs at any particular port of 
entry or throughout the Customs Service asa whole. While the 
need for further inspection personnel is clear, the issue of the 
Customs Service's personnel policies will require further scrutiny by 
the Committee in the future.
    The need for further scrutiny applies with equal force to a 
number of other issues that bear on the efficiency of Customs' 
use of its available resources. Any relative neglect of certain 
basic trade processes, such as classification, valuation, and 
duty drawback, when considering the need for additional 
personnel, could further erode the agency's ability to achieve 
its goals. If the key to future efficiency gains rests as much 
with obtaining the cooperation of major importers and exporters 
under the concept of ``informed compliance'' required by the 
Mod Act, it is not in Customs' interest, either from the 
perspective of alleviating resource constraints or achieving 
high rates of compliance, to undercut the ability of business 
to comply with the law by failing to provide timely, accurate, 
and consistent advice regarding the basic conditions of 
importing into the country.
    The Committee amendment, as discussed in further detail 
below, authorizes those funds necessary to ensure improvements 
in Customs' operations, as well as to initiate management 
reforms that will ensure that Customs is fully capable of 
addressing the challenges of global commerce. In the 
Committee's view, however, passage of the legislation would 
mark only the first step in an ongoing process of Finance 
Committee oversight of the Customs Service and its operations. 
The authorizing legislation suggests a number of areas where 
Congress should be willing to provide the resources Customs 
needs to perform its functions. The authorization of those 
resources is nonetheless conditioned on continuing improvement 
in Customs' delivery of its services and in its internal 
management.

                         C. Legislative History

    H.R. 1833, as passed by the House of Representatives, 
authorized appropriations for the Customs Service, the U.S. 
Trade Representative, and the International Trade Commission. 
Insofar as H.R. 1833 addressed the needs of the Customs 
Service, it built upon legislation originally introduced in the 
Senate in the 105th Congress. The Committee on Ways and Means 
reported the legislation favorably with amendments on May 24, 
1999. The House of Representatives passed the measure on May 
25, 1999, and forwarded it to the Senate, where it was referred 
to the Committee on Finance on May 27, 1999.

                        finance committee action

    As part of the Chairman's comprehensive review of Customs 
Service operations, the Finance Committee held a series of 
three hearings on May 13, 18, and 25, 1999. Those hearings 
focused, respectively, on Customs' commercial operations, its 
enforcement responsibilities, and certain internal management 
issues, particularly needed improvements in the agency's 
handling of internal affairs.
    At its initial May 13 hearing on Customs' commercial 
operations, the Committee heard from Raymond Kelly, the 
Commissioner of Customs, on the specific challenges facing the 
agency, the improvements in technology and personnel required 
to address those challenges, and management reforms undertaken 
by the Commissioner as part of his initial action plan, 
particularly in the area of internal affairs. The Committee 
also heard from the Under Secretary of Treasury for 
Enforcement, James Johnson, regarding the priority the 
Administration places on enhancing the Customs Service's 
ability to secure the Nation's borders while improving the 
agency's ability to process legitimate inbound and outbound 
trade.
    The Committee heard as well from a panel of private sector 
panelists who reinforced the message that Customs needs 
additional resources for the acquisition of both technology and 
personnel to meet the challenge of global commerce. The panel's 
testimony underscored the importance of funding improvements in 
the Customs Service's data processing capabilities, and the 
need for rapid implementation of the Customs Service's proposed 
Automated Commercial Environment. Testimony from the General 
Accounting Office indicated that many of GAO's concerns, as 
reflected in prior GAO reports, had been addressed by the 
Customs Service, and that the agency's actions had improved the 
prospects for early implementation of the ACE proposal.
    In addition, the Committee heard testimony from a variety 
of private sector witnesses who raised a number of concerns 
regarding the Customs Service's commercial operations, its 
implementation of the Customs Modernization Act, and the 
agency's implementation of information technology plans in a 
manner consistent both with the agency's goals and the manner 
in which international business is actually conducted by 
industry.
    On May 18, 1999, the Committee's hearing focused on the 
Customs Service's performance of its enforcement 
responsibilities. The Committee heard first from a protected 
witness who had previously been engaged in the smuggling of 
narcotics into the United States. The witness' testimony 
underscored the vulnerability of the Customs Service's 
enforcement efforts in the absence of congressional action to 
authorize additional investigative agents, increase the 
agency's intelligence gathering capabilities, and other 
cooperative actions designed to move the border offshore (i.e., 
working cooperatively with foreign governments and with 
importers to shield legitimate commerce from abuse by 
smugglers).
    The second panel at the May 18 hearing addressed the 
difficult topic of how best to measure enforcement performance. 
The witnesses offered varying perspectives on that problem, 
which helpfully identified areas for further inquiry with the 
Customs Service, but each underscored the value of the approach 
Customs has recently adopted itself--a determined effort to 
raise the cost of illicit trafficking in narcotics and other 
contraband in order to eliminate its profitability and its 
attraction both to foreign exporters of such illegal products 
and their transportation network.
    The Committee held its third day of hearings on May 25, 
1999. The final hearing focused on Customs' internal 
management. The testimony identified some weaknesses in the 
agency's past management of its internal affairs functions. 
Testimony before the Committee reflected the extent to which 
Commissioner Kelly had already moved aggressively to address 
the problems identified in the hearings, particularly in the 
area of internal affairs. The area is nonetheless one that the 
Committee intends to follow closely in the future because the 
credibility of the Customs Service's improvements in all areas 
of its responsibilities, but particularly in the area of 
enforcement, depends ultimately on the integrity of the agency 
and its inspectors and agents.
    The third day of hearings also focused on the elements of 
sound private sector internal compliance programs. The 
Committee heard testimony emphasizing the importance of a sound 
internal compliance programs to any organization's operations 
and identifying the building blocks of such program. The 
testimony reinforced the Committee's view that the Customs 
Service must reach beyond the basic enforcement mentality of 
its current internal affairs operations to a broader vision of 
internal compliance--one that ensures that the agency is 
performing at its optimal level of performance, not just the 
minimum necessary to ensure that the Customs Service and its 
employees adhere to the letter of the law. The Committee 
intends to followclosely the Customs Service's initial attempts 
to develop such an internal compliance program within its Office of 
Internal Affairs and expects to be kept abreast of any initiatives 
designed to foster improvements in Customs' performance that are 
introduced as a part of that effort.
    Based on the record developed as part of the Chairman's 
comprehensive review, the Committee marked up an amendment to 
H.R. 1833 on June 16, 1999. As explained in greater detail 
below, the amendment passed and the Committee favorably 
reported H.R. 1833, as amended, to the full Senate with the 
recommendation that the measure pass.

               previous authorizations and appropriations

    The statutory basis for the current authorization of 
appropriations for Customs is found in section 301(b) of the 
Customs Procedural Reform and Simplification Act of 1978 (19 
U.S.C. 2075(b)). The 1978 Act, as amended by section 8102 of 
the Omnibus Budget and Reconciliation Act of 1986, requires 
separate authorizations and appropriations for salaries and 
expenses related to commercial and non-commercial (i.e., 
enforcement) operations. For purposes of comparison, the 
figures listed below are total figures for salaries and 
expenses.
    The most recent authorization of appropriations for Customs 
took place in 1990 as part of the Customs and Trade Act of 1990 
(Pub. L. No. 101-382). That Act provided $1,247,000 for total 
salaries and expenses and $150,199,000 for air and marine 
interdiction and other operations and maintenance in fiscal 
year 1992. That authorization expired in 1992 and Customs has 
been without a new authorization for appropriations since that 
time.
    Total appropriations for Customs for fiscal year 1999 
equaled $2.1 billion. Of that amount, Congress appropriated 
$1,642,565,000, and added emergency supplemental appropriations 
of $106,300,000 for salaries and expenses, for a total of 
$1,748,865,000 for salaries and expenses. Congress also 
appropriated $276,388,000 for operations and maintenance, 
including air and marine operations.
    The President's fiscal year 2000 budget request asked for 
total appropriations of $1.6 billion, or a 23 percent decrease 
from actual fiscal year 1999 appropriations, and $1 billion 
less than the amount requested by Customs. Of that amount, the 
President recommended that fully one-quarter of the Customs 
Service's operations be funded through new taxes in the form of 
user fees.
    H.R. 1833, as passed by the House, would authorize a total 
of $1,154,359,000 for fiscal year 2000 for Customs' commercial 
operations, including a specific authorization of $150,000,000 
for the development of the Automated Commercial Environment. 
For Customs' enforcement activities, H.R. 1833 would authorize 
a total of $999,563,000 for fiscal year 2000, including a 
specific increase of $227,100,000 or 18.4 percent for drug 
interdiction resources over the President's FY 2000 request. 
H.R. 1833 would, in addition, authorize $109,413,000 for air 
and marine interdiction, for a total FY 2000 appropriation of 
$2,263,335,000.
    For fiscal year 2001, H.R. 1833 would authorize 
$1,194,534,000 for commercial operations, including an 
additional $150,000,000 for ACE funding; $996,464,000 for 
enforcement activities; and $113,789,000 for air and marine 
interdiction and other operations and maintenance. That 
represents a total FY 2001 authorization of $2,304,787,000.

                      II. EXPLANATION OF THE BILL

    The Committee's amendment builds on the approach adopted in 
the 105th Congress by the Finance Committee in the Committee's 
amendment to H.R. 3809, the Drug Free Borders Act of 1998 and 
several bills introduced in the 106th Congress--S. 689, 
introduced by Senators Grassley and Graham, S. 685, introduced 
by Senator Gramm, and S. 219, introduced by the Ranking Member, 
Senator Moynihan. The core of the proposed amendment to H.R. 
1833 authorizes appropriations to improve Customs' performance 
of its basic missions, the facilitation of trade and the 
enforcement of the customs laws. It also fulfills Congress' 
commitment to ensure the Customs Service's ability to better 
serve the trade community, as well as enhance its enforcement 
performance, by authorizing the appropriations needed to 
implement ACE.
    The Committee's amendment would also make certain changes 
designed to institutionalize the positive internal changes 
under way within the agency. Those include the creation of a 
renewable fixed-term of 5 years for the Commissioner of Customs 
and the requirement that candidates for the position 
demonstrate significant management expertise. The amendment 
would, in addition, implement a newprogram of internal controls 
designed to improve Customs' ability to assess its own performance in 
such basic areas as the implementation of the Customs Modernization 
Act. The Committee supports the reforms that are under way within 
Customs aimed at improving Customs' internal controls. The Committee 
looks forward to reviewing the agency's progress.
    As reflected in the section-by-section analysis below, the 
Committee's amendment is divided into three titles. The first 
would authorize the appropriation of additional resources for 
trade facilitation needed to implement fully Congress' intent 
under the Customs Modernization Act as well as authorize 
additional amounts for aggressive enforcement of U.S. customs 
laws. Title II would, by contrast, make certain changes with 
respect to the internal management of the agency that are 
designed to foster continuity in the leadership of the 
organization and improved internal compliance and performance 
assessment. Title III would introduce certain modifications to 
the provisions of Title 19 of the U.S. Code governing the 
enforcement of marking rules once goods have entered the U.S. 
stream of commerce.
    With respect to the authorization of appropriations, the 
Committee's amendment applies to fiscal years 2000 and 2001, as 
does H.R. 1833. The amendment would authorize approximately 
$109 million more for commercial operations in fiscal year 2000 
and $348 million in fiscal year 2001 than would the House-
passed bill. Virtually all of that increase relates to higher 
amounts authorized for ACE funding, consistent with the capital 
budget for the project estimated by Customs.
    For non-commercial operations, the Committee's amendment 
would add approximately $20 million to the H.R. 1833 fiscal 
year 2000 authorization and $83 million less in fiscal year 
2001. The amendment proposal would authorize $119 million and 
$63 million more for air and marine operations than H.R. 1833 
in fiscal years 2000 and 2001, respectively.

 A. Title I--Authorization of Appropriations for United States Customs 
     Service for Enhanced Inspection, Trade Facilitation and Drug 
                              Interdiction


            1. section 101--authorization of appropriations

Present law

    As noted above, the most recent authorization of 
appropriations for Customs approved by Congress was in 1990. 
The final year of that authorization, for fiscal year 1992, 
provided $1,247,884,000 for salaries and expenses and 
$150,199,000 for operations and maintenance. Fiscal year 1998 
appropriations totaled $1,522,165,000 for salaries and expenses 
and $92,758,000 for operations and maintenance.

Explanation of provision

    Section 101 of the Committee's amendment would authorize 
appropriations for enforcement, commercial operations, and air 
and marine interdiction in fiscal years 2000 and 2001. It would 
also require Customs to provide out-year budget projections for 
fiscal years beyond 2001.
    Specifically, section 101(a) would amend section 301(b) of 
the Customs Procedural Reform and Simplification Act of 1978 to 
authorize $1,029,608,384 and $1,111,450,668 for drug 
enforcement and other non-commercial operations in fiscal years 
2000 and 2001 respectively.
    Section 101(b)(1) would authorize $1,251,794,435 in fiscal 
year 2000 and $1,348,676,435 in fiscal year 2001 for Customs 
Service commercial operations.
    Section 101(c) would, in addition, authorize appropriations 
of $229,001,000 and $176,967,000 for air and marine 
interdiction and other operations and maintenance in fiscal 
years 2000 and 2001 respectively.
    Section 101(d) would require Customs to submit to the 
Finance and Ways and Means Committees the budget request 
submitted by Customs to the Secretary of the Treasury for 
fiscal year 2000 and each succeeding fiscal year.
    Section 101(e)(1) would establish within the U.S. Customs 
Service an Automation Modernization Working Capital Fund, under 
which amounts appropriated for the maintenance of the current 
Automated Commercial System, the establishment of the Automated 
Commercial Environment, and other automation projects would 
remain available to Customs until expended and contracts could 
be authorized for multiple years. Section 101(e)(2) would 
authorize the appropriation of such additional amounts needed 
to implement fully the Customs Service's Automated Commercial 
Environment up to a maximum of $242,000,000 for fiscal year 
2000and $336,000,000 for fiscal year 2001, which is consistent 
with Customs' estimated capital budget for full implementation of ACE 
in each of those fiscal years.
    Section 101(e)(3) would require the Commissioner to report, 
on a semiannual basis, to the Senate Finance Committee, the 
House Ways and Means Committee, and the Senate and House 
Appropriations Committees on the agency's progress in 
implementing the Automated Commercial Environment. The 
reporting requirement would focus, in particular, on Customs' 
progress in eliminating any deficiencies previously identified 
by the General Accounting Office (``GAO'') in the 
implementation of Customs' automated systems modernization 
projects. The provision would also direct GAO to audit Customs 
reports and progress in implementing ACE and other automation 
projects.
    Thus, section 101 would provide a total authorization of 
$2,523,402,819 for salaries and expenses in fiscal year 2000, 
which includes the estimated fiscal year 2000 capital budget 
for ACE funding, and $229,001,000 for air and marine 
interdiction and other operations and maintenance. For fiscal 
year 2001, section 101 would authorize a total of 
$2,796,127,103 in salary and expenses, also including the 
estimated fiscal year capital budget for ACE funding, and 
$176,967,000 for air and marine interdiction and other 
operations and maintenance.

Reasons for change

    Section 101 recognizes the efforts that Customs has made, 
in response to the Customs Modernization Act of 1993, to reform 
its own operations and to manage itself on an increasingly 
efficient basis. It also recognizes the significant new 
challenges Customs faces due to expanding statutory 
responsibilities, significant increases in the level of 
international trade, both inbound and outbound, passing through 
U.S. ports, and the rising level of sophistication of smugglers 
of drugs and other contraband that will require a greater 
investment in resources on Customs part to combat.
    In particular, section 101 underscores the importance of 
the full implementation of the ACE program to support Customs' 
commercial operations and its enforcement activities. Section 
101 would establish a working capital account into which funds 
could be appropriated for the implementation of the ACE 
program, but would allow for greater certainty in Customs' 
financial planning for the project and provide the authority to 
let contracts that might extend beyond the current fiscal year 
in which the funds were appropriated.

2. Section 102--Cargo Inspection and Narcotics Detection Equipment for 
   the United States-Mexico Border, United States-Canada Border, and 
      Florida and Gulf Seaports; Internal Management Improvements

Present law

    No provision.

Explanation of provision

    Out of the total funds authorized by section 101, section 
102(a) would earmark specific amounts for certain express 
purposes. Those purposes would include specific amounts for 
commercial operations and enforcement activities at northern 
and southern land border entry points, as well as at Florida 
and Gulf Coast ports of entry. They would also include 
additional amounts to improve Customs' management performance, 
particularly the agency's internal management information 
systems, as well as additional amounts to address the problem 
of preventing the circumvention of certain rules on textile 
imports. The designated amounts would be distributed as 
follows.
    For the United States-Mexico border: $6 million for 8 
vehicle and container inspection systems; $11 million for 5 
mobile truck X-rays; $12 million for upgrade of 8 fixed-site 
truck X-rays; $7.2 million for 8 pallet X-rays; $1 million for 
200 portable contraband detectors; $0.6 million for 50 
contraband detection kits; $.5 million for 25 ultrasonic 
container inspections units; $2.45 million for 7 automated 
targeting systems; $0.36 million for 30 rapid tire deflator 
systems; $0.48 million for 20 portable Treasury Enforcement 
Communications Systems terminals; $1 million for 20 remote 
watch surveillance cameras; $1.254 million for 57 weigh-in-
motion sensors; $0.180 for 36 AM band traffic information radio 
stations; $1.04 million for 260 inbound vehicle counters; $0.95 
million for 38 counter surveillance spotter cameras; $0.39 
million for 60 inbound commercial truck transponders; $1.6 
million for 40 narcotics vapor and particle detectors; $0.4 
million for license plate reader automatic targeting software; 
and $1 million for a demonstration site for a high-energy 
relocatable rail car inspection system at a shared Defense 
Department testing facility for a two-month period.
    For the United States-Canada border: $3 million for 4 
vehicle and container inspections systems; $8.8 million for 4 
mobile truck X-rays; $3.6 million for 4 pallet X-rays; $0.25 
million for 50 portable contraband detectors; $0.3 million for 
25 contraband detection kits; $0.24 million for 10 portable 
Treasury Enforcement Communications Systems; $0.4 million for 
10 narcotics vapor and particle detectors; $0.6 million for 30 
fibre optic scopes; $0.25 million for 50 portable contraband 
detectors (busters); $3 million for 10 portable X-ray vans with 
particle detectors; $0.04 million for 8 AM loop radio systems; 
$0.4 million for 100 vehicle counters; $1.2 million for 12 
examination tool trucks; $2.4 million for 3 dedicated commuter 
lanes; $1.05 million for 3 automated targeting systems; $0.572 
million for 26 weigh-in motion sensors; and $0.48 million for 
20 portable Treasury Enforcement Communication Systems.
    For Florida and Gulf coast seaports: $4.5 million for 6 
vehicle and container inspection systems; $11.8 million for 5 
mobile truck X-rays; $7.2 million for 8 pallet X-rays; $0.25 
million for 50 portable contraband detectors; and $0.3 million 
for 25 contraband detection kits.
    For internal management: $2.5 million for an internal 
affairs automated systems; $0.7 million for enhanced internal 
affairs file management systems; $2.7 million for enhanced 
financial asset management systems; $6.1 million for an 
enhanced human resources information system to improve 
personnel management; $2.7 million for new data management 
systems for improved performance analysis, internal and 
external reporting, and data analysis; and $1.7 million for 
automation of the collection of key export data as part of the 
implementation of the Automated Export System and to improve 
Customs' ability to enforce the U.S. export control laws.
    Section 102(b) would authorize $3,364,435 for each of 
fiscal years 2000 and 2001 for textile transshipment.
    Section 102(c) would authorize $9,923,500 for maintenance 
and support of the equipment identified above and for training 
of personnel to maintain and support such equipment.
    Section 102(d) would allow the Commissioner flexibility in 
spending the amounts specified in section 102(a) if he were to 
find that technologically superior equipment designed for the 
same purpose was available. In addition, section 102(d) would 
allow some room for reallocation (not to exceed 25 percent) 
among the various enumerated items within any geographic area 
identified above as needed.

Reasons for change

    The provision reinforces the focus of the authorization on 
the specific needs of the Customs Service to meet the rising 
challenges of both increasing levels of legitimate commerce and 
the need for stronger vigilance and enforcement. The provision 
also reinforces the Customs Service's ability to ensure proper 
data management in order to effectively and efficiently manage 
the agency, particularly its internal affairs function.

   3. section 103--peak hours and investigative resource enhancement

Present law

    No provision.

Explanation of provision

    Section 103(a) would authorize a net increase in personnel 
to enhance Customs' ability to address peak loads at various 
points of entry and to increase investigative personnel 
dedicated to the interdiction of drugs and other contraband as 
follows:
          Net increase of 535 inspectors, 120 special agents, 
        and 10 intelligence analysts for the United States-
        Mexico border and 375 inspectors for the United States-
        Canada border in order to open all primary lanes on 
        such border during peak hours;
          Net increase of 285 inspectors and canine enforcement 
        officers on the United States-Mexico border and a net 
        increase of 125 inspectors on the United States-Canada 
        border to be distributed at large cargo facilities in 
        order to reduce commercial waiting times;
          Net increase of 40 special agents and 10 intelligence 
        analysts to facilitate the activities of the additional 
        inspectors;
          Net increase of 40 inspectors at sea ports in 
        southeast Florida to process and screen cargo;
          Net increase of 70 special agents, 23 intelligence 
        agents, nine support staff, and the necessary equipment 
        to enhance investigation efforts targeted at internal 
        conspiracies at the nation's sea ports;
          Net increase of 360 special agents, 30 intelligence 
        analysts, and additional resources for use in ports 
        that have jurisdiction over major metropolitan drug or 
        narcotics distribution and/or transportation centers;
          Net increase of two special agents to staff a Customs 
        attache office in Nassau, Bahamas;
          Net increase of 62 special agents and eight 
        intelligence analysts for maritime smuggling 
        investigations and interdiction operations;
          Net increase of 50 positions and additional resources 
        to staff adequately the Office of Internal Affairs to 
        enhance investigation of anticorruption efforts; and
          Funds necessary to cover the cost incurred as a 
        result of the increase in personnel hired pursuant to 
        that provision of the authorizing legislation.
    Section 103(b) would permit the Commissioner flexibility in 
personnel allocation, particularly in light of the 
Commissioner's ongoing testing of a personnel allocation model 
called for by the General Accounting Office, by permitting the 
reallocation of not more than 25 percent of the amounts noted 
above from one function to another.

Reasons for change

    The provision recognizes the need to provide for a stronger 
commitment to enforcement, intelligence gathering, and the 
maintenance of the high standards of integrity within the 
Customs Service that are fundamental to a stronger enforcement 
effort, as well as to the improvement of commercial operations.

 4. section 104--agent rotations; elimination of backlog of background 
                             investigations

Present law

    No provision.

Explanation of provision

    Section 104 would, out of the amounts authorized under 
section 101, provide additional funding to clear the backlog of 
existing background investigations as part of an effort to 
accelerate the recruitment and training of new inspectors and 
agents. The provision would also provide specific authorization 
for the interoffice transfer of up to 100 special agents, 
including the cost of relocation, between the Office of 
Investigations and the Office of Internal Affairs at the 
direction of the Commissioner in an effort to reinforce the 
capabilities of the internal affairs efforts at Customs.

Reasons for change

    The amounts authorized in section 101 for additional 
inspection and enforcement personnel will require Customs to 
begin recruitment to fill the ranks of both inspectors and 
special agents. Section 104 would authorize certain amounts out 
of the totals authorized in section 101 to assist in 
accelerating the hiring of new inspectors and agents by 
clearing the existing backlog of background investigations.
    Section 104 responds to the testimony provided to the 
Committee by the General Accounting Office and others, as well 
as the report on Customs' internal affairs operations completed 
by the Treasury Department's Office of Professional 
Responsibility, concerning the relative weakness of the 
internal affairs effort at Customs. The provision would 
reinforce the steps taken by current management to improve the 
performance of a function that is critical to the integrity and 
the public's perception of the agency. It would authorize 
additional amounts out of the totals set out in section 101 to 
provide for the regular rotation of agents into the Office of 
Internal Affairs from the field.

   5. section 105--air and marine operations and maintenance funding

Present law

    No provision.

Explanation of provision

    Section 105 would earmark additional amounts out of the 
totals set out in section 101 to improve the Customs Service's 
air and marine interdiction efforts as follows:
          For fiscal year 2000, authorize $96.5 million for 
        restoration or replacement of aging aircraft, $15 
        million for increased air interdiction and 
        investigative support activities, and $19.013 million 
        for marine vessel replacement and related equipment; 
        and
          For fiscal year 2001, $36.5 million for aircraft 
        restoration and replacement, $15 million for increased 
        air interdiction and investigative support activities, 
        and $24.024 million for marine vessel replacement and 
        related equipment.

Reasons for change

    The provision would provide a specific focus to Customs' 
improvement of its marine and air interdiction efforts, as well 
as ensure the investment of any appropriated funds in new 
aircraft that will enhance Customs' interdiction capabilities.

     6. section 106--compliance with performance plan requirements

Present law

    No provision.

Explanation of provision

    Section 106(a) would require Customs to establish specific 
performance goals and standards for evaluating the benefits of 
the additional activities enumerated in sections 102-105 as a 
part of developing its annual performance plan in order toallow 
both Customs and the Committee to assess the value added to Customs' 
efforts by these authorizations.
    Section 106(b) would authorize the Customs Service to 
contract with outside experts to assess, on a periodic basis, 
the agency's performance measures for enforcement activity that 
it is required to establish under the Government Performance 
and Results Act of 1993. The provision would also direct the 
Commissioner of Customs to make those assessments available to 
the Senate Finance and House Ways and Means Committees upon 
their completion.

Reasons for change

    The provision is designed to ensure that Customs provides 
Congress with regular explanations as to how it intends to 
further the goals of the agency and those amounts set out as 
part of this authorizing legislation.

                 7. Section 107--Transfer of Aerostats

Present law

    No provision.

Explanation of provision

    Section 107 would direct the President to submit a budget 
request for the Customs Service, beginning with fiscal year 
2001, that would allow the Customs Service to assume 
responsibility for the operation of certain tethered aerostat 
radar systems (``TARS'') currently operated by the United 
States Air Force, which the Air Force intends to replace with 
new systems for its own use. Section 107 would also authorize 
the appropriations necessary to the operation and maintenance 
of such systems.

Reasons for change

    Customs previously operated its own TARS system covering 
the source zone of illegal contraband and the transit zones 
leading to the United States as part of its overall enforcement 
efforts, particularly with respect to drug interdiction. The 
Department of Defense, specifically the Air Force, assumed 
responsibility for the operation of Customs' TARS system. The 
Air Force now intends to replace the current TARS system with 
new systems designed and operated for its particular defense-
related needs. That prospect would leave Customs without the 
ability it previously had to use the TARS system for radar 
coverage of the source zone of contraband and the transit zones 
leading to the United States.

          8. Section 108--Report on Intelligence Requirements

Present law

    No provision.

Explanation of provision

    Section 108 would direct the Commissioner of Customs, 
within one year, to report to the Senate Finance and House Ways 
and Means Committees regarding the intelligence and information 
requirements of the agency necessary to improve its capability 
to enforce the U.S. customs laws and reinforce the agency's 
ability to interdict illegal imports of narcotics.

Reasons for change

    Testimony before the Finance Committee in the course of its 
Customs oversight hearings underscored the importance of 
improved intelligence to the agency's enforcement efforts. 
Improved intelligence and information gathering capabilities, 
including increased cooperation with other U.S. agencies and 
Customs' counterparts abroad, would enhance the Customs 
Service's ability to enforce the customs laws of the United 
States, including, for example, the interdiction of drugs, 
violations of U.S. intellectual property laws, attempts to 
circumvent the trade laws of the United States, and the 
investigation of instances of forced and indentured child 
labor.

9. Section 109--Authorization of Appropriations for Program to Prevent 
              Child Pornography/Child Sexual Exploitation

Present law

    No provision.

Explanation of provision

    Section 109(a) would authorize the appropriation of 
$10,000,000 for fiscal year 2000 to carry out the program to 
prevent child pornography and child sexual exploitation 
established by the Child Cyber-Smuggling Center of the Customs 
Service. Section 109(b) would direct the Customs Service to 
provide 3.75 percent of the amount authorized to the National 
Center for Missing and Exploited Children for the operation of 
a child pornography cyber tipline established by the Center to 
increase public awareness of the tipline.

Reasons for change

    As reflected in the testimony of the Customs Commissioner 
before the Finance Committee, child pornography distributed 
over the Internet has become a growing public problem. The 
Customs Service has established a Child Cyber-Smuggling Center 
to interdict the illegal distribution of such illegal 
contraband within the United States. The funds authorized would 
reinforce Customs' ability to address the growing problem.

                    B. Title II--Customs Management

    Title II makes certain changes in the existing management 
structure of the Customs Service designed to enhance the 
continuity of leadership at the agency and to improve the 
current system of internal controls. The changes made to 
improve the internal controls of the agency focus on improving 
accountability not only for the enforcement of the letter of 
the law in cases investigated by the Office of Internal 
Affairs, but also the agency's performance of its basic 
missions and its implementation of directives from Congress, 
particularly the Customs Modernization Act.

     1. Section 201--Term and Salary of the Commissioner of Customs

Present law

    Under current law, the Customs Commissioner serves under 
appointment by the President without a fixed term. The 
Commissioner is currently paid at Executive Schedule--Level IV 
or a rate of $118,400 per year.

Explanation of provision

    Section 201(a) would provide a fixed, renewable term of 
five years for the Commissioner of Customs beginning with the 
incumbent's current tenure. It would add to the criteria used 
for appointing the Commissioner the need to show demonstrated 
management ability.
    Section 201(b) would authorize an increase in the Customs 
Commissioner's pay to that of Executive Schedule--Level III or 
a rate of $125,900 per year. Section 201(b) would apply to 
fiscal year 2000 and those that follow.

Reasons for change

    The changes embodied in section 201 are designed to foster 
continuity within the leadership of the agency and to reinforce 
the management changes already under way within Customs under 
its current leadership. The provision would also ensure that 
the Commissioner of Customs is paid at a rate commensurate with 
other U.S. government officials of similar rank and 
responsibility.

                  2. Section 202--Internal Compliance

Present law

    No provision.

Explanation of provision

    Section 202(a) would direct the Commissioner of Customs to 
establish, within the Office of Internal Affairs, a program of 
internal compliance designed to enhance Customs' performance of 
its basic missions, as well as ensure compliance with all 
applicable laws with a particular focus on the agency's 
implementation of the Custom Modernization Act. Section 202(a) 
would require, as part of the compliance program, that the 
Commissioner institute a program of ongoing self-assessment and 
conduct a review of Customs' performance in all core functions 
on an annual basis. Under section 202(a), the self-assessment 
program and the annual performance review would be designed to 
identify where performance deficiencies exist in Customs' 
commercial operations, enforcement efforts, and internal 
management and propose specific corrective measures to address 
such concerns. Section 202(a) would also require the 
Commissioner to report on his or her annual assessment to the 
Senate Finance and House Ways and Means Committees.
    Section 202(b) would direct the Commissioner, as part of 
the development of an improved system of internal compliance, 
to initiate a review of current best practices in internal 
compliance programs among government agencies and private 
sector organizations, and report to the Senate Finance and 
Governmental Affairs Committees and House Ways and Means and 
Government Reform and Oversight Committees on the results of 
that review and the implementation of the program mandated by 
section 202(a). Section 202(c) would require the periodic 
review and audit of the Customs Service's internal compliance 
program by the Treasury Inspector General and require the 
Inspector General to report his findings to the Senate Finance 
and House Ways and Means Committees.

Reasons for change

    The ultimate objective of section 202 is to develop a basis 
on which the Customs Service's authorizing committees, the 
Senate Finance and House Ways and Means Committees, can provide 
continuing effective oversight of the agency's operations. Of 
particular concern are the still unfulfilled objectives of the 
Customs Modernization Act, including the publication of all 
implementing regulations and the development of the automated 
systems necessary to interface electronically with the trade 
community's daily business operations.
    The proposal would institutionalize the management changes 
begun by the Government Performance and Results Act of 1993, 
which requires all government agencies to establish performance 
measures and assess their performance on an annual basis. The 
internal compliance model, with its higher emphasis on 
encouraging compliance through training, self-assessment, the 
identification of specific management objectives for the 
succeeding review period, and the measurement of agency 
performance against those benchmarks, draws on best practices 
currently available within government and the private sector to 
encourage management by objective throughout the agency, and 
thereby contribute to the improvement in Customs' performance 
of its mission responsibilities.

            3. Section 203--Report on Personnel Flexibility

Present law

    No provision.

Explanation of provision

    Section 203 would require the Commissioner of Customs to 
provide to the Senate Committees on Finance and Governmental 
Affairs and the House Committees on Ways and Means and 
Government Reform and Oversight a report detailing his 
recommendations for modifications in existing personnel rules 
that would permit the more effective management of Customs' 
resources, as well as improve the agency's ability to perform 
its basic missions of trade facilitation and enforcement. 
Section 203 would require the Commissioner to include in the 
report his justification for seeking such changes, including a 
statement of reasons why the flexibility provided in the 
current civil service system governing Customs' personnel 
management is insufficient to meet the agency's personnel 
needs.

Reasons for change

    In testimony before the Finance Committee, the current 
Commissioner of Customs identified certain areas in which he 
wanted to see greater flexibility in current personnel rules to 
reinforce other management changes under way within the agency. 
Among the Commissioner's suggestions were changes to rules 
regarding pre-employment screening, the duration of 
probationary periods for newly hired employees, and similar 
modifications to current civil service rules that would make 
Customs' hiring practices consistent with other law enforcement 
agencies. The Committee believes that additional background on 
and justification for these proposals is needed.

             4. Section 204--Report on Personnel Allocation

Present law

    No provision.

Explanation of provision

    Section 204 would require the Commissioner, within six 
months, to report to the Senate Finance and House Ways and 
Means Committees on the implementation of the personnel 
allocation model currently under development within the agency. 
Section 204 would require the Commissioner, in his report, to 
provide a comparison of the results obtained by using the 
personnel allocation model and the allocations provided for in 
section 103, together with his recommendations for any 
reconciliation necessary in future authorizations.

Reasons for change

    Testimony before the Finance Committee, as well as previous 
reports by the General Accounting Office, identified the need 
to strengthen Customs' ability to assess its own personnel 
needs and to ensure the proper allocation of the personnel 
within Customs to ensure that the agency is fully capable of 
meeting its mission goals. The Customs Service's current 
management has responded to those concerns by working closely 
with outside service providers to develop an improved system of 
personnel management. What remains is the implementation of 
that improved approach. Section 204 would require the 
Commissioner to report to the Senate Finance and House Ways and 
Means Committees within six months on the progress toward 
implementation of that improved system.

 5. Section 205--Report on Detection and Monitoring Requirements Along 
                 the Southern Tier and Northern Border

Present law

    No provision.

Explanation of provision

    Section 205 would require the Commissioner of Customs to 
conduct a review of its counterdrug detection and monitoring 
requirements for coverage of the arrival zone along both the 
northern border and southern tier and to provide a report to 
the Senate Finance and House Ways and Means Committees no later 
than 90 days after the date of enactment of this Act. Section 
205 would direct the Commissioner to assess (1) the performance 
of existing detection and monitoring assets, (2) any gaps in 
current radar coverage, and (3) any limitations imposed on 
Customs' enforcement activities due to reliance on Defense 
Department detection and monitoring assets.

Reasons for change

    The Customs Service must currently depend on Defense 
Department detection and monitoring assets for radar coverage 
of the arrival zone along both the northern border and southern 
tier of the United States. Section 205 would provide an 
assessment of Customs' needs and the ability of the Defense 
Department's assets, as currently configured, to meet those 
needs.

                    C. Title III--Marking Violations


         1. Section 301--Civil Penalties for Marking Violations

Present law

    Section 304 of the Tariff Act of 1930 (19 U.S.C. 1304) 
requires that all imported goods of foreign origin (with 
certain statutory exceptions 2) be marked as 
legibly, indelibly and permanently as the nature of the goods 
will permit to indicate the country of origin to the ultimate 
purchaser. In general, the Customs Service, which is charged 
with enforcing U.S. marking laws, allows any reasonable method 
of marking (including string tags or gummed labels) that will 
stay on the product until it reaches the ultimate purchaser. 
Section 304(l) of the Tariff Act of 1930 (19 U.S.C. 1304(l)) 
provides for criminal sanctions of up to $100,000 per violation 
($250,000 for subsequent violations), or imprisonment of up to 
one year, or both, against importers or other parties who 
intentionally tamper with country-of-origin markings on 
imported goods.
---------------------------------------------------------------------------
    \2\ Among the exceptions to the marking requirement are: articles 
that are incapable of being marked and articles that cannot be marked 
prior to shipment without injury.
---------------------------------------------------------------------------

Explanation of provision

    Section 301 would amend section 304(l) of the Tariff Act of 
1930 (19 U.S.C. 1304(l)) to provide the Customs Service with 
additional civil enforcement authority for violations of 
country-of-origin marking requirements by importers or parties 
(other than the ultimate purchaser) who subsequently obtain the 
imported merchandise. Specifically, the changes made by section 
301 to the marking laws would permit the imposition of civil 
penalties on persons who deface, destroy, remove, alter, cover, 
obscure, or obliterate required country-of-origin markings 
prior or subsequent to the importation of the merchandise in 
question. When imposed, such civil penalties would be in 
addition to any duties that may be owed pursuant to section 
304(l) of the Tariff Act of 1930 (19 U.S.C. 1304(l)) for 
failure to mark imported articles. In response to certain 
recent Federal court decisions, this provision also clarifies 
Customs' ability to impose and collect marking duties and 
penalties independent of section 1592 (relating to false 
marking representations). The provision would take effect 60 
days from the date of enactment.

Reason for change

    Despite the requirements of U.S. marking law, it is not 
uncommon for marking provisions to be negligently or 
intentionally disregarded. For example, the U.S. jewelry 
industry continues to report that tags and labels on imported 
foreign jewelry that are in place upon entry into the United 
States often disappear or are removed prior to the jewelry's 
display or sale. When country-of-origin markings do not appear 
on imported jewelry or other items offered to the consumer, it 
constitutes a violation of federal marking law and prevents 
purchasers from being informed about the origin of such 
products.
    Such removal, alteration, or concealment of country of 
origin markings post-importation presents a difficult 
enforcement problem for the Customs Service. While U.S. marking 
law provides criminal enforcement authority, few criminal cases 
are actually pursued (in part because the elements necessary 
for a criminal prosecution are difficult to prove and in part 
because there are other criminal prosecution priorities). As a 
result, Customs is left without specific civil authority to 
penalize those who violate the U.S. marking laws subsequent to 
importation, and instead must rely on Customs' general fraud 
statute (19 U.S.C. 1592) to pursue actions against violators of 
U.S. marking requirements.
    This provision will add a strengthened civil counterpart to 
the criminal authority and, thus, provide the Customs Service 
with enhanced ability to address violations of the marking 
laws. The Committee expects that this provision will enable the 
Customs Service to enforce more fully Federal marking 
requirements for the benefit of American consumers.

                       III. VOTE OF THE COMMITTEE

    In compliance with section 133 of the Legislative 
Reorganization Act of 1946, the Committee states that H.R. 
1833, as amended, was ordered reported favorably by voice vote 
on June 16, 1999.

                     IV. BUDGET EFFECTS OF THE BILL

    In compliance with sections 308 and 403 of the 
Congressional Budget Act of 1974, and paragraph 11(a) of rule 
XXVI of the Standing Rules of the Senate, the following letter 
has been received from the Congressional Budget Office on the 
budgetary impact of the legislation:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 26, 1999.
Hon. William V. Roth, Jr.,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1833, the Customs 
Authorization Act of 1999.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mark 
Grabowicz.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

               congressional budget office cost estimate

H.R. 1833--Customs Authorization Act of 1999

    Summary: H.R. 1833 would authorize appropriations for 2000 
and 2001 for the U.S. Customs Service including funds for 
salaries and expenses, acquisitions, air and marine 
interdiction, the Automated Commercial Environment (ACE) 
computer system, and a program to prevent child pornography. In 
addition, the act would transfer the Tethered Aerostat Radar 
System (TARS) from the Air Force to the Customs Service and 
provide funding for operation and maintenance of this system. 
Finally, this legislation would direct the Customs Service to 
prepare reports on various personnel and management issues and 
would establish a new civil penalty relating to improper 
marking of imported articles.
    CBO estimates that appropriation of the authorized amounts 
would result in additional discretionary spending of about $5.9 
billion over the 2000-2004 period. H.R. 1833 could affect 
receipts; therefore, pay-as-you-go procedures would apply. 
However, we estimate that any increase in receipts would be 
less than $500,000 a year. The act contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would have no affect on 
the budgets of state, local, or tribal governments.
    Estimated cost to the Federal Government: For the purposes 
of this estimate, CBO assumes that the authorized amounts will 
be appropriated by the start of each fiscal year and that 
outlays generally will follow historical spending rates for the 
authorized activities or for similar programs. We expect that 
funds for Customs Service salaries and expenses would be spent 
more slowly than the historical rates because the act would 
provide substantial increases in authorizations relative to the 
funding levels for 1999. The act would authorize such sums as 
may be necessary for operation and maintenance of TARS. CBO 
estimated authorization levels for this program by assuming 
continued funding at the 1999 level (about $31 million), 
adjusted for anticipated inflation.
    The estimated budgetary impact of H.R. 1833 is shown in the 
following table. The costs of this legislation fall within 
budget function 750 (administration of justice). Without an 
adjustment for inflation for TARS, projected costs would be $12 
million less over the 2000-2004 period than shown in the table.

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              1999     2000     2001     2002     2003     2004
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending under current law:
    Budget authority \1\..................................    2,217        0        0        0        0        0
    Estimated outlays.....................................    2,073      297        1        0        0        0
Proposed changes:
    Estimated authorization level.........................        0    2,794     3006       34       35       36
    Estimated outlays.....................................        0    2,249    2,881      571      157       35
Spending under H.R. 1833:
    Estimated authorization level \1\.....................    2,217    2,794     3006       34       35       36
    Estimated outlays.....................................    2,073    2,546    2,882      571      157       35
----------------------------------------------------------------------------------------------------------------
\1\ The 1999 level is the amount appropriated for that year for the salaries and expenses account and
  interdiction program of the U.S. Customs Service and for operation and maintenance of TARS.

    H.R. 1833 would establish a civil penalty for violations of 
laws relating to the marking of imported articles. This 
provision could result in the collection of additional 
receipts, but we estimate that any such amounts would be less 
than $500,000 a year.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. Enacting 
H.R. 1833 could affect receipts, but CBO estimates that any 
such effects would be less than $500,000 a year.
    Intergovernmental and private-sector impact: H.R. 1833 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would have no effect on the budgets of 
state, local, or tribal governments.
    Previous CBO estimate: On May 24, 1999, CBO transmitted a 
cost estimate for H.R. 1833, the Trade Agency Authorizations, 
Drug Free Borders, and Prevention of On-Line Child Pornography 
Act of 1999, as ordered reported by the House Committee on Ways 
and Means on May 20, 1999. In addition to authorizing 
appropriations for the Customs Service for 2000 and 2001 
(without funding for the ACE computer system), that legislation 
would fund the Office of the United States Trade Representative 
and the International Trade Commission--but not TARS--and would 
make changes to the current laws relating to overtime and 
premium pay for Customs officers. CBO estimated that enacting 
the House version of H.R. 1833 would increase discretionary 
spending by about $4.7 billion over the 2000-2004 period, and 
that it would increase direct spending by less than $500,000 
annually.
    Estimate prepared by: Mark Grabowicz. Estimate approved by: 
Robert A. Sunshine, Deputy Assistant Director for Budget 
Analysis.

                 V. REGULATORY IMPACT AND OTHER MATTERS

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee states that the 
legislation will not significantly regulate any individuals or 
businesses, will not impact personal privacy of individuals, 
and will not result in any significant additional paperwork.

                      VI. CHANGES TO EXISTING LAW

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in exiting law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

CUSTOMS PROCEDURAL REFORM AND SIMPLIFICATION ACT OF 1978

           *       *       *       *       *       *       *



SEC. 301. APPROPRIATIONS AUTHORIZATION.

    (a) In General.--

           *       *       *       *       *       *       *

          (3) By no later than the date on which the President 
        submits to Congress the budget of the United States 
        Government for a fiscal year, the Commissioner of 
        Customs shall submit to the Committee on Appropriations 
        and the Committee on Ways and Means of the House of 
        Representatives and the Committee on Appropriations and 
        the Committee on Finance of the Senate the budget 
        request submitted to the Secretary of the Treasury 
        estimating the amount of funds for that fiscal year 
        that will be necessary for the operations of the 
        Customs Service as provided for in subsection (b).

           *       *       *       *       *       *       *

    (b) Authorization of Appropriations.--
          (1) For noncommercial operations.--There are 
        authorized to be appropriated for the salaries and 
        expenses of the Customs Service that are incurred in 
        noncommercial operations not to exceed the following:
                  [(A) $516,217,000 for fiscal year 1991.
                  [(B) $542,091,000 for fiscal year 1992.]
                  (A) $1,029,608,384 for fiscal year 2000.
                  (B) $1,111,450,668 for fiscal year 2001.
          (2) For commercial operations.--
                  (A) There are authorized to be appropriated 
                for the salaries and expenses of the Customs 
                Service that are incurred in commercial 
                operations not less than the following:
                          [(i) $672,021,000 for fiscal year 
                        1991.
                          [(ii) $705,793,000 for fiscal year 
                        1992.]
                          (i) $1,251,794,435 for fiscal year 
                        2000.
                          (ii) $1,348,676,435 for fiscal year 
                        2001.
                  (B) The monies authorized to be appropriated 
                under subparagraph (A) for any fiscal year, 
                except for such sums as may be necessary for 
                the salaries and expenses of the Customs 
                Service that are incurred in connection with 
                the processing of merchandise that is exempt 
                from the fees imposed under section 58c(a) (9) 
                and (10) of this title, shall be appropriated 
                from Customs User Fee Account.
          (3) For air interdiction.--There are authorized to be 
        appropriated for the operation (including salaries and 
        expenses) and maintenance of the air interdiction 
        program of the Customs Service not to exceed the 
        following:
                  [(A) $143,047,000 for fiscal year 1991.
                  [(B) $150,199,000 for fiscal year 1992.]
                  (A) $229,001,000 for fiscal year 2000.
                  (B) $176,967,000 for fiscal year 2001.

           *       *       *       *       *       *       *


                          TARIFF ACT OF 1930

           *       *       *       *       *       *       *



SEC. 304. MARKING OF IMPORTED ARTICLES AND CONTAINERS.

           *       *       *       *       *       *       *


    (l) Penalties.--[Any person]
          (1) In general._Any person who, with intent to 
        conceal the information given thereby or contained 
        therein, defaces, destroys, removes, alters, covers, 
        obscures, or obliterates any mark required under the 
        provisions of this chapter shall--
                  [(1)] (A) upon conviction for the first 
                violation of this subsection, be fined not more 
                than $100,000, or imprisoned for not more than 
                1 year, or both; and
                  [(2)] (B) upon conviction for the second or 
                any subsequent violent of this subsection, be 
                fined not more than $250,000, or imprisoned for 
                not more than 1 year or both.
          (2) Civil penalties.--Any person who defaces, 
        destroys, removes, alters, covers, obscures, or 
        obliterates any mark required under this section shall 
        be liable for a civil penalty of not more than $10,000 
        for each violation. The civil penalty imposed under 
        this subsection shall be in addition to any marking 
        duties owed under subsection (i).

           *       *       *       *       *       *       *


                          UNITED STATES CODE

           *       *       *       *       *       *       *



SEC. 2071. ESTABLISHMENT OF SERVICE; COMMISSIONER; APPOINTMENT.

    [There shall be] (a) In General.--There shall be in the 
Department of the Treasury a service to be known as the United 
States Customs Service, and a Commissioner of Customs. The 
Commissioner of Customs, who shall be appointed by the 
President by and with the advice and consent of the Senate for 
a term of 5 years, shall
          (1) be at the head of the United States Customs 
        Service;
          (2) carry out the duties and powers prescribed by the 
        Secretary of the Treasury; [and]
          (3) report to the Secretary of the Treasury through 
        such other officials as may be designated by the 
        Secretary[.]; and
          (4) have demonstrated ability in management.
    (b) Vacancy.--Any individual appointed to fill a vacancy in 
the position of Commissioner occurring before the expiration of 
the term for which the individual's predecessor was appointed 
shall be appointed only for the remainder of that term.
    (c) Removal.--The Commissioner may be removed at the will 
of the President.
    (d) Reappointment.--The Commissioner may be appointed to 
more than one 5-year term.

           *       *       *       *       *       *       *


SEC. 5314. POSITIONS AT LEVEL III.

    Level III of the Executive Schedule applies to the 
following positions, for which the annual rate of basic pay 
shall be the rate determined with respect to such level under 
chapter 11 of title 2, as adjusted by section 5318 of this 
title:

           *       *       *       *       *       *       *

          Administrator, Research and Special Programs 
        Administration.
          Commissioner of Customs, Department of the Treasury.

SEC. 5315. POSITIONS AT LEVEL IV.

    Level IV of the Executive Schedule applies to the following 
positions, for which the annual rate of basic pay shall be the 
rate determined with respect to such level under chapter 11 of 
title 2, as adjusted by section 5318 of this title:

           *       *       *       *       *       *       *

          Liaison for Community and Junior Colleges, Department 
        of Education.
          [Commissioner of Customs, Department of the 
        Treasury.]
          Director of the Office of Educational Technology.

           *       *       *       *       *       *       *


                                  
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