**Statement**

**Of**

**Julie L. Myers**

**Assistant Secretary**

**U.S. Immigration and Customs Enforcement**

**Department of Homeland Security**

**Regarding a Hearing On**

**Oversight of Trade Functions: Customs and Other Trade Agencies**

**Before The**

**Senate Finance Committee**

**June 24, 2008**

**Washington, D.C.**

**INTRODUCTION**

Good morning Chairman Baucus and distinguished members of the Committee.
It is my privilege to testify before you today and discuss ICE's
investigative efforts and strategies to combat illegal trade practices
and commercial fraud activities. The international transportation and
entry of goods into the United States is an integral part of the
economic health of our nation. The U.S. government seeks to create
economic prosperity through international trade and the opening of new
consumer markets to U.S. goods. However, the growth of international
trade and commerce can increase the possibility of border security
compromises, potential threats to national security and a greater volume
of economic crimes. Threats to America related to international commerce
are multi-dimensional and potentially devastating. Those threats include
the exploitation of trade vulnerabilities by terrorists and unscrupulous
businesspeople; the direct physical harm to our citizens, families and
children from dangerous, substandard, imported products; and an adverse
effect on the U.S. economy, specific markets and American businesses.

In 2007 ICE became aware of one individual who was exploiting our trade
system with potentially lethal results. At that time, the pharmaceutical
industry alerted ICE that Kevin Xu, a citizen of the People's Republic
of China (PRC) and the owner of Orient Pacific International, was
allegedly involved in importing and distributing counterfeit
pharmaceuticals. ICE initiated an international investigation which
further disclosed that Xu illegally imported purported prescription
drugs into the U.S. and the European Union through express courier
services. This illicit scheme put U.S. and European citizens who needed
real medicine for legitimate health care needs at serious health risk.
During the investigation, ICE and the Food and Drug Administration's
(FDA) Office of Investigations (OCI) undercover agents met with XU and
made numerous undercover purchases of counterfeit cardiac, cancer and
psychiatric prescription drugs. Subsequently, on July 24, 2007, ICE
agents arrested Xu after he arrived in Houston allegedly to personally
replace the packaging, lot numbers and expiration dates on an order of
counterfeit and misbranded drugs ordered by ICE undercover agents. 

This joint ICE and FDA-OCI investigation led to a nine-count indictment
charging Xu and others with conspiracy, trafficking in counterfeit goods
and trafficking in misbranded drugs.  An extraordinary facet uncovered
during this investigation was that Xu inserted thousands of dosages of
counterfeit drugs into the supply chain in the United Kingdom that were
dispensed to patients in need of real medicine. Xu's actions were
serious and potentially life threatening and British patients were
deprived of the critical treatments they desperately required. Xu's
successful insertion of counterfeit pharmaceuticals into the supply
chain resulted in three Class I recalls of counterfeit Plavix (a heart
drug), Casodex (a cancer drug) and Zyprexa (a psychiatric medication) in
that country. Class I recalls are categorized for dangerous or defective
products that could cause serious health problems or death to
individuals who consume them and are instituted in the most egregious
cases. The pharmaceutical industry attempted to preserve the integrity
of the drug supply by removing those particular medications from the
market because the supply chain was diluted with the fake drugs. The
efforts of ICE and its law enforcement partners in this investigation
effectively eliminated the threat of one individual whose actions had
serious consequences to the well-being of vast numbers of innocent
citizens from two continents.

The Xu case is just one example of illegal and predatory trade practices
driven by profit and greed motives. ICE Headquarters Commercial Fraud
and Intellectual Property Rights Unit, in conjunction with ICE Office of
Investigations field offices, have implemented a strategy to counter the
impact these crimes have on the safety of our citizens and the financial
well-being of the U.S. economy. Our strategic, tactical and operational
activities are directed to aggressively investigate and prosecute
criminally and civilly those noncompliant importers, exporters,
manufacturers, brokers and others who commit trade related crimes. ICE
seeks to seize and forfeit contraband and criminal proceeds of these
crimes whenever possible. ICE administers and enforces U.S. trade laws
and international agreements utilizing a multi-faceted approach that
combines our efforts with law enforcement partners. We have developed
threat based initiatives and engaged the trade community with an active
outreach program.

Today, I would like to discuss some of the innovative ICE initiatives
and operations instituted as part of this ongoing strategic effort. In
particular, I will focus my remarks on our efforts to keep dangerous and
substandard products out of the U.S. marketplace, how we are protecting
Intellectual Property rights, and the myriad ways in which we target the
goods and schemes designed to circumvent lawful trade mechanisms.

**[PROTECTING HEALTH AND SAFETY]{.underline}**

Operation Guardian is a threat specific initiative that began in October
2007 in response to the Administration's Interagency Working Group on
Import Safety and several incidents of hazardous imports into the United
States that caused public safety concerns. Those imports included

-   counterfeit toothpaste that contained anti-freeze;

-   counterfeit drugs containing too little of the active ingredient,
    too much of the active ingredient or none of the active ingredient
    at all;

-   structural steel imported using false documents that stated the
    steel met a certain grade of the American Society for Testing and
    Materials, found to be substandard;

-   tainted animal food containing melamine, a product contained in
    plastics, cleaning products, countertops, glues, inks and
    fertilizers, that led to the death or injury of pets in U.S.
    households;

-   Counterfeit circuit breakers that explode or cause fires.

-   **OPERATION GUARDIAN**

> In developing Operation Guardian, ICE joined with numerous law
> enforcement and regulatory agencies including U.S. Customs and Border
> Protection, the FDA's OCI, U.S. Postal Inspection Service, the
> Computer Crime and Intellectual Property Section of the Department of
> Justice, and Consumer Products Safety Commission to join a
> Headquarters Working Group (WG) that would function under the
> Operation Guardian umbrella. The Operation Guardian WG initially
> concentrated on illicit imports from the PRC but has since expanded
> its mission to combating the importation and distribution of harmful,
> foreign manufactured products imported from all foreign sources.
>
> The Operation Guardian WG has established specific objectives
> including but not limited to:

-   targeting, interdicting, and investigating imported substandard,
    tainted and counterfeit products, including drugs, that pose a
    health and safety risk to consumers;

-   conducting assessments, identifying high risk commodities and
    specific ports of entry for enforcement activities;

-   creating inspection and investigative standard operating procedures
    to be employed during Operation Guardian enforcement actions;

-   developing specific surge activities targeting known shipments,
    commodities and/or identified smuggling organizations;

-   conducting outreach and coordinating with private sector and
    industry representatives to strengthen and enhance effectiveness in
    responding to the threat of hazardous importations; and

-   individual agencies have placed ongoing investigations and
    regulatory activities under the auspices of Operation Guardian to
    enhance coordination, de-confliction and intelligence sharing.

> Since the inception of the Operation in FY 08, ICE initiated and/or
> designated 69 investigations as Guardian cases. Additionally, there
> are 43 ongoing joint ICE and FDA-OCI investigations that will be
> placed under Operation Guardian to better utilize the combined agency
> authorities, expertise and resources. There are early successes of
> Operation Guardian in ongoing investigations that have resulted in
> criminal arrests and indictments, administrative immigration arrests,
> seizures of cash, counterfeit items, illicit pharmaceuticals,
> narcotics and other regulated items.
>
> Three Guardian surge operations are simultaneously underway at several
> ports of entry throughout the U.S. ICE, together with CBP and other
> Guardian partners conducted trade analysis and identified specific
> commodities and importers to be targeted for inbound inspections and
> product testing at U.S. ports of entry. The products targeted and port
> locations will evolve pending the development of new intelligence,
> identification of anomalies and updated targeting by law enforcement.
> Presently, the surge operations are focused on interdicting tainted
> food products, counterfeit circuit breakers and unregulated cigarette
> lighters. Operation activities to date have resulted in the seizure of
> commercial shipments of tainted shrimp, honey and counterfeit circuit
> breakers.

-   **OPERATION APOTHECARY**

> Operation Guardian member agencies have also conducted numerous
> investigations under the ongoing initiative called Operation
> "Apothecary" (Apothecary). Apothecary addresses, measures, and attacks
> potential vulnerabilities in the entry process that might allow for
> the smuggling of commercial quantities of counterfeit, unapproved,
> and/or adulterated drugs through the Internet, international mail
> facilities (IMFs), international courier hubs (ICHs), and land
> borders.
>
> Since October 2007, Apothecary surges have been conducted at IMFs and
> ICHs in Chicago, Honolulu, and Dallas which have resulted in the
> examination of approximately 7,150 parcels, numerous seizures of
> unapproved drugs, including controlled substances, and the initiation
> of several ICE Office of Investigations (OI) investigations. There are
> seven additional Apothecary surge operations scheduled for the
> remainder of this calendar year. Prior to FY 2008, Operation
> "Apothecary" resulted in the discovery of 50 Internet-based targets
> and initiation of 154 investigations. Those investigations have led to
> 75 indictments, the execution of 24 federal search warrants, 48
> criminal arrests, 52 convictions and 326 seizures.

**[PROTECTING INTELLECTUAL PROPERTY RIGHTS]{.underline}**

The ICE-led National Intellectual Property Rights Coordination Center
(IPR Center) stands as the key post in the fight against the importation
and trafficking of counterfeit goods. The IPR Center offers one stop
shopping for both law enforcement and the private sector to address the
growing economic, transnational threat of counterfeit merchandise. With
increased trade based threats, the IPR Center has recently begun to take
on a more active and expanded role in this arena. The IPR Center
organizational structure will consist of three sections including
Operations, Programs and Outreach/Training formulated to create a
command and coordination posture that will maximize the multi-agency use
and deployment of investigative resources with partnered law enforcement
agencies. The Operations section will be responsible for managing and
directing all identified leads to field offices for investigation.
Investigative activities and targeting will be coordinated on national
and international levels, with member agencies playing critical roles in
deconfliction and coordination. The IPR Center will perform in-depth
analysis of IP industry leads, intelligence, review importer records and
conduct link and financial analysis that will be used to support
affidavits for search, seizure and arrest warrants.

The IPR Center will continue its critical enforcement role in support of
the Administration's Strategy targeting Organized Piracy! (STOP!), the
Security and Prosperity Partnership (SPP) and Operation Guardian. The
enhancements made to support the IPR Center will augment successes of
prior years that resulted in cumulative seizures of counterfeit
merchandise by both ICE and CBP that were valued at almost \$155.3
million in FY 06 and \$196.7 million in FY 07.

Additionally, the IPR Center initiated an outreach program in 2000 and
began to provide IP industries, wholesalers and retailers with
information to help protect their trademarks and copyrights by offering
enforcement assistance through referrals to the IPR Center.  The number
of outreach programs and individuals contacted through the IPR Center
outreach program has spiraled upward in recent years.  During FY2006,
the IPR Center conducted 60 outreach programs through seminars,
conventions, conferences, training sessions and meetings, contacting
approximately 10,000 people.  In FY2007, the IPR Center coordinated and
conducted 95 outreach events to an audience of almost 16,000.  As of
April 2008, the IPR Center has completed 50 outreach and training
sessions for an additional 8,200 people. This outreach conducted by ICE
is paying dividends. The following examples were the direct result of IP
industry partnership with the IPR Center that led to successful
anti-counterfeiting investigations by ICE field offices.

-   **CISCO SYSTEMS JOINT INVESTIGATION**

> In February 2008, the Royal Canadian Mounted Police (RCMP) in Toronto
> charged two individuals and a company with distributing, via the
> Internet, large quantities of counterfeit Cisco Systems network
> components to companies in the U.S. The RCMP seized approximately
> 1,600 pieces of counterfeit network hardware with an estimated value
> of \$2 million.
>
> Thanks to technical assistance from CISCO which resulted from our
> partnership, ICE and the RCMP have been able to validate the
> illegitimacy of the counterfeit network hardware. These arrests and
> seizures are the latest in a joint international enforcement
> initiative between the U.S. and Canada that targets the illegal
> distribution of counterfeit Cisco network hardware manufactured in
> China. All told, the initiative has resulted in more than 400 seizures
> of counterfeit hardware and labels with an estimated retail value of
> more than \$76 million. The initiative is led by ICE, CBP and the FBI,
> working in conjunction with DOJ's CCIPS, U.S. Attorney's Offices
> across the country and the RCMP. Cisco Systems, Inc. provided
> exceptional assistance throughout these investigations.
>
> This landmark initiative has achieved significant successes in
> protecting the public from the risk of network infrastructure failures
> associated with these counterfeits. ICE opened a total of 28
> investigations in 17 separate field offices. Eight of these were
> jointly worked with the FBI, and several with the RCMP. ICE
> investigations accounted for 115 seizures of counterfeit Cisco
> products with an estimated retail value of \$20.4 million. CBP
> seizures accounted for more than \$52 million in counterfeit Cisco
> Systems products, with the FBI accounting for more than \$3.5 million
> in seized counterfeit network hardware. Thus far, our work has led to
> six indictments and four felony convictions.

-   **FIRST FOREIGN NATIONAL EXTRADITED FOR IPR VIOLATIONS**

> Just last month, in March, 2008, Randy Gonzalez, a Philippine citizen
> who allegedly conspired to import and distribute counterfeit drugs
> into the U.S. from Thailand, was the first foreign national to be
> extradited to the U.S. for IPR counterfeit pharmaceutical violations.
> The extradition of Mr. Gonzalez was the result of a joint ICE-FDA/OCI
> investigation that uncovered the smuggling of counterfeit Viagra and
> Cialis pills in packages of general merchandise. The loose tablets
> were packaged and labeled after entering the U.S.
>
> Both trademark holders were essential to our ability to determine
> these products were counterfeit, and, as a result the two importers in
> the U.S. were convicted and sentenced in 2007 after entering guilty
> pleas for conspiracy to traffic in counterfeit goods and trafficking
> in counterfeit pharmaceuticals. Mr. Gonzalez is now being prosecuted
> and his case includes seizures of counterfeit drugs valued at more
> than \$776,000.

-   **XYDEAS UNAPPROVED HALOPERIDOL COUNTERFEIT DRUG INVESTIGATION**

> In another case of note, in February 2007, FDA issued a consumer
> warning that U.S. consumers who ordered drugs over the Internet were
> receiving the powerful anti-psychotic drug Haloperidol rather than the
> specific products they had ordered. Some consumers became ill enough
> to seek emergency medical treatment. Joint investigations by ICE and
> FDA-OCI led to Georgios Xydeas, a Greek national who was allegedly the
> supplier for counterfeit and unapproved prescription drugs, including
> some controlled substances, for several different Web-based dealers.
> Over the course of the investigation, ICE and FDA's OCI agents
> received critical assistance from several major pharmaceutical
> companies, the U.S. State Department, Panamanian officials and the
> British Medicines and Health Care Regulatory Agency. On April 1, 2008,
> Mr. Xydeas was arrested in New York City and charged with 43 criminal
> counts, including trafficking in counterfeit goods, importing
> controlled substances, misbranding drugs and smuggling goods into the
> U.S.

These cases underscore the importance of the ICE industry outreach
program in combating illicit trade. This partnership with the trade
community provides ICE with information, tips and insight from
businesses that encounter suspicious activity in the course of normal
business. Moreover, industry representatives often provide technical
guidance to law enforcement and prosecutors in support of investigative
efforts while ICE provides training to educate industry on lawful
business practices.

[**TARGETING THE SCHEMES DESIGNED TO CIRCUMVENT LAWFUL TRADE
MECHANISMS**]{.underline}

Beyond protecting intellectual property rights and trademarks here at
home through education and partnerships with legitimate businesses, ICE
is also working to attack the illicit schemes designed to circumvent
lawful trade mechanisms. We find particular success in these cases
thanks to strong collaboration with CBP and numerous other law
enforcement partners.

[IN-BOND DIVERSION]{.underline}

We consistently find that illicit cargo and goods are smuggled into the
U.S. using similar methods utilized by drug traffickers and alien
smugglers. These criminals illegally import items via sea, air and land
while penetrating U.S. borders with misdescribed and/or transshipped
merchandise via third countries or diverting merchandise from the
In-Bond system. The In-Bond system allows foreign merchandise to
physically enter at a port other than the official port of importation.
When conducted properly, In-Bond transactions facilitate trade by
allowing the use of U.S. infrastructure for the transportation of goods
to foreign markets. The goods never formally enter into U.S. commerce
but instead transit the U.S. under bond via air, truck or rail before
exiting the country in route to a foreign destination. In-Bond movements
are incredibly valuable to trade, but also have an inherent
vulnerability in that they can be diverted to smuggle restricted or high
duty items, and merchandise limited by quota and visa, into the United
States.

Exploitation of this vulnerability is evidenced in a recent successful
ICE investigation conducted by the Special Agent in Charge (SAC) New
York called KDL. Consolidated containers were imported from China
utilizing false documents listing the merchandise as being inexpensive,
low duty rate items, such as plastic shower curtains, for multiple
companies. The importers, through their fraud scheme, falsified entry
documentation and substituted the counterfeit merchandise with
pre-staged items prior to inspection and facilitated the illegal entry
of more than 950 containers of counterfeit merchandise during a two-year
period with an estimated MSRP of more than \$700 million. In June 2007,
the ICE New York Office of Investigations arrested 29 individuals,
including Customs brokers, container freight station operators, cartmen,
bonded warehouse operators and persons trafficking in counterfeit
merchandise for various smuggling and IPR violations. ICE agents also
coordinated efforts with CBP to seize 103 containers of counterfeit
merchandise with an approximate MSRP of \$230 million.

To help attack potential vulnerabilities in the entry process that might
allow smuggling of commercial merchandise via bonded warehouses, ICE
established Fraud Investigative Strike Teams (FIST). FIST activities,
which began in 2004, are directed towards protecting the integrity of
the in-bond process. FIST personnel consisting of ICE agents and CBP
officers conduct joint operations that focus on identifying the
unauthorized manipulations of commercial merchandise within bonded areas
and unauthorized access by employees who lack proper immigration
documentation and/or the background investigations required to have
access to bonded the warehouses.

To date, FIST operations have resulted in the following:

-   352 individuals identified as being illegally residing and working
    in the United States

-   147 liquidated damages (\$6,370,674)

-   7 penalties (\$102,993)

[ANTI-DUMPING AND COUNTERVAILING DUTIES]{.underline}

The ICE Antidumping and Countervailing Duty (AD/CVD) Program is another
illustration of how ICE and CBP protect U.S. businesses from predatory
and unfair trade practices and protect the revenue of the U.S. AD/CVD
orders are issued by the Department of Commerce (DOC). CBP administers
the collection and distribution of the assessed AD/CVD duties, at the
direction of the DOC. Antidumping duties are assessed when imported
merchandise is being sold at less than fair market value, causing or
threatening to cause material injury to the domestic industry producing
a comparable product. Countervailing duties are imposed to offset
foreign country [subsidy](http://en.wikipedia.org/wiki/Subsidy) payments
on the exports of the foreign businesses. The AD/CVD duties are intended
to balance the value of the foreign merchandise with the domestic
manufactured merchandise.

ICE has the responsibility to investigate importers who evade the
payment of AD/CVD on imported merchandise. When working AD/CVD
investigations, ICE Special Agents work closely with CBP Officers,
Import Specialists and Regulatory Auditors.

AD/CVD evasion schemes often include:

-   Trans-shipment of goods, where goods made in an AD/CVD-affected
    country are shipped to a third, non-affected country and then
    declared as a product of the third country when entered into the
    U.S.;

-   Undervaluing the merchandise to offset the cost of the AD/CVD
    payment; and

-   Falsely describing the merchandise to avoid detection and payment of
    the AD/CVD.

AD/CVD cases are often long-term investigations that involve global
investigative leads. Since 2005, ICE has conducted numerous joint
investigations with CBP, the National Oceanic and Atmospheric
Administration, Office of Law Enforcement (NOAA-OLE), FDA, and the DOJ,
regarding the alleged illegal importation of Vietnamese catfish
described as "grouper," "sole," and "pike" to circumvent the antidumping
order. Here are just a few examples:

-   An ICE Pensacola investigation has resulted in the execution of
    federal search warrants, the arrest, indictment and conviction of
    the main target, Danny Nguyen, on charges of conspiracy to import
    and sell mislabeled fish in 2006 and was ordered by a federal court
    to pay CBP \$1,139,275 in dumping duties.

-   On April 1, 2005, the ICE SAC Washington, DC initiated an
    investigation into Virginia Star Seafood Corporation, located in
    Fairfax, Virginia alleging evasion of anti-dumping duties by falsely
    labeling/classifying goods and entering those goods by means of
    false statements and smuggling fish commonly known as Basa, Tra or
    Swai (subject to Anti-Dumping Duties) as sole, pike, flounder,
    grouper, carp fillets imported from Vietnam not subject to an
    anti-dumping duty order.

-   On January 14, 2008, David S. WONG, the Vice President of True World
    Foods, LLC plead guilty to violating the Lacey Act[^1]. Wong
    purchased, on behalf of his employer, \$197,930 worth of frozen fish
    fillets from Virginia Star Seafood Corporation. In March 2008, True
    World Foods Chicago, LLC, was ordered to pay \$60,000 for its role
    in purchasing and re-selling falsely labeled frozen fish fillets in
    violation of the Lacey Act. Under the December 2007 plea agreement,
    the corporation agreed to publish a full page advertisement
    regarding this incident in a seafood industry publication with wide
    circulation, and also forfeited \$197,930, the purchase value of the
    fish.

In summary, ICE is currently involved with approximately 70 AD/CVD
investigations relating to open DOC AD/CVD orders that include honey,
lined paper products, pasta, polyethylene bags, shrimp, steel and wooden
bedroom furniture.

[TRADE-BASED MONEY LAUNDERING]{.underline}

Another scheme designed to circumvent lawful trade mechanisms is
trade-based money laundering. ICE's Trade Transparency Unit (TTU), which
aggressively targets trade-based money laundering and commercial fraud,
also recently began creating TTUs with foreign trading partners. The
core component of the TTU initiative is the exchange of trade data with
foreign counterparts, which is facilitated by existing Customs Mutual
Assistance Agreements. By combining international efforts, TTUs can
identify and eliminate trade-based money laundering systems. Through
this initiative, ICE is the only federal law enforcement agency
exchanging trade data with foreign governments to investigate
trade-based money laundering investigations. The ICE TTU currently has
partnerships with Argentina, Brazil, Colombia, and Paraguay and
continues to gain momentum by expanding overseas units as well as
increasing domestic support.

The lead initiative for FY 2008 is the establishment of a new TTU in
Mexico City, Mexico, which was completed just last month. This is TTU's
largest project to date, as Mexico is the United States' third largest
trading partner. The U.S. and its foreign TTU partners exchange trade
data that, for the first time, allows both countries to see the full
picture of import and export data relating to commodities entering and
leaving their countries.  This provides for trade transparency and
assists in the identification and subsequent investigation of
international commercial fraud and money laundering organizations. 

 

The exchanged trade data is placed in the Data Analysis & Research for
Trade Transparency System (DARTTS), an analytical computer system that
helps ICE special agents and analysts detect and track money laundering,
contraband smuggling and trade    fraud by analyzing data in ways not
previously feasible.  The ICE TTU installs, updates and maintains the
DARTTS computer systems in foreign TTUs and trains law enforcement
officials in the use of DARTTS and commercial fraud and money laundering
indicators.  TTU efforts with foreign governments have produced recent
operational successes in investigations identifying fraudulent trade
schemes, Black Market Peso Exchange (BMPE) money laundering and
irregular import/export company trans-shipments.

The ICE TTUs bring worldwide recognition to the threat of trade-based
money laundering and ICE's efforts to combat and prevent this threat.
Recognized as the best mechanism to combat trade based money laundering,
TTUs have been highlighted in numerous U.S. Government publications
including The National Money Laundering Threat Assessment, the National
Money Laundering Strategy and the Department of State's International
Narcotics Control Strategy Reports.

Additionally, TTU's are generating valuable case leads. As a result of
just one TTU-generated lead, the ICE's Miami Office of Investigations,
Bulk Currency Smuggling Task Force (BCSTF) targeted several companies
involved in the laundering of Eurodollars from Colombia through the U.S.
Due to strict currency regulations, the Eurodollar cannot be deposited
directly into European financial institutions and therefore are smuggled
into Colombia. Then, from several Colombian money exchange businesses,
the Euros were shipped to a third party country (U.S./Miami) via
commercial jet. The Euros were ultimately delivered to a legitimate
financial institution, which undertook the exchange of them into
Colombian pesos and then wired the pesos back to the Colombian money
exchange businesses. The TTU-lead resulted in the seizure of Euros
valued at \$US 12 million at the Miami International Airport in June
2007. Working with the Department of Justice for civil prosecution, the
majority of the Colombian money exchange businesses have since agreed to
a settlement.

[CONTRABAND SMUGGLING]{.underline}

ICE Headquarters and investigative field offices continue efforts to
identify how organized criminal trafficking organizations exploit
legitimate trade at U.S. borders and ports of entry. One constant is the
threat of internal conspiracies at seaports and airports. These schemes
involve the smuggling of illegal contraband by persons who are employed
in the transportation industry, and who use their access to
international cargo and conveyances to remove illicit contraband from
containers and/or baggage prior to examination. Internal conspirators
introduce contraband into otherwise legitimate export cargo or
conveyances, and they can remove contraband, including narcotics from an
arriving conveyance or a baggage carousel. ICE works closely with the
CBP Office of Field Operations to disrupt contraband smuggling groups
attempting to take advantage of the busy flood of trade goods entering
the U.S. One continuing threat to the United States is the smuggling of
methamphetamine and its precursors, both of which are scheduled under
the Controlled Substances Act (CSA).

One way many of the criminal organizations still manufacturing
methamphetamine in the United States illicitly purchase the necessary
precursors to produce methamphetamine is through the internet.
Precursors for methamphetamine are imported and exported to and from the
United States illicitly via the Internet utilizing trade channels and
courier services. ICE has ongoing initiatives and investigations to
successfully target organizations engaged in this activity. For example,
one such smuggling organization was targeted in a multi-agency
investigation led by the ICE Special Agent in Charge Phoenix. This
internationally coordinated effort named Operation Red Dragon,
dismantled a criminal organization that distributed methamphetamine
precursors worldwide via its website in the United Kingdom. The case
involved six undercover purchases of Red Phosporus and 600 grams of
Iodine Crystals and resulted in the following significant enforcement
results: 138 methamphetamine laboratories dismantled in the United
States; 15 methamphetamine labs dismantled in Australia, German and the
United Kingdom; six search warrants executed in Scotland and the seizure
of 47 different chemicals; and over 90 arrests including the
apprehension of main suspects Kerry Ann Shanks and Brian Howes pursuant
to international arrest and extradition warrants.

**CONCLUSION**

Counterfeiting, piracy and unlawful importation of goods pose a
significant threat to the national security, public safety and the
economic well being of the United States. ICE investigations have shown
us that these illegal traders and criminal organizations are profit
driven and exploit loopholes and vulnerabilities in the transportation,
importation In-Bond system and financial sectors to advance their
criminal enterprises. ICE has strong and unique expertise,
infrastructure and established key law enforcement partnerships that
effectively support investigative and operational activities focused on
dismantling criminal organizations, reducing public safety hazards and
limiting negative economic impact to this country. ICE will continue to
work through institutionalized mechanisms such as the Trade Transparency
Units, and the ICE Intellectual Property Rights Center to coordinate and
unite domestic and international law enforcement efforts in combating
international trade crimes. ICE will build on agency outreach programs
with the trade community designed to enhance cooperation with all
private sector partners.

I want to thank the Chairman and the entire committee for the
opportunity to speak with you today, and for your continued support of
ICE's efforts. I will be happy to answer any questions.

[^1]: ^?^ The Lacey Act provides that it is unlawful for any person to
    import, export, transport, sell, receive, acquire, or purchase any
    fish or wildlife or plant taken, possessed, transported, or sold in
    violation of any law, treaty, or regulation of the United States or
    in violation of any Indian tribal law whether in interstate or
    foreign commerce.