Statement of the Hon. Charles W. Winwood, Acting Commissioner, U.S. Customs Service

Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means

Hearing on Trade Agency Budget Authorizations and Other Customs Issues

July 17, 2001

INTRODUCTION

Good afternoon, Chairman Crane, Congressman Levin and Members of the Subcommittee. It is a privilege to appear before you today to present U.S. Customs' Fiscal Year 2002 budget request, and to share with you some of our recent accomplishments and ongoing activities. Before I begin, I would like to thank you, Mr. Chairman, and the Subcommittee members for your constant support of Customs and our vital mission.

For over two hundred years, the U.S. Customs Service has facilitated the flow of our nation's commerce while protecting American business and consumers from contraband and other threats. Yet, the dramatic growth in global travel and trade over the past decade will continue to test our capacity to carry out our vital mission as never before. As the Subcommittee is aware, the United States faces a complex array of threats at our borders, including narcotics smuggling and international terrorism. It is the job of Customs to deter these threats while ensuring the smooth flow of people and goods into and out of our country. Meeting this challenge in an era of rapidly expanding growth for our world economy will require an effective balance of personnel resources, training, technology, and risk management strategies designed to maximize the impact of Customs operations.

Thanks to the Congress, Customs has been able to acquire the resources to help meet the growing demand for our services from the public. In addition to support for Customs' annual budget requests, Congressional authorization for the collection of traveler and conveyance processing fees, otherwise known as COBRA fees, has enabled Customs to fund numerous additional positions in our core operations to accommodate the growth in travel and trade. Currently, COBRA fees support approximately 1100 inspector positions, as well as overtime and premium pay for all inspection personnel at airports, seaports and land border crossings, and other essential equipment and operational costs.

COBRA fees are due to sunset on September 30, 2003. While the Administration is currently formulating views in advance of the sunset, we look forward to working with the Congress to address this issue.

In addition to this critical issue, Customs has focused significant attention on the following key challenges:

TECHNOLOGY

The Automated Commercial Environment (ACE)

The FY 2002 President's budget requests $130 million to continue work on modernizing Customs antiquated automated systems. The Automated Commercial Environment, otherwise known as ACE, will enable the Customs Service to utilize technological advances to meet the challenges of a rapidly growing international economy. Customs is the federal government's second largest source of revenue, collecting $24 billion in FY 2000. Every year since 1993, Customs import workload has been at least double that of ten years earlier, and this trend is expected to continue through 2007. By 2004, Customs will be processing over 30 million commercial entries a year, a projected 30% increase over the 23 million entries processed in FY 2000. It is essential that we modernize our automated systems to improve response to the explosion in international trade and travel.

Customs current automated trade system is the 17-year-old Automated Commercial System (ACS). Until a new system is deployed, Customs will continue to rely on ACS. As trade volumes continue to grow dramatically each year, the ability of ACS to manage increased demand will decline. Using the $123 million in ACS "life support" funding provided in the FY 2001 appropriation, we have taken steps to improve processing time and storage capacity for the trade, and have improved the commercial interface with ACS. There is, however, more work to be done. With the additional $123 million requested for FY 2002, Customs will continue to improve the system's capacity and accessibility.

The Customs Modernization Act of 1993 mandated new account based import transaction processing that cannot be accommodated through ACS. ACE, in contrast, will address trade compliance and Mod Act requirements. ACE is being developed in four increments, with each successive increment expected to deliver benefits to both the trade community and Customs operations.

The consolidated appropriations of $130 million provided for ACE in FY 2001 enabled us to begin our first phase work on ACE. That work included award of the ACE prime contract to the "e-Customs Partnership," led by IBM. The "e-Customs Partnership" is a team of top-notch companies and highly qualified professionals who have successfully executed large information systems projects similar to this one in the past. In addition to the IBM Corporation, key team members include Lockheed Martin Corporation, KPMG Consulting, Computer Sciences Corporation, and Sandler & Travis Trade Advisory Services. The team also includes BoozAllen & Hamilton, ITS Services, and over 40 small businesses.

The President's FY 2002 budget builds on this effort by requesting an additional $130 million to expand the capabilities of the ACE software and to deliver ACE capability to more service ports and sites. Specifically, with the additional FY 2002 funding, we will extend the capability developed with the FY 2001 funding to air, sea, and rail imports; build an interface to the Automated Manifest System; and provide the trade with a common interface to ACE. We will also refine ACE requirements with the assistance of our prime integration contractor.

Non-Intrusive Inspection Technology

The use of non-intrusive inspection (NII) technology (e.g. truck, rail, sea container, vehicle, and mobile x-ray/gamma-ray systems) is crucial to maintaining the success of our interdiction efforts. Customs is in the final year of a 5-year technology plan that calls for the deployment of NII technology to blanket the Southern Tier and other high-risk locations. At the end of FY 1999, there were a total of 14 NII systems in place. During FY 2000, 23 additional NII systems were deployed throughout the nation. Currently, 50 systems are in operation, with an additional 45 systems funded and scheduled for delivery by the end of FY 2002. NII systems, in many cases, give Customs the capability to perform thorough examinations of cargo without having to resort to the costly, time-consuming process of unloading cargo for manual searches, or intrusive examinations of conveyances by methods such as drilling and dismantling.

In FY 1999, a total of 100,000 NII examinations were performed. For FY 2001, we have already performed over 260,000 NII examinations. These figures will continue to increase as Customs deploys additional systems.

Since the deployment of the first truck x-ray at Otay Mesa, California, in 1996, these systems have contributed to over 400 seizures totaling over 300,000 pounds of illegal drugs in commercial and passenger vehicles. Recently, in a single week, our NII systems contributed to the seizure of almost 9,000 pounds of illegal drugs.

In addition, on April 4, 2001, a Customs canine at the Otay Mesa port of entry alerted to a tractor-trailer carrying televisions from Mexico. The vehicle was subsequently scanned by a gamma-ray imaging system that led to the discovery of more than 15,000 pounds of marijuana. This was the largest single-seizure ever made at a border station.

NII technology has also benefited the passenger environment. We have deployed 15 body imagers at major land border crossings and airports to offer travelers selected for personal searches an option to a physical inspection. These systems are capable of detecting smuggled objects concealed under clothing.

Customs has also contracted for a service at nine international airports that enables us to determine in approximately 30 minutes if a passenger is carrying drugs internally. This process used to require several hours and the participation of at least two Customs officers. The contracted service provides a mobile x-ray van and a licensed x-ray technician at the international arrival terminal for the screening of passengers suspected of concealing drugs or currency in or on their bodies. A trained technician performs an x-ray that is then transmitted digitally to a licensed radiologist for interpretation. Based on that determination, Customs may either release the passenger, or hold him or her for further investigation. Both the Body Imagers and the Mobile x-ray service examination are only used once all the requirements of Customs personal search policies are met.

Laboratories and Scientific Services

We are pleased to report that all eight laboratories of the United States Customs Laboratory System have received their International Standards Organization (ISO) Guide 25 Accreditation. The Customs Labs are the first Federal laboratory system to receive this professional accreditation.

I am also pleased to announce that twelve of our scientists have received board certification in criminology from the American Board of Criminologists. No other crime laboratory can boast this number of board certified criminologists. With this certification our scientists can now be considered true expert witnesses for Customs and the American criminal justice system.

Customs has embarked upon a laboratory construction plan that is scheduled to improve and update our aging laboratory facilities. The construction of laboratories in Los Angeles and Virginia have been completed. The New York Laboratory is currently under construction, and plans are underway to improve the facilities in New Orleans and San Francisco.

TRAINING AND DEVELOPMENT

The Office of Training and Development (OTD) was established to ensure that Customs employees receive quality and effective training. During its first year, OTD has built centralized training programs and systems, created a direct link between training and operational success, enhanced career development, expanded course offerings, and strengthened leadership development and professionalism.

One of the fundamental elements in Customs future training success was the development of The National Training Plan (NTP) which establishes core occupational instruction designed to keep our employees on the cutting edge of new skills and technologies. The NTP identifies the core, standardized, and recurring training requirements for employees at the entry, mid and advanced career levels. The NTP targets training areas with the greatest need to reach the maximum number of employees in the most cost-effective manner. Some of the key areas of training cover passenger and cargo drug interdiction, strategies targeting money laundering, stolen vehicle exporting, and anti-terrorism tailored to the Customs environment. Customs has developed training profiles for its mission-critical occupations, as well as rigorous training and tracking procedures. These procedures were designed to maximize the use of scarce training resources and deliver useful, real-time training to all of our employees.

In addition to the NTP, Customs has created the Customs Tuition Program, which last year provided over 600 employees nationwide with tuition assistance for job-related courses. This program supports the national strategy of raising the level of professionalism and education in the Customs workforce.

OTD has also played an integral role in addressing personal search policies and procedures, introducing change in national policy regarding the 24-hour carrying of firearms by Customs law enforcement personnel, and expanding the national strategy of risk management throughout all levels of Customs.

Through centralized planning and tracking, Customs delivered a record 100,731 instances of training in FY 2000. Since its inception, OTD has developed over 20 new training courses to address mission-critical needs. The measurement of OTD's success is seen throughout the Customs workforce. Customs dedicated training efforts increased morale and commitment to the Customs mission. Our training is continuously measured through an evaluation of training by students and supervisors to determine if students are applying newly learned classroom skills on the job. It is imperative that we maintain a well educated, customer-oriented workforce, which protects our officers and enhances service to business and the traveling public.

RISK MANAGEMENT STRATEGIES

As global trade has expanded, Customs' commercial workload has escalated dramatically. In FY 2000 the agency processed over 23 million trade entries--an increase of almost 10 percent from FY 1999.

Customs strategy to ensure greater compliance among importers with our trade requirements is focused around a comprehensive strategy of risk management. At its core, risk management involves the constant analysis of data and information to determine how to apply resources most effectively.

For the first time, that analysis is being built uniformly into the way Customs ports are managed. The Trade Compliance Enforcement Plan, which makes each Customs Management Center accountable for implementing Risk Management in all port operations, ensures that the relationship of resources to risk can be monitored on a Service-wide basis.

In addition, we have initiated monthly Management Accountability Reports from the field that provide immediate feedback on the effectiveness of our enforcement activities.

One of the goals of risk management is to ease the movement of goods for law-abiding members of the trade community. By implementing a data-driven focus on the most serious compliance problems, Customs will lessen its oversight of compliant companies. In fact, participants in the innovative Low Risk Importer Initiative can expect fewer cargo exams, document reviews and requests by Customs for more information. To qualify for this program, importers must undergo compliance assessments and pass a thorough evaluation process involving compliance measurement, account manager evaluations, and other reviews.

Customs is using a systematic process to identify those importers whose transactions represent the highest risk of non-compliance. Again, Customs will use this data to make informed judgements about the best use of its limited resources.

Another element in the Risk Management approach has been Customs increased use of account managers to focus on major importers. Since a relatively small number of large importers account for the majority of total imports, account managers provide even more leverage in elevating overall compliance with Customs commercial requirements.

In FY 2000, 392 consignees were responsible for half of the total value of all the imports into the United States. The top 1,000 consignees imported 61 percent, by value, of all imports. Customs has responded to this trend by increasing the number of managed accounts in FY 2001 to more than 1,100.

HUMAN RESOURCES MANAGEMENT

As we continue to build a Customs workforce worthy of the highest public trust, our Human Resources Management programs have continued to emphasize recruitment of the most qualified candidates for employment.

 Our Quality Recruitment program has proven to be a success in filling our core occupations. Through this program we have hired 565 new inspectors and canine enforcement officers, and we have approximately 750 candidates in our hiring pool. We believe that we have attracted some of our Nation's best and brightest. This has been evidenced by the test scores from the basic training our new recruits go through as well as reports of their successes on the job.

We were pleased to obtain a new Schedule B hiring authority for special agents. In addition, Quality Recruitment, with its emphasis on testing and structured interviews, has been expanded to special agent positions. Through this program, we expect to build the pool of candidates ready to hire for our front-line occupations when they are needed.

Our marketing and recruitment efforts have been a success as we continue to attract quality candidates. Our recent announcement for inspectors and canine enforcement officers was open for 5 days and resulted in more than 5,500 applications. More than 1,500 of those applicants passed the test and structured interview. In the past 3 months 1,184 applicants have been tested for special agent positions.

Through our National Recruitment Program we are able to emphasize the importance of attracting a diverse pool of highly qualified applicants for our frontline positions. A recruitment plan is issued each year to ensure a national direction, professional advertising, and recruitment of a diverse applicant pool. We have installed 6 kiosks in selected universities to provide information about Customs occupations and job opportunities. Local recruiters represent Customs in conferences, job fairs, colleges, and general applicant inquiries. Our Office of Investigations recruiters recently held 9 open houses for universities in their geographic areas. In addition, we established a National Intern Program last year and hired 21 interns. Other student programs are also used throughout Customs to provide additional opportunities.

While we are actively filling our entry-level positions, we are also very aware of our aging workforce. Within the next 5 years 34 percent of our current employees will be eligible for retirement. The retirement bubble is particularly significant for our law enforcement employees as they face mandatory retirement. In addition, we anticipate losses in our supervisory and management positions. We have sophisticated data systems that allow us to predict our attrition by occupation, grade, and geographic area. Human Resources Management and the Office of Training and Development are building a succession planning model to prepare for our future losses.

Defending our borders presents many challenges to Customs employees. Through our Employee Support and Assistance Unit we have an immediate response for employees and their families who experience serious injuries, illnesses or other crises. More than 120 collateral duty Family Liaison Officers were recently selected. After completing comprehensive training they will serve as the first line of counseling and advisory support for employees in need.

In addition, we have placed a heavy emphasis on our safety programs. We recognize that we cannot protect our employees and do our jobs effectively for the American public without first ensuring that we follow the highest safety standards in the workplace. Accordingly, Customs recently hired 5 additional safety and occupational health specialists and we are actively recruiting several others. We have also expanded our radiation safety program. As a result of our radiation safety committee's efforts, Customs has the most stringent radiation exposure standard of any Federal agency. We are also expanding our environmental management and hazardous material safety programs. In addition, we have placed greater emphasis on our tuberculosis, hepatitis B, and hearing conservation programs for our employees.

INTEGRITY

Customs core law enforcement responsibilities demand an unyielding commitment to the highest standards of ethical and professional conduct by our employees. For the past several years, the agency has been instituting a comprehensive series of reforms aimed at bolstering integrity within the agency. These include a renewed emphasis on our Office of Internal Affairs (IA), the lead office for integrity at Customs.

Internal Affairs has increased its focus on the Southwest Border. Additionally, Internal Affairs has reinvigorated its ranks by transferring 131 criminal investigators between Internal Affairs and the Office of Investigations since 1999.

The office is presently in the process of reassigning additional investigators; closing smaller, dispersed offices; establishing a larger office in San Antonio; and expanding other offices to concentrate investigative resources. It has also activated a fully operational Special Investigations Unit comprised of senior investigators who conduct investigations into critical and sensitive incidents. In its first six months since activation, the unit completed 21 investigations, seven of which were presented for criminal prosecution.

IA recently revised and published its investigative guidebook to provide special agents with clear, applicable policy regarding nearly every aspect of investigations.

Investigative policy is now disseminated using electronic publishing so as to provide instant access to updates.
IA Regional Operations Managers and specialized experts with legal and law enforcement experience now provide on-call guidance to special agents. These

personnel provide constant oversight of all aspects of investigations to ensure the resulting investigative reports are accurate, timely, and comprehensive.

A new automated Case Management System is being developed that will more efficiently integrate with other Customs human resource and investigative systems. This system will utilize Web-based technology to provide Internal Affairs with accurate data capture and retrieval, improved accessibility, enhance overall systems durability, and lead to more cost-efficient maintenance. All allegations are tracked from initial receipt to final disposition through the Customs Service's allegation and intake process. This process is continually refined to ensure allegations are handled efficiently and correctly. The process features a combined effort between IA, the Office of Human Resources Management, and the respective Assistant Commissioners.

In addition, Customs recently published the first annual "Report on Conduct and Discipline. " The report provides a summary and overview of discipline cases resolved within Customs for fiscal year 1999. The report emphasizes our primary goal to bring greater fairness, objectivity and consistency to the discipline process. It is another tool to keep employees informed about conduct and discipline matters. It also provides them with an opportunity to learn from others and to gain a clearer sense of what types of behavior can result in disciplinary action.

CUSTOMS CORE MISSION ACTIVITIES and ACCOMPLISHMENTS

Customs core mission has evolved significantly over its two hundred-year history to meet the nation's changing needs. Once concerned primarily with the collection of tariff duties, Customs now serves as one of the federal government's leading drug interdiction agencies. In addition, it is involved in a wide range of trade and enforcement activities related to the flow of people and goods across borders. Balancing the need for efficiency in trade facilitation with effective enforcement of U.S. laws is the agency's most fundamental challenge.

Over the last ten years, trade entries (the number of individual shipments of goods processed) have more than doubled, jumping from 9.2 million to over 23 million. By the year 2004, Customs will be processing over 30 million entries.

On a typical day, Customs officers process 1.3 million passengers and nearly 350,000 vehicles at ports and border crossings around the country. They seize over 4,000 pounds of narcotics and upwards of $1 million in monetary instruments and proceeds generated from criminal activities. Yet drug smuggling organizations continue to demonstrate flexibility in response to our interdiction efforts. We must constantly adapt to their changing methods.

Customs is responsible for enforcing hundreds of Federal statutes for dozens of federal agencies. In addition to seizing narcotics and dismantling smuggling organizations, Customs enforcement actions protect domestic manufacturing industries from unfair foreign competition and help ensure the health and safety of the American public. Through our Strategic Investigations and Antiterrorism initiatives, Customs aids in the national effort to prevent rogue states, terrorist groups, and criminal organizations from obtaining sensitive and controlled commodities including weapons of mass destruction. Customs is also a recognized leader in the investigation of Internet crime, notably child pornography, as well as the smuggling of stolen art and artifacts and violations of intellectual property rights.

Narcotics Smuggling

In FY 2000, Customs seized approximately 1.5 million pounds of illegal narcotics, conducted 39,000 investigations, effected more than 24,765 arrests, and seized over $587 million in currency and ill-gotten assets.

Customs approach to fighting narcotics smuggling is multifaceted. It includes traditional searches by our Inspectors and Canine Enforcement teams; partnerships with industry to prevent drugs from being imported in their merchandise or conveyances; air and marine interdiction; and the work of our Special Agents in dismantling and disrupting drug trafficking and money laundering organizations.

The Southwest Border (SWB) continues to be a major crossing area for illegal drugs of all types, including cocaine, marijuana, heroin, and methamphetamine. Customs enforcement records indicate that 79 percent of all Customs narcotics seized in FY 2000 occurred at the SWB. From October 2000 through May 2001, Customs made 537 seizures totaling $11.7 million in undeclared currency bound mostly for Mexico. In FY 2000, approximately 293 million travelers, 89 million vehicles and 4.5 million trucks entered the U.S. through the SWB. Also in FY 2000, Customs seized a total of approximately 1.1 million pounds of illegal narcotics including heroin, cocaine, marijuana, and methamphetamines along the SWB.

In addition to the drug threats coming from our Southern Hemisphere, Customs has proactively redirected resources to address the growing threat of Ecstasy. Western Europe now serves as the main source for Ecstasy smuggling. In February 2000, Customs created the Ecstasy Task Force. The mission of the Task Force is to act as a command and control center to maximize the level of interdiction and case exploitation relative to Ecstasy investigations. Customs currently has approximately 240 Canine Enforcement teams trained to detect Ecstasy and is in the process of training additional teams. In FY 2000, Customs seized approximately 9.3 million Ecstasy tablets. That is a more than a 2,300 percent increase from the 400,000 tablets seized in FY 1997.

Customs actively participated in the recent Presidential Commission on Seaport Security. Customs has always recognized the threat that internal conspiracies pose at our land, sea, and air ports of entry. To combat this risk, Customs has successfully deployed several investigative initiatives that have had a positive impact on this challenge. Operation River Blue and Riversweep are among the successful initiatives that have targeted drug smuggling organizations operating in port environments in the South Florida area.

In addition, Customs is one of the key agencies in a joint operation made up of federal, state, and local agencies to stop narcotics smuggling on the Miami River, a key drug trafficking route. Florida Governor Jeb Bush announced a 2-year initiative known as Operation River Walk on February 7, 2001, in Miami. Operation River Walk began on February 15, 2001. Customs plays the chief coordinating role for boardings and searches of vessels arriving and departing by the Miami River.

At a national level, a total of 82 additional Special Agents are being strategically deployed at both border and inland command and control cities to conduct long-term, complex investigations that focus on the most significant drug smuggling organizations. These investigations are designed to increase the risk borne by drug traffickers and impede their smuggling operations.

Customs Air and Marine Interdiction Division (AMID) plays an instrumental role in our National Drug Control Strategy. AMID's mission is to protect the Nation's borders and the American people from the smuggling of narcotics and other contraband with an integrated and coordinated air and marine interdiction force. This strategy impacts drug smuggling organizations because it denies drug traffickers the use of aircraft and vessels to smuggle drugs into the U.S., thus forcing them to choose other modes of transportation or geographic locations that are less profitable or riskier.

In the arrival zone, Air and Marine assets are strategically located along the Southern Border of the U.S. and in Puerto Rico and the Virgin Islands. The primary focus of these Branches is to detect, sort, and intercept suspect air and marine targets. The AMID also provides assistance to the enforcement efforts of Customs and other Federal, State, and local law enforcement agencies to stop the flow of money and equipment to drug smuggling organizations.

In the transit and source zones, AMID crews work in conjunction with the law enforcement agencies and military forces of our partner nations in support of counterdrug programs. AMID supports other Western Hemisphere nations with airborne detection and monitoring, interceptor support, and coordinated training with military and law enforcement agencies. Customs P-3 airborne early warning (AEW) aircraft provide radar coverage over the jungles and mountainous regions of Central and South America. They also patrol the international waters of the transit zone to monitor shipping lanes and air routes in search of smuggling activities.

AMID aviation assets include jet interceptors and long-range trackers equipped with radar and infrared detection sensors, high performance helicopters, single- and multiengine support aircraft, and sensor-equipped marine search and detection platforms. AMID maritime assets include interceptor go-fast boats with a complement of utility and blue-water support vessels that are equipped with marine radar systems, radios, and other sensors.

Coordinated air and marine interdiction operations have been highly successful, particularly in Southeast Florida and the Caribbean. Customs air and marine interdiction efforts during FY 2000 resulted in the seizure of more than 187,000 pounds of marijuana and close to 44,000 pounds of cocaine. Air and marine personnel also supported law enforcement efforts that resulted in the seizure of over $17 million in narcotics proceeds and 760 arrests.

As smugglers change their patterns of behavior, AMID must be flexible to meet new threats. A fleet modernization program has been developed by the AMID to combat the current threat and meet future needs. Modernization will help to reduce the strain on crew requirements and increase mission effectiveness, thereby saving money for operations and maintenance.

Cooperation with the Drug Enforcement Administration (DEA)

Since signing the Memorandum of Understanding with the DEA in August 1999, Customs has been working with DEA to coordinate the process to place permanent intelligence teams in selected drug source and transit countries. Customs sent teams on two 30-day trips to Mexico, and one team each to Ecuador, the Netherlands, and Thailand. These trips were designed as surveys to determine whether a permanent team should be placed in each of these countries, and were found to be very successful. The teams gathered valuable information and made useful contacts. In coordination with DEA, Customs has held discussions with the Ambassador to Mexico and obtained his approval of the concept. Currently, we are proceeding with the official request to get the proper Department of State approvals for the placement of a permanent team in Mexico. Other countries being considered for placement are Colombia, Venezuela, Panama, Hong Kong, and Brazil.

Personal Search

As the Committee is aware, the Customs Service has been faced in recent years with allegations that the agency was engaged in racial bias in the selection of certain members of the travelling public for personal searches at our nation's airports. Under no circumstance does Customs tolerate race-based and gender bias discriminatory treatment of individuals. Nonetheless, we have taken these allegations very seriously and implemented a series of reforms to ensure that the rights of the travelling public are protected.

We appointed a Personal Search Review Commission (PSRC) in April 1999 that reviewed the policies and procedures used by Customs to process passengers at our major international airports, including our personal search procedures. The PSRC made several recommendations. In order to address these recommendations, Customs convened the Assessment Implementation and Monitoring (AIM) Committee in July 2000. Significant progress has been made towards implementing actions based on the PSRC recommendations.

Customs also established the Passenger Data Analysis Team (PDAT) to review and analyze personal search data. In addition, Customs has improved the personal search data collection process by making specific input of data mandatory. Additional data is now collected on travelers selected for a personal search. This data is reviewed daily by management.

In November 1999, the new Personal Search Handbook was issued and training was provided to over 8,000 Customs Officers. In an effort to provide continued training, a Personal Search Computer Based Training course was developed. All Customs officers who perform personal searches are required to take this course annually.

Additional training was provided to all Customs Inspectors and completed by December 31, 2001. This Inspection and Interaction Skills Workshop offered 16 hours of refresher training in the areas of interpersonal communications, cultural sensitivity, verbal judo, passenger enforcement selectivity and personal search.

I am pleased to report that these combined reforms have helped Customs to reduce its searches of law-abiding passengers dramatically, while maintaining our overall levels of narcotics seizures. To provide you an example, Customs reduced searches from 23,108 passengers in fiscal year 1999 to 9,008 in fiscal year 2000. Yet our seizures of illegal narcotics from passengers in the air environment were approximately the same. That trend continues for 2001.

Combating Terrorism

Customs' mission in combating international terrorism is two-fold: to protect the American public from Weapons of Mass Destruction (WMD) and other instruments of terror and prevent international terrorists from obtaining WMD materials and technologies, arms, funds, and other material support from U.S. and foreign sources.

Customs plays a central role in preventing the smuggling of nuclear, radiological, chemical, and biological weapons, arms, and other instruments of terror into the U.S. for use in terrorist attacks against our citizens. The increasing terrorist threat has led to the development and implementation of an alert plan that outlines four alert levels, each with a very specific set of actions designed to ensure an appropriate response to the threat at hand, while ensuring minimal disruption to normal border traffic flows. Trained volunteers and specialized equipment are on hand to respond to a heightened state of alert. Customs has also established an external and internal antiterrorism intelligence communications infrastructure that enables the agency to obtain threat information on foreign terrorism and disseminate it to field positions.

Customs conducts investigations into violations of U.S. laws by terrorist groups, and participates in interagency intelligence groups, and shares in joint international investigations with foreign customs and law enforcement counterparts through our Customs Attaché offices abroad. Additionally, Customs is an active participant in FBI-sponsored Joint Terrorism Task Forces located throughout the U.S. that are designated to conduct investigations involving outbound counter-terrorism.

Public Law 106-346 and Public Law 106-554 provided additional resources to increase Customs counter-terrorism activities. Funding was provided for 48 additional Special Agents to increase Customs ability to counter the threat along the Northern Border and 17 additional Special Agents to participate in Joint Terrorism Task Forces. Resources were also obtained to fix and replace aging Northern Border security infrastructure, including NII technology, gates, signage, and video security systems.

CyberSmuggling Center Activities

Customs has assumed a leading role in the fight against various forms of Internet crime, thanks to the funding provided for the agency's Cybersmuggling Center. One of the Cybersmuggling Center's most critical areas of activity is the investigation of the transmission of child pornography via the Internet. We have had numerous successes in this area and continue to monitor this growing enforcement concern. In addition, Customs has tackled other forms of Internet crime, including the illegal on-line sale of pharmaceuticals, controlled substances, pirated software, music and movies, counterfeit watches, clothing, and other goods. We are also actively pursuing cases involving the use of the Internet for financial crime and fraud. The number of "on-line" criminal cases has risen dramatically, from approximately 40 investigations in 1999 to 190 in 2000. To date in FY 2001, Customs has initiated 302 Internet investigations unrelated to child pornography.

Stolen Vehicles

Customs has expanded its partnership with the National Insurance Crime Bureau (NICB) in its efforts to identify possible stolen automobiles presented for export. NICB examiners and Customs Inspectors review vehicle identification numbers (VINs) and associated ownership documentation for authenticity at the 28 busiest vehicle export locations across the country. Vehicle identification data is transmitted via the FBI's "VINNY" system for query against FBI and NICB databases. "VINNY" is an electronic reporting system targeting possible stolen or altered vehicles. Vehicles identified as being stolen, salvaged, or plated with false VIN numbers are flagged for intensive examination and possible seizure by field personnel. Further investigation is conducted by Customs Special Agents working cooperatively with State and local law enforcement stolen vehicle task forces.

Forced Child Labor

The investigation of imports alleged to have been manufactured with convict or indentured child labor is among the most difficult aspects of our mission. These investigations demand a unique balance of investigative and diplomatic skill due to their highly sensitive nature.

As a result of funding provided by Congress in fiscal years 1999, 2000, and 2001, Customs has begun to formulate a better understanding of the extent to which products manufactured or produced with some form of proscribed labor are imported into the U.S. Additionally, Customs has sought to create bilateral relationships with foreign governments' labor and law enforcement officials, who recognize the importance of working together to dismantle the organizations that recruit and utilize these labor tactics.

Customs has issued 32 detention orders against foreign manufacturers that utilize prison/forced labor to assemble or cultivate their goods for export to the United States. U.S. Customs, at the request of the Mongolian Government, conducted an investigation and substantiated forced labor allegations against a Chinese-owned textile manufacturer in that country. The Mongolian Government requested Customs assistance because their labor system would not take action against the manufacturers unless the violators came under scrutiny by the importing countries.

Customs is also in the process of opening two Foreign Attaché Offices in the Philippines and Brazil to assist in these types of investigations. We anticipate opening an office in India, pending the authorization of the Government of India.

Tobacco Smuggling

Customs has experienced a dramatic increase in international tobacco smuggling investigations in the past year. This includes smuggling both into and out of the U.S. In addition, Customs is conducting joint investigations with foreign law enforcement agencies, primarily in Europe, to combat international tobacco smuggling. International organized crime groups continue to expand their tobacco smuggling ventures.

Importations of paper wrapped cigarettes reached an all time high in calendar year 2000, with a total value of $265 million. This figure surpassed the previous high of $153.7 million in 1993, which was predominantly comprised of Canadian brand name cigarettes imported into the U.S. to be smuggled back into Canada. As a result of a recent amendment to the Tariff Act of 1930 that became effective in December 2000, importations of cigarettes with brand names registered by the U.S. Patent and Trademark Office will require the permission of the trademark holder to be imported into the U.S. Enforcement of this new statute is likely to become a considerable challenge, as smugglers may seek to evade the new requirement. In an effort to cope with the increase in international cigarette smuggling, Customs has formed a multi-disciplined task force to coordinate all tobacco-related investigations. The coordination includes intelligence collection and analysis, liaison with domestic and foreign law enforcement agencies, and liaison with tobacco manufacturers and importers.

Intellectual Property Rights

The enforcement of Intellectual Property Rights (IPR) continues to be a top priority mission for Customs. In order to accomplish this mission, Customs concentrates its efforts in three principal areas: trademarks, copyrights, and patents. Customs routinely pursues criminal, civil, and administrative investigations of individuals, companies, and organizations that utilize illicit trade practices to circumvent and unlawfully exploit Intellectual Property. The goal of Customs in its IPR enforcement effort is to allow for the successful prosecution of violators and to diminish their economic base through the seizure of all prohibited items and merchandise, the assessment of penalties and sanctions, and the collection of lost revenue.

Customs unique border enforcement authority places it at the forefront of IPR investigations. In FY 2000, Customs effected approximately 3,357 IPR seizures valued at an estimated $60.3 million. These enforcement efforts resulted in a dramatic increase in IPR and Internet-related investigations.

Customs latest IPR initiative is the formulation of the National Intellectual Property Rights Coordination Center (IPR Center). Located at Customs Headquarters in Washington, D.C., the IPR Center is a joint Customs/FBI center responsible for the coordination of a unified federal response to IPR enforcement issues. Particular emphasis is given to investigating major criminal organizations and those utilizing the Internet to facilitate IPR crime. The IPR Center's positive influence on IPR enforcement worldwide has been widely recognized. The Center is currently coordinating a transnational IPR investigation involving specific strains of counterfeit computer software. This coordination involves the direct oversight and analysis of intelligence and information from over 80 related investigations currently being pursued by Customs and the FBI.

Textile Smuggling

Customs continues to increase its efforts in combating the smuggling and illegal transshipment of falsely declared textiles and wearing apparel. Violators utilize illegal schemes to circumvent U.S. quota and visa restrictions to gain unfair trade advantages over U.S. manufacturers. It is anticipated that, with the elimination of the current quota system in 2005 and the implementation of a new system/rules, illegal textile transshipments to the U.S. will increase. Customs has developed a strategic plan to address the issue of illegal textile transshipments and smuggling utilizing the coordinated efforts of Textile Production Verification Teams and domestic investigations.

In FY 2000, Textile Production Verification Teams were deployed to 7 foreign countries and conducted visits to over 450 foreign textile factories to verify production capabilities and identify illegal transshipment schemes. The Office of Investigations, through the use of undercover and special operations, successfully identified transnational criminal organizations responsible for smuggling millions of dollars worth of textiles and merchandise into the U.S. In one such investigation, Customs identified an organization responsible for smuggling in excess of $2.3 million of trademarked and quota/visa restricted merchandise into the commerce of the U.S. The head of the organization was convicted of smuggling and faces 20 years incarceration in addition to payment of criminal fines and restitution to Customs of approximately $700,000.

Financial Investigations

Customs and the Department of the Treasury are leaders in the Federal Government's efforts to combat money laundering. Customs provides key support to the National Money Laundering Strategy. Customs has been given a broad grant of authority to conduct international financial crime and money laundering investigations. This authority is primarily derived from the Bank Secrecy Act and Money Laundering Control Acts of 1986 and 1988. Customs has implemented an aggressive strategy to combat money laundering and now dedicates in excess of 400 full time equivalent (FTE) positions worldwide to money laundering investigations. These efforts against money laundering are not limited only to drug related money laundering, but to proceeds of all criminal proceeds laundered in a variety of ways. During Fiscal Years 1998, 1999, and 2000, money laundering investigations conducted by Customs resulted in the arrest of over 3,100 violators and the seizure of more than $625 million.

Funding was provided in FY 2001 for the creation of multidisciplinary teams which will give Customs the organizational capacity to identify important patterns of noncompliance with the Bank Secrecy Act, identify and establish an expertise in money laundering systems that impact Customs jurisdiction, and equip Customs with the ability to address patterns and trends effectively.

Bulk Cash Smuggling

We have seen a growing problem in the bulk smuggling of cash. Because U.S. banks have become more vigilant about reporting large cash deposits, many traffickers opt to avoid U.S. banks altogether. They smuggle their drug cash out of the country and deposit it into foreign locations where reporting requirements are less stringent or non-existent. U.S. Customs has permanent full-time inspectors assigned to outbound programs, and in part they conduct examinations to search for bulk cash shipments. Additionally, Customs is in the process of deploying new technology in an effort to conduct less intrusive and more effective outbound searches. Seizures of outbound currency rose from $49 million in FY 1996 to $62 million in FY 2000.

Intelligence Collection and Analysis Teams

Customs has begun implementation of a plan for establishing field intelligence units for the collection and dissemination of tactical intelligence in support of the Customs mission. Two of these units, called Intelligence Collection Analysis Teams (ICATs), were established in FY 2000: one in Blaine, Washington, and one in Los Angeles, California. Customs has begun a programmatic review of the ICATs along the southern tier to ensure compliance with the national standard operating procedure. Any issues identified through this review are being immediately addressed to ensure that the ICATs continue to provide intelligence support in the port environment.

Tactical Communications

Tactical communications and investigative information support is administered to field law enforcement staff 24 hours per day, 7 days per week by the Tactical Communications Division, which delivers services through its principal field entity, the National Law Enforcement Communications Center (NLECC). This activity directly affects officer safety and the successful accomplishment of the tactical enforcement operations. There are some significant challenges facing this program in the near term. User training on network capabilities and operation is an increasing requirement due to a dispersed user population, added network complexities, and increased functionality. Establishment of a tactical communications training element focused on delivering regular user training through various methods to field enforcement staff is a high priority.

Trade Outreach

The Customs Service continues to work collaboratively with the trade community to achieve greater streamlining and uniformity of cargo entry processes. The highly successful Customs Trade Symposium 2000, an all-day conference hosted by Customs for business and industry, highlighted agency trade priorities including the Entry Revision Project and the Low Risk Importer Initiative.

The Entry Revision Project is a proposal to develop consensus between Customs and the trade community on a legislative framework to extend modernization to the import entry process. This is second only to the Automated Commercial Environment as a top Customs trade priority. We have met frequently with trade consortia to help build a new entry system that will better meet government and business needs.

Along with risk management and improved oversight, our efforts to enhance compliance have emphasized the need for uniformity. Customs must provide the international trade and travel communities with consistent handling of their transactions at all locations. To help ensure this, we established a new and ongoing process at Headquarters to identify, address and monitor uniformity problem areas. We met with the trade at many outreach events around the country, and used risk management tools to target major areas of need. We have already achieved notable progress with what were once viewed as intractable problems, and we are also giving uniformity top priority in our written directives. Over 5,000 Customs Management Center and port standard operating procedures (SOPs) have been reviewed to ensure alignment with national policies, and we will continue to treat uniformity as a minimum standard of excellence for our Service.

In addition to day-to-day interactions, Customs has also engaged the trade community in numerous fora, including a series of high-level roundtables held around the country at which we discussed specific trade concerns. We have also increased our network of Customs account managers, whose outreach efforts identify and help resolve systemic issues. We are fully committed to continuing and expanding our trade outreach efforts to further improve all areas of our commercial operations.

International Affairs

In the international arena we continue to see an expanding role for Customs in the trade facilitation and law enforcement areas. As the primary border enforcement agency for the world's largest economy, the Customs Service sets the global standard for effective and transparent customs operations. Our international efforts focus on streamlining the flow of global trade, increasing compliance, building effective alliances to combat transnational crime, reducing corruption, strengthening border controls, promoting the rule of law and enhancing economic stability throughout the world. Customs enlists the support of foreign governments to further those objectives and to support the foreign policy goals of the United States.

Customs Attaches represent the Customs Service in foreign countries. They are responsible for investigations, liaison, training coordination, infrastructure building and regulatory and compliance functions. They employ an integrated strategy to deliver law enforcement expertise, training and technical assistance and effective partnerships to combat transnational crime, money laundering and trade fraud. This integrated strategy provides Customs with unique access and influence abroad, which contributes to better outcomes in foreign legislation, trade practices and international law enforcement.

Customs has played a critical role in a number of important international investigations such as operations Blue Orchid (child pornography), Multi-core (illegal export of arms), and Journey (drug smuggling), as well as counterfeit software and tobacco smuggling cases. Collectively, these investigations have resulted in the seizure of over 2,600 videotapes containing child pornography; the indictments of individuals involved in the illegal export of military aircraft and missile parts from the U.S. to Iran; the arrest of a foreign national who headed a major distribution network of counterfeit software; the seizure of 22,489 kilograms of cocaine, 43 arrests, and multiple convictions.

At the Headquarters level, we support the United States Trade Representative and other organizations in bilateral and multilateral negotiations concerning deregulation, protection of intellectual property rights and harmonized Customs procedures. We also service U.S. travelers, the international trade community and the expatriate community by responding to numerous inquiries regarding U.S. import and export laws and procedures.

Customs has also established partnerships with the private sector in order to promote U.S. business interests in foreign countries. The business community frequently cites foreign customs procedures and regulations as one of the most significant obstacles to the efficient, cost-effective movement of goods across international borders. Through our global network of contacts, we provide an important entrée for U.S. business to negotiate foreign regulations.

Customs is proud of its work with the private sector through our Industry Partnership Programs (IPP). Currently, over 4,800 air, sea, trucking, and railroad carriers have signed Carrier Initiative Agreements with Customs. In FY 2000, these carriers provided information to Customs that resulted in 82 domestic seizures totaling 27,014 pounds of narcotics. During the same period, these carriers helped intercept 44,122 pounds of narcotics from conveyances or freight destined for the U.S. from abroad.

Over the last 6 fiscal years (1995 - 2000), participants in IPP programs have provided information to Customs that has resulted in domestic seizures totaling over 91,823 pounds of narcotics. During the same 6 fiscal years, IPP participants helped intercept over 195,306 pounds of narcotics destined for the U.S. from abroad.

In addition to our Carrier Initiative programs, Customs is actively working with foreign business communities through the Business Anti-Smuggling Coalition (BASC). BASC is an industry-led, Customs supported program. The goal of BASC is to enhance security from the point of manufacture in foreign countries through the distribution chain in the United States. There are currently 17 BASC chapters established by foreign business communities and Customs throughout Colombia, Ecuador, Venezuela, Panama, Peru, Costa Rica, and Mexico.

FY 2002 BUDGET REQUEST

For FY 2002, the Customs Service proposes a total program level of $2,385,226,000 and 17,849 Full Time Equivalents (FTEs), all of which will be directly appropriated. The FY 2002 budget represents an increase of 4.6 percent above the FY 2001 enacted level.

The explosive growth in the volume of trade will place an even greater demand on Customs to address pressing trade and enforcement issues with limited staffing and resources. The FY 2002 budget includes $130 million in base funding to continue development of the Automated Commercial Environment (ACE). ACE is designed to replace our current antiquated commercial processing system, and help Customs manage its expanding workload.

As part of the FY 2002 President's Budget submission, $35 million is requested in the Air and Marine Program to support the Western Hemisphere Drug Elimination Act. These funds will be used towards Customs interdiction efforts primarily in the source and transit zones. Specifically, the resources will support acquisition of maritime patrol aircraft; implementation of various safety enhancements for flight crews; replacement of aging P-3 Forward Looking Infrared sensors (FLIR); replacement and modernization of current marine vessels; and replacement of deteriorating and obsolete equipment associated with the Customs Air and Marine Interdiction Coordination Center.

This concludes my statement for the record. I appreciate the opportunity to appear before you today. Again, I want to express my thanks to the Subcommittee for its tremendous support of Customs in the past. We look forward to your continued support as we strive to meet the dramatic challenges faced by the Customs Service in this dynamic era of global trade and enforcement.