prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.



Report 2: To varying extents, Internet content providers—also called “edge providers”—and Internet service providers collect, use, and share information from their customers to enable their services, support advertising, and for other purposes  Many companies describe these and other privacy-related practices in privacy policies, to which consumers may be required to consent in order to use the service  Consumers access such services through a variety of devices, including mobile phones and tablets, computers, and other devices connected to the Internet by wired or wireless means  A nationwide survey that the U S  Census Bureau conducted for NTIA in 2017 found that 78 percent of Americans ages 3 and older used the Internet  Another nationwide survey that the Pew Research Center conducted in 2018 found that 69 percent of American adults reported that they use some kind of social media platform such as Facebook  No comprehensive federal privacy law governs the collection, use, and sale or other disclosure of personal information by private-sector companies in the United States  Rather, the federal privacy framework for private-sector companies is comprised partly of a set of tailored laws that govern the use and protection of personal information for specific purposes, in certain situations, or by certain sectors or types of entities  These laws include the Fair Credit Reporting Act, which protects the security and confidentiality of personal information collected or used to help make decisions about individuals’ eligibility for such products as credit or for insurance or employment; the Gramm-Leach-Bliley Act, which protects nonpublic personal information that individuals provide to financial institutions or that such institutions maintain; and the Health Insurance Portability and Accountability Act which establishes a set of national standards for the protection of certain health information  In addition, as detailed in this report, FTC addresses consumer concerns about Internet privacy using its broad authority to protect consumers from unfair and deceptive trade practices  We have reported on a variety of Internet privacy concerns in recent years that include the collection and use of data such as people’s Internet browsing histories, purchases, locations, and travel routes, including: Internet of things: In 2017, we found that as new and more devices become connected, they increase not only the opportunities for security and privacy breaches, but also the scale and scope of any resulting consequences  Vehicle data privacy: We found in 2017 that most selected automakers reported limiting their data collection, use, and sharing, but their written notices did not clearly identify data sharing and use practices  Information resellers: In a 2013 report on companies that collect and resell information on individuals, we found that no overarching federal privacy law governs the collection and sale of personal information among private-sector companies, including information resellers  We found that gaps exist in the federal privacy framework, which does not fully address changes in technology and the marketplace  Among the issues we noted were the potential need for changes to privacy controls for web tracking, mobile devices, and other technologies  We recommended that Congress consider strengthening the consumer privacy framework to reflect the effects of changes in technology and the marketplace  Such legislation has not been enacted to date  Mobile device location data: In 2012, we found that, according to privacy advocates, consumers are generally unaware of how their location data are shared with and used by third parties  We recommended that FTC consider issuing guidance establishing FTC’s views regarding mobile companies’ appropriate actions to protect location data privacy  FTC implemented that recommendation in 2013  To guide their privacy practices, many organizations and governments have used the Fair Information Practice Principles  As noted above, these principles—which are not limited to Internet privacy—address the collection and use of personal information, data quality and security, and transparency, among other things, and have served as the basis for many of the privacy recommendations federal agencies have made  The Organisation for Economic Co-Operation and Development developed a version of these principles in 1980 that has been widely adopted and was updated in 2013  In 2000, FTC recommended that Congress enact a consumer Internet privacy statute that would require companies to comply with broad and flexible definitions of the principles, and an FTC commissioner said in a 2014 speech that they are a solid framework and are flexible and effective  While they are principles, not legal requirements, they provide a possible approach for balancing the need for privacy with other interests  Table 1 provides more detailed information about the principles  FTC is primarily a law enforcement agency that, among other responsibilities, currently has the lead in overseeing Internet privacy at the federal level  Specifically, it addresses consumer concerns about Internet privacy, both for Internet service providers and content providers, using its general authority under section 5 of the FTC Act  Section 5, as amended in 1938, prohibits “unfair or deceptive acts or practices in or affecting commerce ” Although the FTC Act generally empowers FTC to take enforcement action, it prohibits FTC from taking action against common carriers such as telecommunication services, airlines, and railroads under certain circumstances  FTC also does not have jurisdiction over banks, credit unions, or savings and loans institutions  Even though the FTC Act does not speak in explicit terms about protecting consumer privacy, the Act authorizes such protection to the extent it involves practices FTC defines as unfair or deceptive  According to FTC, an act or practice is “unfair” if it causes, or is likely to cause, substantial injury not reasonably avoidable by consumers and not outweighed by countervailing benefits to consumers or competition as a result of the practice  FTC has used this “unfairness” authority to address situations where a company has allegedly failed to properly protect consumers’ data  According to FTC, a representation or omission is “deceptive” if it is material and is likely to mislead consumers acting reasonably under the circumstances  For example, the omission of terms in an advertisement would need to be material and likely to mislead consumers in order to be deceptive  FTC applies this “deceptive” authority to address deceptions or violations of written privacy policies and representations concerning data security  FTC’s Bureau of Consumer Protection investigates Internet privacy complaints from various sources, including consumers, other agencies, Congress, and industry, and also initiates investigations on its own  If the bureau has reason to believe that an entity is engaging in an unfair or deceptive practice, it may forward an enforcement recommendation to the commission  The commission then determines whether to pursue an enforcement action, which can include the following: litigating commission-filed administrative complaints before an FTC administrative law judge; filing and litigating complaints in federal district court seeking preliminary and permanent injunctions, monetary redress for consumers or other equitable relief; or referring complaints seeking civil penalties for violations of rules authorizing such penalties or for violations of administrative orders to the Department of Justice (DOJ) and assisting DOJ in litigating those cases (if DOJ does not take action, FTC can pursue the action on its own)  FTC’s Internet privacy enforcement cases may be settled without the imposition of civil penalties  Instead, FTC typically enters into settlement agreements requiring companies to take actions such as: implementing reasonable privacy and security programs; being subject to long-term monitoring of compliance with the settlements by outside entities; providing monetary redress to consumers; forfeiting any money gained from the unfair or deceptive conduct; deleting illegally obtained consumer information; and providing transparency and choice mechanisms to consumers  If a company violates an FTC final consent order, the agency can then request civil monetary penalties in court for the violations  In addition, as discussed below, FTC can seek to impose civil monetary penalties directly for violations of certain privacy statutes and regulations such as the statute pertaining to the Internet privacy of children and its implementing regulations  Although FTC can levy civil penalties up to $41,484 per violation, per day, against an entity that violates a trade regulation rule under the FTC Act, it has not promulgated trade regulation rules under section 5 specific to privacy  Although FTC has not implemented its section 5 authority by issuing regulations regarding Internet privacy, it has issued regulations to implement other statutory authorities  Likewise, other federal agencies use regulations to implement the statutes they are charged with administering  The process by which federal agencies typically develop and issue regulations is spelled out in the Administrative Procedure Act (APA)  Section 553 of the APA establishes procedures and requirements for what is known as “informal” rulemaking, also known as notice-and- comment rulemaking  Among other things, section 553 generally requires agencies to publish a notice of proposed rulemaking in the Federal Register  After giving interested persons an opportunity to comment on the proposal by providing “data, views, or arguments,” the statute then requires the agency to publish the final rule in the Federal Register  Regulations may be enforced in various ways, for example, by seeking civil penalties for non-compliance  FTC has authority to seek civil penalties, for example, when a company knowingly violates a regulation or, as discussed below, a final consent order  In contrast to the APA section 553 rulemaking process, the rulemaking process that FTC generally must follow to issue rules under the FTC Act is spelled out in the Magnuson-Moss Warranty Act amendments to the FTC Act (Magnuson-Moss)  The Magnuson-Moss amendments— enacted in 1975 partly in response to industry opposition to FTC’s trade regulations, and amended in 1980—require additional rulemaking steps beyond APA section 553  For example, Magnuson-Moss requires FTC to publish an advance notice of proposed rulemaking in addition to the notice of proposed rulemaking required by the APA, and to offer interested parties the opportunity for an informal hearing involving oral testimony  FTC has not promulgated any regulations using the Magnuson-Moss procedures since 1980; according to FTC staff, the additional steps required under Magnuson-Moss add time and complexity to the rulemaking process  The Children’s Online Privacy Protection Act (COPPA), enacted in 1998, governs the online collection of personal information from children under the age of 13 by operators of websites or online services, including mobile applications  COPPA required FTC to issue and enforce regulations concerning children’s online privacy and directed FTC to promulgate these regulations using the APA section 553 notice-and- comment rulemaking process  COPPA contained a number of specific requirements that FTC was directed to implement by regulation, such as requiring websites to post a complete privacy policy, to notify parents directly about their information collection practices, and to obtain verifiable parental consent before collecting personal information from their children or sharing it with others  The commission’s original COPPA regulations became effective on April 21, 2000, and amended COPPA regulations took effect on July 1, 2013  According to an FTC staff member, COPPA and FTC’s implementing regulations reflect various principles that are similar to the Fair Information Practice Principles  FCC regulates the telecommunications industry pursuant to the Communications Act of 1934, as amended (Communications Act)  FCC follows the APA section 553 notice-and-comment rulemaking process to promulgate regulations implementing the Communications Act  FCC also has an enforcement bureau that pursues violations of its regulations and the Communications Act  The Communications Act establishes separate definitions for “information services” and “telecommunications services” and treats these two types of services differently  Specifically, information services are subject to less regulation by FCC than telecommunications services under the Communications Act  However, FTC is prohibited from regulating telecommunications carriers (a provider of telecommunications services) under the common carrier exemption  Prior to 2015, Internet services were considered information services under the Communications Act, and thus FTC was not prohibited from considering the privacy practices of Internet service providers under its FTC Act authority to protect consumers from unfair and deceptive practices  This changed in 2015 when FCC classified broadband as a telecommunications service, which meant that broadband Internet service providers were considered telecommunications carriers and FCC asserted primary oversight over them  As a result of the reclassification, FTC no longer had jurisdiction over Internet service providers  Once FCC had asserted primary oversight over Internet service providers, FCC promulgated privacy regulations specific to them  However, before the privacy regulations went into effect, Congress repealed them under the Congressional Review Act  In December 2017, FCC reclassified broadband as an information service—reverting Internet service providers’ classification to what it had been prior to 2015  When that reclassification became effective in June 2018, jurisdiction of Internet privacy for Internet service providers was effectively transferred from FCC back to FTC  As a result, FCC currently has limited Internet privacy oversight responsibilities, as shown in figure 1  Perspectives on the benefits of and concerns about the collection and use of consumers’ data from the Internet varied somewhat across stakeholder groups  Various stakeholders we interviewed—including those from academia, industry, and government—said that there should be a balance between the freedom of companies to collect and use consumers’ data needed to provide services and the necessity to protect consumers’ privacy  In general, industry stakeholders highlighted the benefits of data collection and use, such as facilitating innovation, while consumer advocacy groups and other stakeholders emphasized concerns about consumers’ loss of control over their data and their lack of understanding of how companies collect and use their information  Additionally, surveys and other literature that we reviewed on Internet privacy highlighted concerns among consumers  The key benefits of information collection were identified as: Enables certain services  According to two industry stakeholders, the collection and use of consumer data from the Internet enable content providers to provide services  These stakeholders said that sometimes a content provider must collect and use information from consumers to provide the service  For example, a mapping service must collect and use consumers’ current location to provide them with up-to-date directions  Provides low-cost or free services  A representative from a content provider said that revenue from targeted advertising helps allow some content providers’ services to be offered to consumers at little or no charge  Instead of charging a subscription fee, a social media company may be able to provide free service because it uses information that it collects from consumers to target advertisements to users on a customized, user-by-user basis  These ads are targeted to users based on interests they express through their use of social media, among other things  According to a representative from an Internet search engine, using consumer data for targeted advertising may be relatively less important for some kinds of content providers, such as search engines  This company representative said that search engines may use keywords entered for a particular Internet search to provide advertisements relevant to the search  For example, a search for “car insurance” can offer the consumer advertisements from car insurance companies without any additional data from the consumer other than the search’s keywords  Supports innovation and customization  According to some stakeholders, the collection and use of data also benefit consumers through other means such as providing innovative products or customized services  According to a representative from a content provider, the collection of personal information, with consent, for commercial purposes can at times have benefits  The representative said, for example, that collection of images containing identifiable information, like faces, can help in the development of new technologies such as object and facial recognition  According to two content providers, consumers may also benefit from customized services and content  For example, according to a representative from a travel-related company, that company can collect information about a consumer to suggest travel itineraries and suggestions for activities  Additionally, representatives from a consumer advocacy group and a content provider stated that direct-marketing approaches are enabled through data collection  Such marketing approaches allow consumers to receive advertisements that are uniquely tailored to their interests  For example, a consumer that a content provider has identified as being a hiker may receive advertisements for hiking boots  Despite these benefits, public opinion surveys have shown concerns about the collection and use of consumers’ information on the Internet  For instance, recent analyses based on surveys by the Pew Research Center and NTIA showed that the public lacks trust in Internet privacy, a concern that may limit economic activities  NTIA’s survey results show that privacy concerns may lead to lower levels of economic productivity as people decline to make financial transactions on the Internet  According to the NTIA analysis, in 2017, 24 percent of American households surveyed avoided making financial transactions on the Internet due to privacy or security concerns  Consumers NTIA surveyed indicated that their specific concerns were identity theft, credit card or banking fraud, data collection by online services, loss of control over personal information, data collection by government, and threats to personal safety  Stakeholders we interviewed elaborated on some of these concerns: Public disclosure and data breaches  Some stakeholders, including representatives from content providers, said that personal information from the Internet can be publicly disclosed, including through data breaches  An academic and a former FCC commissioner told us that such disclosures are becoming more frequent  Various consumer advocacy groups and state governments continue to report data breaches  This personal information can include financial information such as credit card information, the disclosure of which can result in financial harm to the consumer  It can also include other kinds of sensitive information such as political views or medical conditions, the disclosure of which can cause non-financial harms such as embarrassment or harassment  According to public reports, the 2017 breach of consumer information from Equifax, a credit-reporting agency, resulted in the disclosure of 143 million American consumers’ sensitive information  According to NTIA’s 2017 survey, 45 percent of households surveyed reported major concerns about credit card fraud  Regarding non-financial information, in a recent case FTC alleged that an Internet-based company publicly disclosed patients’ sensitive medical information without their knowledge after patients submitted what they thought were confidential reviews of physicians  According to FTC, these reviews were then publicly posted on the company’s website  Financial and other harms  Stakeholders identified both potential financial and non-financial harms associated with misuse of personal information from the Internet  A former FTC acting chair has said that privacy and data-security incidents can cause injuries that do not only involve financial loss and that it may be difficult to measure this type of non-financial injury  In a February 2018 speech, this former acting FTC chair cited a case that the agency filed involving the misuse of personal information from the Internet that resulted in people losing jobs or job opportunities or being threatened, stalked, and harassed  The acting chair said that in another case, there was evidence that several people committed suicide after their names and other data were disclosed  The commission can, by bringing suit in district court, obtain an order compelling content providers to provide monetary relief to consumers if a data disclosure results in financial harm to a consumer  However, an academic noted that many data disclosures of sensitive information cannot be financially redressed; information can indefinitely persist on the Internet once it is disclosed  Consumers’ lack of understanding  A range of stakeholders we interviewed, including those from industry, said that consumers lack an understanding of how their data are collected and used  Some stakeholders said content providers are insufficiently transparent about how they collect and use data  For instance, content providers’ privacy policies, according to various stakeholders, may contain technical language that is difficult for typical consumers to understand, may be located in a difficult-to-access or inconspicuous part of the content provider’s website, or may be lengthy to the point where it becomes prohibitively difficult for a consumer to set aside enough time to read  Furthermore, according to an academic, companies may have an incentive to intentionally obscure their privacy practices, since clarity could put the companies at a competitive disadvantage  The academic also stated that different privacy policies may apply to different parts of a consumer’s experience on a single website  For example, the academic described how a website may have contracts with third-party vendors for specific services included on the website that consumers use, such as an online shopping cart’s features  The privacy policy for the website and the third-party shopping cart can be separate and unrelated to each other, and consumers may not be aware of this since these policies may never appear to consumers or be hard to obtain  A representative from a consumer advocacy group also mentioned that consumers may be unaware that companies track consumers’ Internet activity in order to target those consumers with customized prices  An academic said that these practices may disproportionately affect people with low computer literacy, as they may not be aware of tracking or know of ways to counteract it  In 2015, we found that the lack of computer and Internet skills is one of the primary barriers people face in using the Internet and that this is a particular problem for certain demographic segments who may lack exposure to or knowledge about computers, such as those of age 65 and older and those with low levels of income and education  Consumer lack of control  Some academics and consumer advocacy groups also identified a lack of control as a concern with respect to Internet privacy—consumers have little or no control over how their information is collected, used, and shared  In a 2015 survey conducted by Pew Research Center, 65 percent of respondents said it is very important to be in control of what information is collected about them  However, according to an academic and a consumer advocacy group we interviewed, privacy policies offer consumers little or no bargaining power, and consumers may be forced to either accept the terms of the policy as written or not use the application or service at all  Furthermore, we recently reported that sometimes consumers’ information is used for purposes that are altogether separate from what those consumers originally anticipated  For example, FTC alleged in an enforcement action that in 2009 and 2010, a company told consumers that it would track the websites they visited in order to provide them with personalized offers, when in fact the company was also transmitting credit card information it collected through such tracking to third parties  The company settled with FTC  We also recently reported on how devices that comprise the Internet of Things pose privacy concerns for consumers, including that information collected by such Internet-connected devices can be used in ways to which the consumer was not given the option to opt out  As discussed above, stakeholders described various types of harm that could result from Internet privacy violations  Regardless of whether violations involve financial or other types of harm, a challenging factor in providing Internet privacy oversight is identifying the responsible parties  A former federal government official with experience in privacy issues said that it frequently is difficult to identify which Internet entity in the chain is ultimately responsible for a privacy-related harm  For example, if a consumer is harmed by the theft of his or her Social Security number, it can be difficult to determine which entity is responsible if multiple entities have suffered data breaches of information systems that contained the Social Security number  In addition to the challenges in identifying responsible parties, the federal government has faced challenges in providing Internet privacy oversight  Our prior work has found that such efforts lack clearly defined roles, goals and performance measures, and that gaps exist in the current privacy framework  We found that during the last decade, FTC filed 101 Internet privacy enforcement actions for practices that the agency alleged were unfair, deceptive, a violation of COPPA, a violation of a settlement agreement, or a combination of those reasons  Most of these actions pertained to first-time violations of the FTC Act for which FTC does not have the authority to levy civil penalties  In those cases where a party violated an FTC regulation or settlement agreement, however, FTC does have the authority to impose civil penalties  The 101 cases—filed between July 1, 2008 and June 30, 2018—involved a variety of products, services, and industries that collect and use personal information from the Internet  During the years for which we examined full-year data, the number of enforcement actions taken per year ranged from 5 in 2010 and 2016 to 23 in 2015  For example, in recent years, FTC took enforcement action against the following entities for alleged conduct that the agency contended violated section 5 or COPPA: a toy manufacturer for collecting personal information from children online without providing direct notice and obtaining their parents’ consent; a computer manufacturer for pre-loading laptops with software that compromised security protections in order to deliver ads to consumers; a mobile ride-hailing business for misrepresenting the extent to which it monitored its employees’ access to personal information about users; a television manufacturer for installing software on its televisions to collect viewing data on 11 million consumers without their knowledge or consent and providing the viewing data to third parties; and a mobile advertising network for deceptively tracking the locations of hundreds of millions of consumers, including children, without their knowledge or consent, to serve them geographically targeted advertising  Of the 101 actions filed during the 10-year period, 51 involved Internet content providers, 21 involved software developers, 12 involved the sale of information or its use in advertising, 5 involved manufacturers, 1 involved an Internet service provider, and 11 involved a variety of different products, such as those provided by rent-to-own companies or certification services  In nearly all 101 cases, companies settled with FTC, which required the companies to make changes in their policies or practices as part of the settlement  FTC levied civil penalties against two of those companies for violating their settlement agreements  Also during this 10-year period, FTC levied civil penalties against 15 companies (a total of $12 7 million) for alleged violations of the COPPA regulations  The COPPA civil penalties ranged from $50,000 to $4 million and the average amount was $847,333  FTC can also seek to compel companies to provide monetary relief to those they have harmed  During this time period, FTC levied civil penalties against companies for violations of consent decrees or ordered monetary relief to consumers from companies for a total of $136 1 million  These payment orders ranged from $200,000 to $104 5 million and the average amount was $17 million  In the majority of these 101 enforcement actions that FTC settled, FTC alleged that companies engaged in practices that were deceptive  Examples of the charges FTC brought include: “Deceptive practices” cases (61 cases): In 2016, FTC alleged that Turn, Inc , an Internet advertising company, continued to track the Internet activities of consumers for targeted advertising purposes after the company had made representations that it would stop doing so  According to FTC, the company led consumers to believe they could turn off such tracking when in fact they were unable to do so  “Unfair practices” cases (4 cases): In 2014, FTC alleged that LeapLab, a data broker, knowingly provided scammers with hundreds of thousands of consumers’ sensitive personal information, including Social Security and bank account numbers  “Unfair and deceptive” practices cases (19 cases): In 2015, FTC alleged that Equiliv Investments, a software developer, lured consumers into downloading its “rewards” application, saying it would be free of malware, when the application’s main purpose was actually to load the consumers’ mobile phones with malicious software to mine virtual currencies for the developer  COPPA and COPPA regulations cases (6 cases): In 2011, FTC alleged that Broken Thumbs Apps, a software developer, had collected information from Internet applications that the developer specifically targeted toward children under the age of 13  FTC’s complaint stated that the company had, among other things, failed to provide notice of what information it collected and how it was used and also had failed to inform parents of these practices and receive their consent as COPPA required  Violation of settlement agreement cases (2 cases): In 2012, Google agreed to pay a $22 5 million civil penalty to settle FTC charges that it misrepresented to users of Apple’s Safari Internet browser that Google would not place tracking cookies or provide targeted ads to those users, violating an earlier settlement agreement between the company and FTC  In 14 of the 101 cases, FTC required companies to be audited by outside entities to monitor compliance with the terms of the settlement  The audit period ranged from 5 years to 20 years, with an average of 17 5 years  As noted above, 2 of the 101 cases involved a violation of FTC settlement agreements  In addition, in March 2018, FTC announced that it is investigating whether Facebook’s privacy practices violate a 2012 Facebook settlement agreement with FTC  In the case that resulted in the 2012 settlement, FTC charged Facebook with deceiving consumers by telling them they could keep their information private, but then allowing it to be shared and made public  Appendix II contains more detailed information about the 101 cases  As stated earlier, in 2015, FCC classified broadband Internet service as a telecommunications service, placing primary oversight of broadband Internet service providers’ privacy practices under FCC’s jurisdiction instead of FTC’s jurisdiction  In 2016, FCC filed a privacy enforcement action against a mobile Internet service provider, alleging, in part, violation of section 222 of the Communications Act and FCC’s Open Internet Transparency Rule  Section 222 requires telecommunications carriers to protect the confidentiality of customers’ proprietary information  In that case, FCC fined Verizon Wireless $1 4 million for failing to disclose that it was inserting “unique identifier headers,” also called “perma- cookies” or “super cookies” (mobile web tracking cookies that users cannot remove), into customers’ Internet traffic over its wireless network  Although the settlement was finalized during the 2015-2017 period when FCC had asserted jurisdiction over the privacy practices of Internet providers, the Verizon Wireless practices occurred prior to the classification of Internet service providers as telecommunications carriers  The investigation therefore did not rely upon FCC’s subsequent assertion of authority over Internet service providers’ privacy practices  In October 2016, after FCC had reclassified broadband as a telecommunications service, the commission issued Internet service provider privacy regulations, asserting its authority under section 222 of the Communications Act  In April 2017, however, Congress repealed these regulations under the Congressional Review Act before they took effect  In December 2017, FCC then reversed its 2015 classification of broadband, and oversight of broadband Internet service providers’ privacy practices reverted to FTC once the decision took effect in June 2018  In explaining the December 2017 decision, FCC’s new chair said that FTC’s privacy oversight approach regarding Internet service providers—using its authority to protect consumers against unfair, deceptive, and anti- competitive practices—had worked well in the past and that this action would “put the nation’s most experienced privacy cop back on the beat ” Under FCC’s new legal approach, it no longer asserts jurisdiction to take enforcement action against Internet service providers for privacy-related matters, including mobile Internet service providers
Report 2:  5515 , the House agreed to by voice vote H Amdt  644 , an en bloc amendment including, inter alia, amendment number 91 as printed in H Rept  115-698 of May 21, 2018, providing for consideration of H R  5515   Amendment 91 added Section 1298, which states the following: SEC  1298  Modification to annual report on military and security developments involving the People's Republic of China  Paragraph (22) of section 1202(b) of the National Defense Authorization Act for Fiscal Year 2000 (Public Law 106–65; 10 U S C  113 note), as most recently amended by section 1261 of the National Defense Authorization Act for Fiscal Year 2018 (Public Law 115–91; 131 Stat  1688), is further amended by striking "activities in the South China Sea" and inserting the following: ""activities— "(A) in the South China Sea; "(B) in the East China Sea, including in the vicinity of the Senkaku islands; and "(C) in the Indian Ocean region "  In S  2987 as reported by the Senate Armed Services Committee ( S Rept  115-262 of June 5, 2018), Section 1064 states the following: SEC  1064  United States policy with respect to freedom of navigation and overflight  (a) Declaration of policy —It is the policy of the United States to fly, sail, and operate throughout the oceans, seas, and airspace of the world wherever international law allows  (b) Implementation of policy —In furtherance of the policy set forth in subsection (a), the Secretary of Defense should— (1) plan and execute a robust series of routine and regular air and naval presence missions throughout the world and throughout the year, including for critical transportation corridors and key routes for global commerce; (2) in addition to the missions executed pursuant to paragraph (1), execute routine and regular air and maritime freedom of navigation operations throughout the year, in accordance with international law, including the use of expanded military options and maneuvers beyond innocent passage; and (3) to the maximum extent practicable, execute the missions pursuant to paragraphs (1) and (2) with regional partner countries and allies of the United States  Section 1241 of S  2987 as reported states the following: SEC  1241  Redesignation, expansion, and extension of Southeast Asia Maritime Security Initiative  (a) Redesignation as Indo-Pacific Maritime Security Initiative — (1) IN GENERAL —Subsection (a)(2) of section 1263 of the National Defense Authorization Act for Fiscal Year 2016 (10 U S C  333 note) is amended by striking "the 'Southeast Asia Maritime Security Initiative'" and inserting "the 'Indo-Pacific Maritime Security Initiative'"  (2) CONFORMING AMENDMENT —The heading of such section is amended to read as follows: "SEC  1263  Indo-Pacific Maritime Security Initiative"  (b) Expansion — (1) EXPANSION OF REGION TO RECEIVE ASSISTANCE AND TRAINING —Subsection (a)(1) of such section is amended by inserting "and the Indian Ocean" after "South China Sea" in the matter preceding subparagraph (A)  (2) RECIPIENT COUNTRIES OF ASSISTANCE AND TRAINING GENERALLY —Subsection (b) of such section is amended— (A) in paragraph (2), by striking the comma at the end and inserting a period; and (B) by adding at the end the following new paragraphs: "(6) Bangladesh  "(7) Sri Lanka "  (3) COUNTRIES ELIGIBLE FOR PAYMENT OF CERTAIN INCREMENTAL EXPENSES —Subsection (e)(2) of such section is amended by adding at the end the following new subparagraph: "(D) India "  (c) Extension —Subsection (h) of such section is amended by striking "September 30, 2020" and inserting "December 31, 2025"  Regarding Section 1241, S Rept  115-262 states the following: Redesignation, expansion, and extension of Southeast AsiaMaritime Security Initiative (sec  1241) The committee recommends a provision that would amend section 1263 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114–92) to: redesignate the Southeast Asia Maritime Security Initiative as the Indo-Pacific Maritime Security Initiative; add Bangladesh and Sri Lanka as recipient countries of assistance and training; add India as a covered country eligible for payment of certain incremental expenses; and extend the authority under the section through December 31, 2025  The committee continues to strongly support efforts under the Southeast Asia Maritime Security Initiative aimed at enhancing the capabilities of regional partners to more effectively exercise control over their maritime territory and to deter adversaries  The committee is encouraged by the progress that has been made under the initiative, and notes that to date, the Department of Defense has utilized the authority under section 1263 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114–92), as amended, to support specified partner capacity-building efforts in the region, to include the provision of training, sustainment support, and participation in multilateral engagements  The committee recognizes that the initiative was designed to support a long-term capacity building effort, which will require increased resources in future years as requirements are established and refined, as programs mature, and as the regional security environment continues to evolve  The committee believes the Department's efforts to improve maritime domain awareness and maritime security should be fully integrated into a U S  strategy for a free and open Indo-Pacific  Therefore, the committee supports redesignating the authority under section 1263 as the Indo-Pacific Maritime Security Initiative, the inclusion of Bangladesh and Sri Lanka as recipient countries, and the addition of India as a covered country to encourage its participation in regional security initiatives of this kind  Furthermore, as a demonstration of the United States' commitment to allies and partners in the region, the committee supports the extension of the Indo-Pacific Maritime Security Initiative through the end of 2025  Beyond the Indo-Pacific Maritime Security Initiative, the committee encourages the Department to make use of the full complement of security cooperation authorities available to the Department, particularly those under section 1241 of the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114–328), to enhance the capabilities of foreign security partners in South and Southeast Asia to protect mutual security interests  (Pages 296-297) Section 1245 of S  2987 as reported states the following: SEC  1245  Prohibition on participation of the People's Republic of China in Rim of the Pacific (RIMPAC) naval exercises  (a) Sense of Congress —It is the sense of Congress that— (1) the pace and militarization by the Government of the People's Republic of China of land reclamation activities in the South China Sea is destabilizing the security of United States allies and partners and threatening United States core interests; (2) these activities of the Government of the People's Republic of China adversarially threaten the maritime security of the United States and our allies and partners; (3) no country that acts adversarially should be invited to multilateral exercises; and (4) the involvement of the Government of the People's Republic of China in multilateral exercises should undergo reevaluation until such behavior changes  (b) Conditions for future participation in RIMPAC —The Secretary of Defense shall not enable or facilitate the participation of the People's Republic of China in any Rim of the Pacific (RIMPAC) naval exercise unless the Secretary certifies to the congressional defense committees that China has— (1) ceased all land reclamation activities in the South China Sea; (2) removed all weapons from its land reclamation sites; and (3) established a consistent four-year track record of taking actions toward stabilizing the region  A June 26, 2018, statement of Administration policy regarding S  2987 stated the following: Prohibition on Participation of the People's Republic of China in Rim of the Pacific (RIMPAC) Naval Exercises  The Administration objects to section 1245 because China's participation in RIMPAC and other military-to-military events may be appropriate or inappropriate in any given year, depending on numerous other factors  Section 1245 would place restrictions on the Secretary of Defense's ability to manage a strategic relationship in the context of competition, limiting DOD's options on China and ability to act in the national security interest of the United States  Section 1251 of S  2987 as reported states the following: SEC  1251  Report on military and coercive activities of the People's Republic of China in South China Sea  (a) In general —Except as provided in subsection (d), immediately after the commencement of any significant reclamation or militarization activity by the People's Republic of China in the South China Sea, including any significant military deployment or operation or infrastructure construction, the Secretary of Defense, in coordination with the Secretary of State, shall submit to the congressional defense committees, and release to the public, a report on the military and coercive activities of China in the South China Sea in connection with such activity  (b) Elements of report to public —Each report on a significant reclamation or militarization activity under subsection (a) shall include a short narrative on, and one or more corresponding images of, such significant reclamation or militarization activity  (c) Form — (1) SUBMITTAL TO CONGRESS —Any report under subsection (a) that is submitted to the congressional defense committees shall be submitted in unclassified form, but may include a classified annex  (2) RELEASE TO PUBLIC —If a report under subsection (a) is released to the public, such report shall be so released in unclassified form  (d) Waiver — (1) RELEASE OF REPORT TO PUBLIC —The Secretary of Defense may waive the requirement in subsection (a) for the release to the public of a report on a significant reclamation or militarization activity if the Secretary determines that the release to the public of a report on such activity under that subsection in the form required by subsection (c)(2) would have an adverse effect on the national security interests of the United States  (2) NOTICE TO CONGRESS —If the Secretary issues a waiver under paragraph (1) with respect to a report on an activity, not later than 48 hours after the Secretary issues such waiver, the Secretary shall submit to the congressional defense committees written notice of, and justification for, such waiver  Regarding Section 1251, S Rept  115-262 states the following: Report on military and coercive activities of the People's Republic of China in the South China Sea (sec  1251) The committee recommends a provision that would require the Secretary of Defense, in coordination with the Secretary of State, to submit to the congressional defense committees and release to the public, a report on the military and coercive activities of China in the South China Sea in connection with such activity immediately after the commencement of any significant reclamation or militarization activity by the People's Republic of China in the South China Sea, including any significant military deployment or operation or infrastructure construction  The committee is concerned that sufficient information has not been made publicly available in a timely fashion regarding China's reclamation and militarization activities of China in the South China Sea  Therefore, the committee urges the Secretary of Defense to determine that the public interest in selective declassification of China's activities in the South China Sea outweighs the potential damage from disclosure  The Secretary should consider mandating that the directors of National Geospatial-Intelligence Agency and the Defense Intelligence Agency provide the Bureau of Intelligence and Research (INR) at the State Department with declassified aircraft-generated imagery and supporting analysis describing Chinese activities of concern  The committee also urges that the State Department brief and distribute the reports to the media and throughout Southeast Asia  (Page 300) In the conference report ( H Rept  115-874 of July 25, 2018) on H R  5515 / P L  115-232 of August 13, 2018, Section 1086 states the following: SEC  1086  UNITED STATES POLICY WITH RESPECT TO FREEDOM OF NAVIGATION AND OVERFLIGHT  (a) DECLARATION OF POLICY —It is the policy of the United States to fly, sail, and operate throughout the oceans, seas, and airspace of the world wherever international law allows  (b) IMPLEMENTATION OF POLICY —In furtherance of the policy set forth in subsection (a), the Secretary of Defense should— (1) plan and execute a robust series of routine and regular air and naval presence missions throughout the world and throughout the year, including for critical transportation corridors and key routes for global commerce; (2) in addition to the missions executed pursuant to paragraph (1), execute routine and regular air and maritime freedom of navigation operations throughout the year, in accordance with international law, including, but not limited to, maneuvers beyond innocent passage; and (3) to the maximum extent practicable, execute the missions pursuant to paragraphs (1) and (2) with regional partner countries and allies of the United States  Section 1252 of H R  5515 states the following: SEC  1252  REDESIGNATION, EXPANSION, AND EXTENSION OF SOUTHEAST ASIA MARITIME SECURITY INITIATIVE  (a) REDESIGNATION AS INDO-PACIFIC MARITIME SECURITY INITIATIVE — (1) IN GENERAL —Subsection (a)(2) of section 1263 of the National Defense Authorization Act for Fiscal Year 2016 (10 U S C  333 note) is amended by striking ''the 'Southeast Asia Maritime Security Initiative' '' and inserting ''the 'Indo-Pacific Maritime Security Initiative' ''  (2) CONFORMING AMENDMENT —The heading of such section is amended to read as follows: ''SEC  1263  INDO-PACIFIC MARITIME SECURITY INITIATIVE ''  (b) EXPANSION — (1) EXPANSION OF REGION TO RECEIVE ASSISTANCE AND TRAINING —Subsection (a)(1) of such section is amended by inserting ''and the Indian Ocean'' after ''South China Sea'' in the matter preceding subparagraph (A)  (2) RECIPIENT COUNTRIES OF ASSISTANCE AND TRAINING GENERALLY —Subsection (b) of such section is amended— (A) in paragraph (2), by striking the comma at the end and inserting a period; and (B) by adding at the end the following new paragraphs: ''(6) Bangladesh  ''(7) Sri Lanka ''  (3) COUNTRIES ELIGIBLE FOR PAYMENT OF CERTAIN INCREMENTAL EXPENSES —Subsection (e)(2) of such section is amended by adding at the end the following new subparagraph: ''(D) India ''  (c) EXTENSION —Subsection (h) of such section is amended by striking ''September 30, 2020'' and inserting ''December 31, 2025''  Section 1259 of H R  5515 states the following: SEC  1259  PROHIBITION ON PARTICIPATION OF THE PEOPLE'S REPUBLIC OF CHINA IN RIM OF THE PACIFIC (RIMPAC) NAVAL EXERCISES  (a) CONDITIONS FOR FUTURE PARTICIPATION IN RIMPAC — (1) IN GENERAL —The Secretary of Defense shall not enable or facilitate the participation of the People's Republic of China in any Rim of the Pacific (RIMPAC) naval exercise unless the Secretary certifies to the congressional defense committees that China has— (A) ceased all land reclamation activities in the South China Sea; (B) removed all weapons from its land reclamation sites; and (C) established a consistent four-year track record of taking actions toward stabilizing the region  (2) FORM —The certification under paragraph (1) shall be in unclassified form but may contain a classified annex as necessary  (b) NATIONAL SECURITY WAIVER — (1) IN GENERAL —The Secretary of Defense may waive the certification requirement under subsection (a) if the Secretary determines the waiver is in the national security interest of the United States and submits to the congressional defense committees a detailed justification for the waiver  (2) FORM —The justification required under paragraph (1) shall be in unclassified form but may contain a classified annex as necessary  Section 1262 of H R  5515 states the following: SEC  1262  REPORT ON MILITARY AND COERCIVE ACTIVITIES OF THE PEOPLE'S REPUBLIC OF CHINA IN SOUTH CHINA SEA  (a) IN GENERAL —Except as provided in subsection (d), immediately after the commencement of any significant reclamation, assertion of an excessive territorial claim, or militarization activity by the People's Republic of China in the South China Sea, including any significant military deployment or operation or infrastructure construction, the Secretary of Defense, in coordination with the Secretary of State, shall submit to the appropriate congressional committees, and release to the public, a report on the military and coercive activities of China in the South China Sea in connection with such activity  (b) ELEMENTS OF REPORT TO PUBLIC —Each report on the commencement of a significant reclamation, an assertion of an excessive territorial claim, or a militarization activity under subsection (a) shall include a short narrative on, and one or more corresponding images of, such commencement of a significant reclamation, assertion of an excessive territorial claim, or militarization activity  (c) FORM — (1) SUBMISSION TO CONGRESS —Any report under subsection (a) that is submitted to the appropriate congressional committees shall be submitted in unclassified form, but may include a classified annex  (2) RELEASE TO PUBLIC —If a report under subsection (a) is released to the public, such report shall be so released in unclassified form  (d) WAIVER — (1) RELEASE OF REPORT TO PUBLIC —The Secretary of Defense may waive the requirement in subsection (a) for the release to the public of a report on the commencement of any significant reclamation, an assertion of an excessive territorial claim, or a militarization activity by the People's Republic of China in the South China Sea if the Secretary determines that the release to the public of a report on such activity under that subsection in the form required by subsection (c)(2) would have an adverse effect on the national security interests of the United States  (2) NOTICE TO CONGRESS —If the Secretary issues a waiver under paragraph (1) with respect to a report on an activity, not later than 48 hours after the Secretary issues such waiver, the Secretary shall submit to the appropriate congressional committees written notice of, and justification for, such waiver  (e) APPROPRIATE CONGRESSIONAL COMMITTEES DEFINED —In this section, the term ''appropriate congressional committees'' means— (1) the congressional defense committees; and (2) the Committee on Foreign Relations of the Senate and the Committee on Foreign Affairs of the House of Representatives  Regarding Section 1262, H Rept  115-874 states the following: Report on military and coercive activities of the People's Republic of China in South China Sea (sec  1262) The House bill contained a provision (sec  1261) that would require Secretary of Defense, in consultation with the Director of National Intelligence and the Secretary of State, to submit a report to appropriate congressional committees on a quarterly basis describing China's activities in the Indo-Pacific region, and to disseminate the report to regional allies and partners and provide public notification, as appropriate  The provision would require that the dissemination and availability of the report and public notification be made in a manner consistent with national security and the protection of classified national security information  The Senate amendment contained a similar provision (sec  1251) that would require the Secretary of Defense, in coordination with the Secretary of State, to submit to the congressional defense committees and release to the public, a report on the military and coercive activities of China in the South China Sea in connection with such activity immediately after the commencement of any significant reclamation or militarization activity by the People's Republic of China in the South China Sea, including any significant military deployment or operation or infrastructure construction  The House recedes with an amendment that would clarify that the required report shall be submitted to the congressional defense committees immediately after the commencement of any significant reclamation, assertion of an excessive territorial claim, or military activity by the People's Republic of China in the South China Sea  The conferees are concerned that sufficient information has not been made publicly available in a timely fashion regarding China's reclamation and militarization activities in the South China Sea  Moreover, the conferees recognize that China has engaged in provocative military activities elsewhere throughout the Indo-Pacific Region, including the East China Sea, the Taiwan Strait, and the Indian Ocean  The conferees urge the Secretary of Defense to give full consideration to the strategic and public interest in selective declassification of China's activities in the South China Sea and elsewhere in the Indo-Pacific region  (Pages 993-994) Section 1288 of H R  5515 states the following: SEC  1288  MODIFICATION OF FREEDOM OF NAVIGATION REPORTING REQUIREMENTS  Subsection (a) of section 1275 of the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114–328; 130 Stat  2540), as amended by section 1262(a)(1) of the National Defense Authorization Act for Fiscal Year 2018 (Public Law 115–91; 131 Stat  1689), is further amended by striking ''the Committees on Armed Services of the Senate and the House of Representatives'' and inserting ''the Committee on Armed Services and the Committee on Foreign Relations of the Senate and the Committee on Armed Services and the Committee on Foreign Affairs of the House of Representatives''  Appendix A  Strategic Context from U S  Perspective This appendix presents a brief discussion of some elements of the strategic context from a U S  perspective in which the issues discussed in this report may be considered  There is also a broader context of U S -China relations and U S  foreign policy toward the Indo-Pacific that is covered in other CRS reports  Shift in International Security Environment World events have led some observers, starting in late 2013, to conclude that the international security environment has undergone a shift from the familiar post-Cold War era of the past 20 to 25 years, also sometimes known as the unipolar moment (with the United States as the unipolar power), to a new and different situation that features, among other things, renewed great power competition with China and Russia and challenges by these two countries and others to elements of the U S -led international order that has operated since World War II  China's actions in the SCS and ECS can be viewed as one reflection of that shift  Uncertainty Regarding Future U S  Role in World The overall U S  role in the world since the end of World War II in 1945 (i e , over the past 70 years) is generally described as one of global leadership and significant engagement in international affairs  A key aim of that role has been to promote and defend the open international order that the United States, with the support of its allies, created in the years after World War II  In addition to promoting and defending the open international order, the overall U S  role is generally described as having been one of promoting freedom, democracy, and human rights, while criticizing and resisting authoritarianism where possible, and opposing the emergence of regional hegemons in Eurasia or a spheres-of-influence world  Certain statements and actions from the Trump Administration have led to uncertainty about the Administration's intentions regarding the future U S  role in the world  Based on those statements and actions, some observers have speculated that the Trump Administration may want to change the U S  role in one or more ways  A change in the overall U S  role could have profound implications for U S  foreign policy, including U S  policy regarding maritime territorial and EEZ disputes involving China  U S  Grand Strategy Discussion of the above-mentioned shift in the international security environment has led to a renewed emphasis in discussions of U S  security and foreign policy on grand strategy and geopolitics  From a U S  perspective, grand strategy can be understood as strategy considered at a global or interregional level, as opposed to strategies for specific countries, regions, or issues  Geopolitics refers to the influence on international relations and strategy of basic world geographic features such as the size and location of continents, oceans, and individual countries  From a U S  perspective on grand strategy and geopolitics, it can be noted that most of the world's people, resources, and economic activity are located not in the Western Hemisphere, but in the other hemisphere, particularly Eurasia  In response to this basic feature of world geography, U S  policymakers for the past several decades have chosen to pursue, as a key element of U S  grand strategy, a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another, on the grounds that such a hegemon could represent a concentration of power strong enough to threaten core U S  interests by, for example, denying the United States access to some of the other hemisphere's resources and economic activity  Although U S  policymakers have not often stated this key national strategic goal explicitly in public, U S  military (and diplomatic) operations in recent decades—both wartime operations and day-to-day operations—can be viewed as having been carried out in no small part in support of this key goal  Focus on Great Power Competition with China and Russia The Trump Administration's December 2017 National Security Strategy (NSS) and the 11-page unclassified summary of its January 2018 National Defense Strategy (NDS) reorient U S  national security strategy and, within that, U S  defense strategy, toward an explicit primary focus on great power competition with China and Russia and on countering Chinese and Russian military capabilities  The new U S  strategy orientation set forth in the 2017 NSS and 2018 NDS is sometimes referred to a "2+3" strategy, meaning a strategy for countering two primary challenges (China and Russia) and three additional challenges (North Korea, Iran, and terrorist groups)  Concept of a Free and Open Indo-Pacific (FOIP) In addition to the 2017 NSS and 2018 NDS, the Trump Administration has highlighted the concept of a free and open Indo-Pacific (FOIP), with the term Indo-Pacific referring to the Indian Ocean, the Pacific Ocean, and the countries (particularly those in Eurasia) bordering on those two oceans  The concept, which is still being fleshed out by the Trump Administration, appears to be a general U S foreign policy and national security construct for the region, but observers view it as one that includes a military component  Challenge to U S  Sea Control and U S  Position in Western Pacific Observers of Chinese and U S  military forces view China's improving naval capabilities as posing a potential challenge in the Western Pacific to the U S  Navy's ability to achieve and maintain control of blue-water ocean areas in wartime—the first such challenge the U S  Navy has faced since the end of the Cold War  More broadly, these observers view China's naval capabilities as a key element of an emerging broader Chinese military challenge to the long-standing status of the United States as the leading military power in the Western Pacific  Regional U S  Allies and Partners The United States has certain security-related policies pertaining to Taiwan under the Taiwan Relations Act ( H R  2479 / P L  96-8 of April 10, 1979)  The United States has bilateral security treaties with Japan, South Korea, and the Philippines, and an additional security treaty with Australia and New Zealand  In addition to U S  treaty allies, certain other countries in the Western Pacific can be viewed as current or emerging U S  security partners  Appendix B  U S  Treaties with Japan and Philippines This appendix presents brief background information on the U S  security treaties with Japan and the Philippines  U S -Japan Treaty on Mutual Cooperation and Security The 1960 U S -Japan treaty on mutual cooperation and security states in Article V that Each Party recognizes that an armed attack against either Party in the territories under the administration of Japan would be dangerous to its own peace and safety and declares that it would act to meet the common danger in accordance with its constitutional provisions and processes  The United States has reaffirmed on a number of occasions over the years that since the Senkaku Islands are under the administration of Japan, they are included in the territories referred to in Article V of the treaty, and that the United States "will honor all of our treaty commitments to our treaty partners " (At the same time, the United States, noting the difference between administration and sovereignty, has noted that such affirmations do not prejudice the U S  approach of taking no position regarding the outcome of the dispute between China, Taiwan, and Japan regarding who has sovereignty over the islands ) Some observers, while acknowledging the U S  affirmations, have raised questions regarding the potential scope of actions that the United States might take under Article V  U S -Philippines Mutual Defense Treaty The 1951 U S -Philippines mutual defense treaty states in Article IV that Each Party recognizes that an armed attack in the Pacific Area on either of the Parties would be dangerous to its own peace and safety and declares that it would act to meet the common dangers in accordance with its constitutional processes  Article V states that For the purpose of Article IV, an armed attack on either of the Parties is deemed to include an armed attack on the metropolitan territory of either of the Parties, or on the island territories under its jurisdiction in the Pacific or on its armed forces, public vessels or aircraft in the Pacific  The United States has reaffirmed on a number of occasions over the years its obligations under the U S -Philippines mutual defense treaty  On May 9, 2012, Filipino Foreign Affairs Secretary Albert F  del Rosario issued a statement providing the Philippine perspective regarding the treaty's application to territorial disputes in the SCS  U S  officials have made their own statements regarding the treaty's application to territorial disputes in the SCS  Appendix C  Treaties and Agreements Related to the Maritime Disputes This appendix briefly reviews some international treaties and agreements that bear on the issues discussed in this report  UN Convention on Law of the Sea (UNCLOS) The United Nations Convention on the Law of the Sea (UNCLOS) establishes a treaty regime to govern activities on, over, and under the world's oceans  UNCLOS was adopted by Third United Nations Conference on the Law of the Sea in December 1982, and entered into force in November 1994  The treaty established EEZs as a feature of international law, and contains multiple provisions relating to territorial waters and EEZs  As of May 10, 2018, 168 nations were party to the treaty, including China and most other countries bordering on the SCS and ECS (the exceptions being North Korea and Taiwan)  The treaty and an associated 1994 agreement relating to implementation of Part XI of the treaty (on deep seabed mining) were transmitted to the Senate on October 6, 1994  In the absence of Senate advice and consent to adherence, the United States is not a party to the convention and the associated 1994 agreement  A March 10, 1983, statement on U S  ocean policy by President Ronald Reagan states that UNCLOS contains provisions with respect to traditional uses of the oceans which generally confirm existing maritime law and practice and fairly balance the interests of all states  Today I am announcing three decisions to promote and protect the oceans interests of the United States in a manner consistent with those fair and balanced results in the Convention and international law  First, the United States is prepared to accept and act in accordance with the balance of interests relating to traditional uses of the oceans—such as navigation and overflight  In this respect, the United States will recognize the rights of other states in the waters off their coasts, as reflected in the Convention, so long as the rights and freedoms of the United States and others under international law are recognized by such coastal states  Second, the United States will exercise and assert its navigation and overflight rights and freedoms on a worldwide basis in a manner that is consistent with the balance of interests reflected in the convention  The United States will not, however, acquiesce in unilateral acts of other states designed to restrict the rights and freedoms of the international community in navigation and overflight and other related high seas uses  Third, I am proclaiming today an Exclusive Economic Zone in which the United States will exercise sovereign rights in living and nonliving resources within 200 nautical miles of its coast  This will provide United States jurisdiction for mineral resources out to 200 nautical miles that are not on the continental shelf  UNCLOS builds on four 1958 law of the sea conventions to which the United States is a party: the Convention on the Territorial Sea and the Contiguous Zone, the Convention on the High Seas, the Convention on the Continental Shelf, and the Convention on Fishing and Conservation of the Living Resources of the High Seas  1972 Convention on Preventing Collisions at Sea (COLREGs) China and the United States, as well as more than 150 other countries (including all those bordering on the South East and South China Seas, but not Taiwan), are parties to an October 1972 multilateral convention on international regulations for preventing collisions at sea, commonly known as the collision regulations (COLREGs) or the "rules of the road " Although commonly referred to as a set of rules or regulations, this multilateral convention is a binding treaty  The convention applies "to all vessels upon the high seas and in all waters connected therewith navigable by seagoing vessels " It thus applies to military vessels, paramilitary and law enforcement (i e , coast guard) vessels, maritime militia vessels, and fishing boats, among other vessels  In a February 18, 2014, letter to Senator Marco Rubio concerning the December 5, 2013, incident involving the Cowpens , the State Department stated the following: In order to minimize the potential for an accident or incident at sea, it is important that the United States and China share a common understanding of the rules for operational air or maritime interactions  From the U S  perspective, an existing body of international rules and guidelines—including the 1972 International Regulations for Preventing Collisions at Sea (COLREGs)—are sufficient to ensure the safety of navigation between U S  forces and the force of other countries, including China  We will continue to make clear to the Chinese that these existing rules, including the COLREGs, should form the basis for our common understanding of air and maritime behavior, and we will encourage China to incorporate these rules into its incident-management tools  Likewise, we will continue to urge China to agree to adopt bilateral crisis management tools with Japan and to rapidly conclude negotiations with ASEAN on a robust and meaningful Code of Conduct in the South China in order to avoid incidents and to manage them when they arise  We will continue to stress the importance of these issues in our regular interactions with Chinese officials  In the 2014 edition of its annual report on military and security developments involving China, the DOD states the following: On December 5, 2013, a PLA Navy vessel and a U S  Navy vessel operating in the South China Sea came into close proximity  At the time of the incident, USS COWPENS (CG 63) was operating approximately 32 nautical miles southeast of Hainan Island  In that location, the U S  Navy vessel was conducting lawful military activities beyond the territorial sea of any coastal State, consistent with customary international law as reflected in the Law of the Sea Convention  Two PLA Navy vessels approached USS COWPENS  During this interaction, one of the PLA Navy vessels altered course and crossed directly in front of the bow of USS COWPENS  This maneuver by the PLA Navy vessel forced USS COWPENS to come to full stop to avoid collision, while the PLA Navy vessel passed less than 100 yards ahead  The PLA Navy vessel's action was inconsistent with internationally recognized rules concerning professional maritime behavior (i e , the Convention of International Regulations for Preventing Collisions at Sea), to which China is a party  2014 Code for Unplanned Encounters at Sea (CUES) On April 22, 2014, representatives of 21 Pacific-region navies (including China, Japan, and the United States), meeting in Qingdao, China, at the 14 th Western Pacific Naval Symposium (WPNS), unanimously agreed to a Code for Unplanned Encounters at Sea (CUES)  CUES, a nonbinding agreement, establishes a standardized protocol of safety procedures, basic communications, and basic maneuvering instructions for naval ships and aircraft during unplanned encounters at sea, with the aim of reducing the risk of incidents arising from such encounters  The CUES agreement in effect supplements the 1972 COLREGs Convention (see previous section); it does not cancel or lessen commitments that countries have as parties to the COLREGS Convention  Two observers stated that "the [CUES] resolution is non-binding; only regulates communication in 'unplanned encounters,' not behavior; fails to address incidents in territorial waters; and does not apply to fishing and maritime constabulary vessels [i e , coast guard ships and other maritime law enforcement ships], which are responsible for the majority of Chinese harassment operations " DOD stated in 2015 that Going forward, the Department is also exploring options to expand the use of CUES to include regional law enforcement vessels and Coast Guards  Given the growing use of maritime law enforcement vessels to enforce disputed maritime claims, expansion of CUES to MLE [maritime law enforcement] vessels would be an important step in reducing the risk of unintentional conflict  U S  Navy officials have stated that the CUES agreement is generally working well, and that the United States (as noted in the passage above) is interested in expanding the agreement to cover coast guard ships  Officials from Singapore and Malaysia reportedly have expressed support for the idea  An Obama Administration fact sheet about Chinese President Xi Jinping's state visit to the United States on September 24-25, 2015, stated the following: The U S  Coast Guard and the China Coast Guard have committed to pursue an arrangement whose intended purpose is equivalent to the Rules of Behavior Confidence Building Measure annex on surface-to-surface encounters in the November 2014 Memorandum of Understanding between the United States Department of Defense and the People's Republic of China Ministry of National Defense  A November 3, 2018, press report published following an incident in the SCS between a U S  Navy destroyer and a Chinese destroyer stated the following: The U S  Navy's chief of naval operations has called on China to return to a previously agreed-upon code of conduct for at-sea encounters between the ships of their respective navies, stressing the need to avoid miscalculations  During a Nov  1 teleconference with reporters based in the Asia-Pacific region, Adm  John Richardson said he wants the People's Liberation Army Navy to "return to a consistent adherence to the agreed-to code that would again minimize the chance for a miscalculation that could possibly lead to a local incident and potential escalation " The CNO cited a case in early October when the U S  Navy's guided-missile destroyer Decatur reported that a Chinese Type 052C destroyer came within 45 yards of the Decatur as it conducted a freedom-of-navigation operation in the South China Sea  However, he added that the "vast majority" of encounters with Chinese warships in the South China Sea "are conducted in accordance with the Code of Unplanned Encounters at Sea and done in a safe and professional manner " The code is an agreement reached by 21 Pacific nations in 2014 to reduce the chance of an incident at sea between the agreement's signatories  2014 U S -China MOU on Air and Maritime Encounters In November 2014, the U S  DOD and China's Ministry of National Defense signed a Memorandum of Understanding (MOU) regarding rules of behavior for safety of air and maritime encounters  The MOU makes reference to UNCLOS, the 1972 COLREGs convention, the Conventional on International Civil Aviation (commonly known as the Chicago Convention), the Agreement on Establishing a Consultation Mechanism to Strengthen Military Maritime Safety (MMCA), and CUES  The MOU as signed in November 2014 included an annex on rules of behavior for safety of surface-to-surface encounters  An additional annex on rules of behavior for safety of air-to-air encounters was signed on September 15 and 18, 2015  An October 20, 2018, press report states the following: Eighteen nations including the U S  and China agreed in principle Saturday [October 20] to sign up to guidelines governing potentially dangerous encounters by military aircraft, a step toward stabilizing flashpoints but one that leaves enough wiggle room to ignore the new standards when a country wants  The guidelines essentially broaden a similar agreement reached by the U S  and China three years ago and are an attempt to mitigate against incidents and collisions in some of the world's most tense areas…  The in-principle agreement, which will be put forward for formal adoption by the group of 18 nations next year, took place at an annual meeting of defense ministers under the aegis of the 10-country Association of Southeast Asian Nations, hosted by Singapore  Asean nations formally adopted the new guidelines themselves Friday  "The guidelines are very useful in setting norms," Singapore's defense minister Ng Eng Hen told reporters after the meeting  "All the 18 countries agreed strong in-principle support for the guidelines "… The aerial-encounters framework agreed to Saturday includes language that prohibits fast or aggressive approaches in the air and lays out guidelines on clear communications including suggestions to "refrain from the use of uncivil language or unfriendly physical gestures " Signatories to the agreement, which is voluntary and not legally binding, would agree to avoid unprofessional encounters and reckless maneuvers…  The guidelines fall short on enforcement and geographic specifics, but they are "better than nothing at all," said Evan Laksmana, senior researcher with the Center for Strategic and International Studies in Jakarta  "Confidence-building surrounding military crises or encounters can hardly move forward without some broadly agreed-upon rules of the game," he said  Negotiations on SCS Code of Conduct (COC) In 2002, China and the 10 member states of ASEAN signed a nonbinding Declaration on the Conduct (DOC) of Parties in the South China Sea in which the parties, among other things,     reaffirm their respect for and commitment to the freedom of navigation in and overflight above the South China Sea as provided for by the universally recognized principles of international law, including the 1982 UN Convention on the Law of the Sea         undertake to resolve their territorial and jurisdictional disputes by peaceful means, without resorting to the threat or use of force, through friendly consultations and negotiations by sovereign states directly concerned, in accordance with universally recognized principles of international law, including the 1982 UN Convention on the Law of the Sea         undertake to exercise self-restraint in the conduct of activities that would complicate or escalate disputes and affect peace and stability including, among others, refraining from action of inhabiting on the presently uninhabited islands, reefs, shoals, cays, and other features and to handle their differences in a constructive manner        reaffirm that the adoption of a [follow-on] code of conduct in the South China Sea would further promote peace and stability in the region and agree to work, on the basis of consensus, towards the eventual attainment of this objective     In July 2011, China and ASEAN adopted a preliminary set of principles for implementing the DOC  U S  officials since 2010 have encouraged ASEAN and China to develop the follow-on binding Code of Conduct (COC) mentioned in the final quoted paragraph above  China and ASEAN have conducted negotiations on the follow-on COC, but China has not yet agreed with the ASEAN member states on a final text  On March 8, 2017, China announced that the first draft of a framework for the COC had been completed, and that "China and ASEAN countries feel satisfied with this " On May 18 and 19, 2017, it was reported that the China and the ASEAN countries had agreed on the framework  An article from a Chinese news outlet stated the following: All countries involved have agreed not to release the framework document, but to maintain it as an internal document at this time since the consultation will continue and they do not want any external interference, [Vice-Foreign Minister] Liu [Zhenmin] said  "Against the backdrop of economic globalization, China and ASEAN countries should continue making our regional rules to guide our own actions and protect our common interests," Liu said  A May 18, 2017, press report stated that Liu Zhemin "called on others to stay out [of the negotiations], apparently a coded message to the United States  'We hope that our consultations on the code are not subject to any outside interference,' Liu said " An August 3, 2017, press report stated the following: Southeast Asian ministers meeting this week are set to avoid tackling the subject of Beijing's arming and building of manmade South China Sea islands, preparing to endorse a framework for a code of conduct that is neither binding nor enforceable  The Association of South East Asian Nations (ASEAN) has omitted references to China's most controversial activities in its joint communique, a draft reviewed by Reuters shows  In addition, a leaked blueprint for establishing an ASEAN-China code of maritime conduct does not call for it to be legally binding, or seek adherence to the United Nations Convention on the Law of the Sea (UNCLOS)     Analysts and some ASEAN diplomats worry that China's sudden support for negotiating a code of conduct is a ploy to buy time to further boost its military capability     The agreed two-page framework is broad and leaves wide scope for disagreement, urging a commitment to the "purposes and principles" of UNCLOS, for example, rather than adherence  The framework papers over the big differences between ASEAN nations and China, said Patrick Cronin of the Center for a New American Security  "Optimists will see this non-binding agreement as a small step forward, allowing habits of cooperation to develop, despite differences," he said  "Pessimists will see this as a gambit favorable to a China determined to make the majority of the South China Sea its domestic lake " An August 6, 2017, press report stated the following: Southeast Asian nations agreed with China on Sunday [August 6] to endorse a framework for a maritime code of conduct that would govern behavior in disputed waters of the South China Sea, a small step forward in a negotiation that has lasted well over a decade  Though not the long-discussed code itself, the framework sets out parameters for discussion of an agreement intended to bring predictability to a potential flashpoint as China increasingly asserts its military presence over the area in the face of rival claims  The 10 countries of the Association of Southeast Asian Nations will meet with China at the end of August to discuss legalities for negotiations on the code of conduct, with formal talks beginning soon after, Philippines department of foreign affairs spokesman Robespierre Bolivar said Sunday  The endorsement of the framework, which was tentatively agreed to in May, came during a bilateral meeting between China and Asean on the sidelines of a series of security-oriented meetings that will conclude Tuesday  The unsticking of the framework after years of obstruction is widely seen as a concession by China, which has opposed any legally binding code on maritime engagement, stepped up naval patrols and built artificial islands to enforce its claims, equipping them with military weapons  Beijing's move to allow discussion on the code of conduct follows a resetting of ties with the Philippines under President Rodrigo Duterte, who in October—just four months after taking office—visited Beijing and declared a new friendship between the two countries  An August 8, 2017, blog post about the framework states the following: In Manila on 6 August 2017, the foreign ministers of ASEAN and China endorsed the framework for the Code of Conduct for the South China Sea (COC)  While the framework is a step forward in the conflict management process for the South China Sea, it is short on details and contains many of the same principles and provisions contained in the 2002 ASEAN-China Declaration on the Conduct of Parties in the South China Sea (DOC) which has yet to be even partially implemented  The text includes a new reference to the prevention and management of incidents, as well as a seemingly stronger commitment to maritime security and freedom of navigation  However, the phrase "legally binding" is absent, as are the geographical scope of the agreement and enforcement and arbitration mechanisms  The framework will form the basis for further negotiations on the COC  Those discussions are likely to be lengthy and frustrating for those ASEAN members who had hoped to see a legally binding, comprehensive and effective COC  Some observers have argued that China has been dragging out the negotiations on the COC for years as part of a "talk and take strategy," meaning a strategy in which China engages in (or draws out) negotiations while taking actions to gain control of contested areas  A May 25, 2017, news report states the following: To call negotiations between China and the ten-country Association of South-East Asian Nations (ASEAN) over rival claims in the South China Sea "drawn out" would be a gross understatement  At the centre of the matter is an unsquareable circle: the competing claims of China and several South-East Asian countries  Nobody wants to go to war; nobody wants to be accused of backing down  Still, at a meeting of senior Chinese and ASEAN officials on May 18 th , something happened: the two sides agreed on a "framework" for a code of conduct  An official from Singapore (which currently co-ordinates ASEAN-China relations) called the agreement a sign of "steady progress"     ASEAN members called for a legally binding code of conduct as far back as 1996     Since then, code-of-conduct negotiations have proceeded glacially     Last July, after China received an unfavourable ruling on its maritime claims in a case brought by the Philippines to a tribunal in The Hague, China agreed to expedite the talks     The draft framework will be presented to ASEAN and Chinese foreign ministers at a conference in August  This will then form the basis for the thorny negotiations to follow  The text has not (yet) been leaked  But its most salient feature may be what it appears to lack: any hint of enforcement mechanisms or consequences for violations  China has long rejected a legally binding agreement—or indeed any arrangement that could limit its actions in the South China Sea  The result, explains Ian Storey, of the ISEAS-Yusof Ishak Institute, a think-tank in Singapore, is a framework "that makes China look co-operative…without having to do anything that might constrain its freedom of action"  ASEAN, meanwhile, gets the appearance of progress  "The ASEAN secretariat is a bureaucracy, and bureaucrats like process," explains Mr Storey  A July 13, 2018, blog post states the following: The COC has become a "holy grail," highly desired but unattainable  A major concern should be that this holy grail could turn into a tool for China to legitimize its actions in the South China Sea by engaging in the process while subverting its spirit  To this end, the challenges to the COC process are likely to be: China will use the COC talks to delay, exploit, and divert focus from any ASEAN consensus on the South China Sea; China will seek to include unhelpful and imprecise language in the COC which it could then use to justify its actions; China will nonetheless claim the COC as a diplomatic success and will use it as cover to avoid criticism while still pursuing its unilateral strategy to control the South China Sea…  If the COC process continues on its current trajectory, and China succeeds in filling the document with vague articles that would have little impact on its behavior, it would effectively be abusing the rules-based order to its own benefit  Instead of protecting against unilateral actions in the South China Sea, the rules-based order in the form of the COC could assist and justify China's expansion and ultimately its sole control of the South China Sea  Other regional actors need to recognize these traps of concluding a counter-productive COC, and resist the urge to reach an agreement just to be able to say they made progress  Instead, they should insist on negotiating the terms and conditions of a real COC, one that would establish effective rules-based dispute management mechanisms, not one that would by-pass them for the sake of an easy "win " An August 2, 2018, press report states the following: After more than a decade of talks, a bloc of Southeast Asian nations and China have agreed on a draft code of conduct that will lay the foundation for negotiations over the disputed South China Sea  Observers said the agreement showed that China and the Association of Southeast Asian Nations (Asean) could make progress through talks despite rising regional tensions, but they also warned that there was still a long way to go until a final deal  The agreement on the "Single Draft COC Negotiating Text" was announced at a meeting of Asean foreign ministers in Singapore on Thursday [August 2], after being nailed down at a China-Asean meeting in the central Chinese city of Changsha in June  An August 9, 2018, press report stated the following: Talks on completing a code of conduct for the disputed South China Sea will be long and complex and it would be unrealistic to set a timetable, state media on Thursday [August 9] cited a senior Chinese diplomat as saying…  In an interview with China Newsweek magazine, Yi Xianliang, Director General of the Chinese Foreign Ministry's Department of Boundary and Ocean Affairs, said the talks were continuing  Many of the topics were complex and sensitive and there were many different points of view, he said  "If these issues are to be resolved, and the code finally comes together, all sides need to keep looking for the greatest common denominator," Yi added  "There are voices from the outside, who are trying to set a timetable for the talks on the code  I think this is unrealistic," he said  Any multilateral talks take time, especially on such a complex issue as the South China Sea, Yi added  "It is impossible to define a timetable  Instead of setting the timetable unrealistically, and binding one's hands, it's better to step forward one foot at a time "… "Certain countries outside the region have been agitating that the code must be legally binding  This issue is quite complicated, including the domestic legal procedures involved in the countries concerned," he added, without elaborating  An October 22, 2018, press report stated the following: As China moves to complete the creation of military outposts in the South China Sea, Beijing's negotiation with southeastern Asian nations over a binding code of conduct is gaining momentum  But U S  officials and experts warn China's insertions in the draft South China Sea code of conduct may put Washington and Beijing on a collision course  The text of the draft also shows that deep divisions remain among claimants  One of the Chinese provisions in the text states, "The Parties shall not hold joint military exercises with countries from outside the region, unless the parties concerned are notified beforehand and express no objection " China also proposed cooperation on the marine economy "shall not be conducted in cooperation with companies from countries outside the region " A State Department spokesperson told VOA the United States is concerned by reports China has been pressing members of the Association of Southeast Asian Nations "in the closed-door talks, to accept restrictions on their ability to conduct exercises with security partners, and to agree not to conduct oil and gas exploration in their claimed waters with energy firms based in countries which are not part of the ongoing negotiations " "These proposals, if accepted, would limit the ability of ASEAN nations to conduct sovereign, independent foreign and economic policies and would directly harm the interests of the broader international community," added the State Department spokesperson…  "In other words, China would like a veto over all the military exercises held by ASEAN countries with other nations  I think this really provides some evidence that China indeed is trying to limit American influence in the region, one might go so far as to say to push American military presence out of the region eventually, but certainly in the area of the South China Sea," said Bonnie Glaser, director of the China Power Project at the Center for Strategic and International Studies in Washington…  The United States is also calling for ongoing discussions on the South China Sea code of conduct to be transparent and consultative with the rest of the international community  U S  officials said the international community has direct stakes in the outcome  A September 6, 2018, blog post stated the following: After two decades of talks, scepticism about the development of a South China Sea Code of Conduct (COC) is well-deserved, but it is also important to acknowledge progress when it happens  The agreement on a single draft negotiating text, revealed ahead of the ASEAN–China Post Ministerial Meeting on 2 August 2018, is an important step in the process that deserves recognition  The COC will not resolve the South China Sea disputes, nor was it ever meant to  Instead the COC is intended to manage disputes to avoid conflict pending their eventual resolution by direct negotiation or arbitration among the claimants  But any system to effectively manage the South China Sea disputes would require three things, none of which are achieved yet in the draft text  First, an effective COC would need to be geographically defined…  Second, an effective COC would need a dispute settlement mechanism…  Third, any effective regime to manage the South China Sea disputes would need detailed provisions on fisheries management and oil and gas development…  The solution to this problem could be a COC signed by all 10 ASEAN members and China that establishes general rules of behaviour within a clear geographic area, sets up an effective dispute settlement mechanism and endorses the immediate start of follow-on negotiations involving only the relevant claimants on fisheries management and oil and gas cooperation  Such a document would be a major step towards peacefully managing the South China Sea disputes and there are hints that at least some sections of the negotiating text might be on the right track  But the differences between parties remain considerable and final agreement on an effective COC still seems some way off  An October 29, 2018, press report states the following: The Philippines on Monday said a set of rules intended to prevent conflict in the South China Sea need not legally compel countries to follow it—an issue of importance for the Chinese government  Philippine Foreign Affairs Secretary Teodoro Locsin Jr  raised this possibility during a joint news conference with Wang Yi, his Chinese counterpart, in Davao City where they held bilateral talks to firm up preparations for President Xi Jinping's visit to Manila next month  The Association of Southeast Asian Nations and China are negotiating a code of conduct in the South China Sea  The 10-member bloc wants it to be legally binding, but Beijing prefers just "binding," ASEAN diplomats have said  "Perhaps, we will not be able to arrive at a legally binding COC, but it will be a standard on how people of ASEAN and governments of ASEAN will behave with each other -- always with honor, never with aggression, and always for mutual progress," Locsin said…  Wang said China will abide by the code whether it is legally binding or not  He said China hopes to finish the negotiations before Manila's term as ASEAN-China coordinator ends  "We welcome constructive opinions within the framework    that has been agreed," Wang said, referring to the general outline agreed last year, which dropped a reference to a legally binding code  The framework essentially repeats the spirit of a 2002 declaration on the South China Sea that called on parties to exercise restraint to avoid escalating tensions, and respect international law, among other things  Critics and ASEAN officials said the declaration failed to manage tensions in the disputed area because it was not legally binding  A November 14, 2018, press report stated the following: A rulebook to settle disputes in the hotly contested South China Sea should be finished in three years, Chinese Premier Li Keqiang said on Tuesday, insisting his nation does not seek "hegemony or expansion " Li's comments appeared to be the first clear timeframe for finishing the code of conduct  Talks have dragged on for years, with China accused of delaying progress as it prefers to deal with less powerful countries on a one-to-one basis  Appendix D  July 2016 Tribunal Award in SCS Arbitration Case Involving Philippines and China This appendix provides background information on the July 2016 tribunal award in the SCS arbitration case involving the Philippines and China  Overview In 2013, the Philippines sought arbitration under UNCLOS over the role of historic rights and the source of maritime entitlements in the South China Sea, the status of certain maritime features and the maritime entitlements they are capable of generating, and the lawfulness of certain actions by China that were alleged by the Philippines to violate UNCLOS  A tribunal was constituted under UNCLOS to hear the case  China stated repeatedly that it would not accept or participate in the arbitration and that, in its view, the tribunal lacked jurisdiction in this matter  China's nonparticipation did not prevent the case from moving forward, and the tribunal decided that it had jurisdiction over various matters covered under the case  On July 12, 2016, the tribunal issued its award (i e , ruling) in the case  The award was strongly in favor of the Philippines—more so than even some observers had anticipated  The tribunal ruled, among other things, that China's nine-dash line claim had no legal basis; that none of the land features in the Spratlys is entitled to any more than a 12-nm territorial sea; that three of the Spratlys features that China occupies generate no entitlement to maritime zones; and that China violated the Philippines' sovereign rights by interfering with Philippine vessels and by damaging the maritime environment and engaging in reclamation work on a feature in the Philippines' EEZ  Under UNCLOS, the award is binding on both the Philippines and China (China's nonparticipation in the arbitration does not change this)  There is, however, no mechanism for enforcing the tribunal's award  The United States has urged China and the Philippines to abide by the award  China, however, has declared the ruling null and void  Philippine President Rodrigo Duterte, who took office just before the tribunal's ruling, has not sought to enforce it  The tribunal's press release summarizing its award states the following in part: The Award is final and binding, as set out in Article 296 of the Convention [i e , UNCLOS] and Article 11 of Annex VII [of UNCLOS]  Historic Rights and the 'Nine-Dash Line':     On the merits, the Tribunal concluded that the Convention comprehensively allocates rights to maritime areas and that protections for pre-existing rights to resources were considered, but not adopted in the Convention  Accordingly, the Tribunal concluded that, to the extent China had historic rights to resources in the waters of the South China Sea, such rights were extinguished to the extent they were incompatible with the exclusive economic zones provided for in the Convention  The Tribunal also noted that, although Chinese navigators and fishermen, as well as those of other States, had historically made use of the islands in the South China Sea, there was no evidence that China had historically exercised exclusive control over the waters or their resources  The Tribunal concluded that there was no legal basis for China to claim historic rights to resources within the sea areas falling within the 'nine-dash line'  Status of Features:     Features that are above water at high tide generate an entitlement to at least a 12 nautical mile territorial sea, whereas features that are submerged at high tide do not  The Tribunal noted that the reefs have been heavily modified by land reclamation and construction, recalled that the Convention classifies features on their natural condition, and relied on historical materials in evaluating the features  The Tribunal then considered whether any of the features claimed by China could generate maritime zones beyond 12 nautical miles  Under the Convention, islands generate an exclusive economic zone of 200 nautical miles and a continental shelf, but "[r]ocks which cannot sustain human habitation or economic life of their own shall have no exclusive economic zone or continental shelf "     the Tribunal concluded that none of the Spratly Islands is capable of generating extended maritime zones  The Tribunal also held that the Spratly Islands cannot generate maritime zones collectively as a unit  Having found that none of the features claimed by China was capable of generating an exclusive economic zone, the Tribunal found that it could—without delimiting a boundary—declare that certain sea areas are within the exclusive economic zone of the Philippines, because those areas are not overlapped by any possible entitlement of China  Lawfulness of Chinese Actions:     Having found that certain areas are within the exclusive economic zone of the Philippines, the Tribunal found that China had violated the Philippines' sovereign rights in its exclusive economic zone by (a) interfering with Philippine fishing and petroleum exploration, (b) constructing artificial islands and (c) failing to prevent Chinese fishermen from fishing in the zone  The Tribunal also held that fishermen from the Philippines (like those from China) had traditional fishing rights at Scarborough Shoal and that China had interfered with these rights in restricting access  The Tribunal further held that Chinese law enforcement vessels had unlawfully created a serious risk of collision when they physically obstructed Philippine vessels  Harm to Marine Environment: The Tribunal considered the effect on the marine environment of China's recent large-scale land reclamation and construction of artificial islands at seven features in the Spratly Islands and found that China had caused severe harm to the coral reef environment and violated its obligation to preserve and protect fragile ecosystems and the habitat of depleted, threatened, or endangered species  The Tribunal also found that Chinese authorities were aware that Chinese fishermen have harvested endangered sea turtles, coral, and giant clams on a substantial scale in the South China Sea (using methods that inflict severe damage on the coral reef environment) and had not fulfilled their obligations to stop such activities  Aggravation of Dispute: Finally, the Tribunal considered whether China's actions since the commencement of the arbitration had aggravated the dispute between the Parties  The Tribunal found that it lacked jurisdiction to consider the implications of a stand-off between Philippine marines and Chinese naval and law enforcement vessels at Second Thomas Shoal, holding that this dispute involved military activities and was therefore excluded from compulsory settlement  The Tribunal found, however, that China's recent large-scale land reclamation and construction of artificial islands was incompatible with the obligations on a State during dispute resolution proceedings, insofar as China has inflicted irreparable harm to the marine environment, built a large artificial island in the Philippines' exclusive economic zone, and destroyed evidence of the natural condition of features in the South China Sea that formed part of the Parties' dispute  Assessments of Impact of Arbitral Award One Year Later In July 2017, a year after the arbitral panel's award, some observers assessed the impact to date of the award  For example, one observer stated the following: One year ago, China suffered a massive legal defeat when an international tribunal based in The Hague ruled that the vast majority of Beijing's extensive claims to maritime rights and resources in the South China Sea were not compatible with international law  Beijing was furious  At an official briefing immediately after the ruling, Vice Foreign Minister Liu Zhenmin twice called it "nothing more than a piece of waste paper," and one that "will not be enforced by anyone " And yet, one year on, China is, in many ways, abiding by it     China is not fully complying with the ruling—far from it  On May 1, China imposed a three-and-a-half-month ban on fishing across the northern part of the South China Sea, as it has done each year since 1995  While the ban may help conserve fish stocks, its unilateral imposition in wide areas of the sea violates the ruling  Further south, China's occupation of Mischief Reef, a feature that is submerged at high tide and the tribunal ruled was part of the Philippines' continental shelf, endures  Having built a vast naval base and runway here, China looks like it will remain in violation of that part of the ruling for the foreseeable future  But there is evidence that the Chinese authorities, despite their rhetoric, have already changed their behavior  In October 2016, three months after the ruling, Beijing allowed Philippine and Vietnamese boats to resume fishing at Scarborough Shoal, west of the Philippines  A China Coast Guard ship still blocks the entrance to the lagoon, but boats can still fish the rich waters around it  The situation is not perfect but neither is China flaunting its defiance     Much more significantly, China has avoided drilling for oil and gas on the wrong side of the invisible lines prescribed by the United Nations Convention on the Law of the Sea (UNCLOS)         the ruling means China has no claim to the fish, oil or gas more than 12 nautical miles from any of the Spratlys or Scarborough Shoal  The Chinese authorities appear not to accept this     There are clear signs from both China's words and deeds that Beijing has quietly modified its overall legal position in the South China Sea  Australian researcher Andrew Chubb noted a significant article in the Chinese press in July last year outlining the new view         China's new position seems to represent a major step towards compliance with UNCLOS and, therefore, the ruling  Most significantly, it removes the grounds for Chinese objections to other countries fishing and drilling in wide areas of the South China Sea     Overall, the picture is of a China attempting to bring its vision of the rightful regional order (as the legitimate owner of every rock and reef inside the U-shaped line) within commonly understood international rules  Far from being "waste paper," China is taking the tribunal ruling very seriously  It is still some way from total compliance but it is clearly not deliberately flouting the ruling  Another observer stated the following: A year ago today, an arbitral tribunal formed pursuant to the United Nations Convention for the Law of the Sea issued a blockbuster award finding much of China's conduct in the South China Sea in violation of international law  As I detailed that day on this blog and elsewhere, the Philippines won about as big a legal victory as it could have expected  But as many of us also warned that day, a legal victory is not the same as an actual victory  In fact, over the past year China has succeeded in transforming its legal defeat into a policy victory by maintaining its aggressive South China Sea policies while escaping sanction for its non-compliance  While the election of a new pro-China Philippines government is a key factor, much of the blame for China's victory must also be placed on the Obama Administration     International law seldom enforces itself, and even the reputational costs of violating international law do not arise unless other states impose those costs on the law-breaker  Both the Philippines and the U S  had policy options that would have raised the costs of China's non-compliance with the award  But neither country's government chose to press China on the arbitral award     Looking back after one year, we cannot say (yet) that U S  policy in the South China Sea is a failure  But we can say that the U S  under President Obama missed a huge opportunity to change the dynamics in the region in its favor, and it is hard to know whether or when another such opportunity will arise in the future  Reported Chinese Characterization of Arbitral Award as "Waste Paper" When the arbitral panel's award was announced, China stated that "China does not accept or recognize it," and that the award "is invalid and has no binding force " The first of the two passages quoted above states that "at an official briefing immediately after the ruling, Vice Foreign Minister Liu Zhenmin twice called it 'nothing more than a piece of waste paper,' and one that 'will not be enforced by anyone '" A November 22, 2017, press report states the following: An eight-page essay pumped through social media and Chinese state newspapers in recent days extolled the virtues of president Xi Jinping  Among his achievements, in the Chinese language version, was that he had turned the South China Sea Arbitration at The Hague—which found against China—into "waste paper"  It was an achievement that state news agency Xinhua's lengthy hymn, entitled "Xi and His Era", did not include in the English version for foreign consumption  Assessments and Events Two Years Later Another observer writes in a May 10, 2018, commentary piece that Two years after an international tribunal rejected expansive Chinese claims to the South China Sea, Beijing is consolidating control over the area and its resources  While the U S  defends the right to freedom of navigation, it has failed to support the rights of neighboring countries under the tribunal's ruling  As a result, Southeast Asian countries are bowing to Beijing's demands…  While Beijing's dramatic military buildup in the South China Sea has received much attention, its attempts at "lawfare" are largely overlooked  In May, the Chinese Society of International Law published a "critical study" on the South China Sea arbitration case  It rehashed old arguments but also developed a newer one, namely that China is entitled to claim maritime zones based on groups of features rather than from individual features  Even if China is not entitled to historic rights within the area it claims, this argument goes, it is entitled to resources in a wide expanse of sea on the basis of an exclusive economic zone generated from outlying archipelagoes  But the Convention on the Law of the Sea makes clear that only archipelagic states such as the Philippines and Indonesia may draw straight archipelagic baselines from which maritime zones may be claimed  The tribunal also explicitly found that there was "no evidence" that any deviations from this rule have amounted to the formation of a new rule of customary international law  China's arguments are unlikely to sway lawyers, but that is not their intended audience  Rather Beijing is offering a legal fig leaf to political and business elites in Southeast Asia who are already predisposed to accept Beijing's claims in the South China Sea  They fear China's threat of coercive economic measures and eye promises of development through offerings such as the Belt and Road Initiative  Why did Washington go quiet on the 2016 tribunal decision? One reason is Philippine President Rodrigo Duterte's turn toward China and offer to set aside the ruling  The U S  is also worried about the decision's implications for its own claims to exclusive economic zones from small, uninhabited land features in the Pacific  The Trump administration's failure to press Beijing to abide by the tribunal's ruling is a serious mistake  It undermines international law and upsets the balance of power in the region  Countries have taken note that the tide in the South China Sea is in China's favor, and they are making their strategic calculations accordingly  This hurts U S  interests in the region  A July 12, 2018, press report stated the following: The Philippines is celebrating today the second anniversary of its landmark arbitration award against China's territorial claims in the South China Sea handed down by an arbitral tribunal in The Hague…  Until now, the Philippines remains sharply divided on how to leverage its arbitration award  Filipino President Rodrigo Duterte has repeatedly downplayed the relevance of the ruling by questioning its enforceability amid China's vociferous opposition  Soon after taking office in mid-2016, Duterte declared that he would "set aside" the arbitration award in order to pursue a "soft landing" in bilateral relations with China  In exchange, he has hoped for large-scale Chinese investments as well as resource-sharing in the South China Sea…  Other major leaders in the Philippines, however, have taken a tougher stance and continue to try to leverage the award to resist China's expanding footprint in the area  The Stratbase-Albert Del Rosario Institute, an influential think tank co-founded by former Philippine Secretary of Foreign Affairs Albert del Rosario, hosted today a high-level forum on the topic at the prestigious Manila Polo Club  Del Rosario oversaw the arbitration proceedings against China under Duterte's predecessor, Benigno Aquino  He opened the event attended by dignitaries from major Western and Asian countries with a strident speech which accused China of trying to "dominate the South China Sea through force and coercion " He defended the arbitration award as an "overwhelming victory" to resist "China's unlawful expansion agenda " The ex-top diplomat also accused the Duterte administration of acquiescence to China by acting as an "abettor" and "willing victim" by soft-pedaling the Philippines' claims in the South China Sea and refusing to raise the arbitration award in multilateral fora  The keynote speaker of the event was Vice President Leni Robredo, who has recently emerged as the de facto leader of the opposition against Duterte  Though falling short of directly naming Duterte, her spirited speech served as a comprehensive indictment of the administration's policy in the South China Sea…  Her keynote address, widely covered by the local media, was followed by an even more spirited speech by interim Supreme Court Chief Justice Antonio Carpio, another leading critic of Duterte's foreign policy  The chief magistrate, who also oversaw the Philippines' arbitration proceedings against China, lashed out at Duterte for placing the landmark award in a "deep freeze " He called on the Duterte administration to leverage the award by negotiating maritime delimitation agreements with other Southeast Asian claimant states such as Malaysia and Vietnam which welcomed the arbitral tribunal's nullification of China's nine-dashed-line map  He also called on the Philippines to expand its maritime entitlement claims in the area, in accordance to the arbitration award, by applying for an extended continental shelf in the South China Sea at the UN  Another July 12, 2018, press report stated the following: Tarpaulins bearing the words "Welcome to the Philippines, province of China" were seen hanging from several footbridges in Metro Manila Thursday, two years after the country won its arbitration case against China  The red banners bore the Chinese flag and Chinese characters  It is unclear who installed the tarpaulins, which are possible reference to a "joke" by President Rodrigo Duterte that the country can be a province of the Asian giant  "He (Xi Jinping) is a man of honor  They can even make us 'Philippines, province of China,' we will even avail of services for free," Duterte said in apparent jest before an audience of Chinese-Filipino business leaders earlier in 2018  "If China were a woman, I'd woo her "… In a Palace briefing, presidential spokesperson Harry Roque said enemies of the government are behind the tarpaulins  A report on ANC said that the Metro Manila Development Authority already took the banners down  The tarpaulins sparked outrage among social media users  A July 17, 2018, press report stated the following: Protesters held a rally in front of the Chinese Consulate [in San Francisco] before proceeding to the Philippine Consulate downtown, demanding that China "get out of Philippine territory in the West Philippine Sea " The protest was timed with others in Los Angeles and Vancouver on the second anniversary of the UN's Permanent Court of Arbitration ruling that China had no right to the territory it was claiming  Filipino American Human Rights Advocates (FAHRA) in a statement celebrated the court's finding that "China's historical claim of the "nine-dash line" [is] illegal and without basis " "China continues to violate the UN's decision with the backing of its puppet Philippine government headed by President Duterte, who is deceived by the 'build, build, build' economic push while China establishes a 'steal, steal, steal' approach to islands and territories belonging to the Exclusive Economic Zone (EEZ) of the Philippines as determined by UN," the statement lamented  FAHRA also found it unacceptable that Filipino fishermen must now ask permission to fish in the Philippine waters from "a Chinese master " "Duterte is beholden to the $15-billion loan with monstrous interest rate and China's investments in Boracay and Marawi, at the expense of Philippine sovereignty," FAHRA claimed  "This is not to mention that China remains to be the premier supplier of illegal drugs to the country through traders that include the son, Paolo Duterte, with his P6 billion shabu shipment to Davao," it further charged  The group demanded that "China abide by the UN International Tribunal Court's decision two years ago, to honor the full sovereignty of the Philippines over all territories at the Exclusive Economic Zone (EEZ) including the West Philippine Sea and the dismantling of the nuclear missiles and all military facilities installed by the Chinese government at the Spratly islands meant to coerce the Filipinos and all peace-loving people of Southeast Asia who clamor for equal respect and equal sovereignty in the area" among others  Appendix E  Additional Elements of China's Approach to Maritime Disputes This appendix presents background information on additional elements of China's approach to the maritime disputes in the SCS and ECS  Map of Nine-Dash Line China depicts its claims in the SCS using the so-called map of the nine-dash line—a Chinese map of the SCS showing nine line segments that, if connected, would enclose an area covering roughly 90% (earlier estimates said about 80%) of the SCS ( Figure E-1 )  The area inside the nine line segments far exceeds what is claimable as territorial waters under customary international law of the sea as reflected in UNCLOS, and, as shown in Figure E-2 , includes waters that are within the claimable EEZs (and in some places are quite near the coasts) of the Philippines, Malaysia, Brunei, and Vietnam  The map of the nine-dash line, also called the U-shaped line or the cow tongue, predates the establishment of the People's Republic of China (PRC) in 1949  The map has been maintained by the PRC government, and maps published in Taiwan also show the nine line segments  In a document submitted to the United Nations on May 7, 2009, which included the map shown in Figure E-1 as an attachment, China stated the following: China has indisputable sovereignty over the islands in the South China Sea and the adjacent waters, and enjoys sovereign rights and jurisdiction over the relevant waters as well as the seabed and subsoil thereof (see attached map [of the nine-dash line])  The above position is consistently held by the Chinese Government, and is widely known by the international community  The map does not always have exactly nine dashes  Early versions of the map had as many as 11 dashes, and a map of China published by the Chinese government in June 2014 includes 10 dashes  The exact positions of the dashes have also varied a bit over time  China has maintained ambiguity over whether it is using the map of the nine-dash line to claim full sovereignty over the entire sea area enclosed by the nine-dash line, or something less than that  Maintaining this ambiguity can be viewed as an approach that preserves flexibility for China in pursuing its maritime claims in the SCS while making it more difficult for other parties to define specific objections or pursue legal challenges to those claims  It does appear clear, however, that China at a minimum claims sovereignty over the island groups inside the nine line segments—China's domestic Law on the Territorial Sea and Contiguous Zone, enacted in 1992, specifies that China claims sovereignty over all the island groups inside the nine line segments  China's implementation on January 1, 2014, of a series of fishing regulations covering much of the SCS suggests that China claims at least some degree of administrative control over much of the SCS  An April 30, 2018, blog post states the following: In what is likely a new bid to reinforce and even expand China's sweeping territorial claims in the South China Sea, a group of Chinese scholars recently published a "New Map of the People's Republic of China " The alleged political national map, reportedly first published in April 1951 but only "discovered" through a recent national archival investigation, could give new clarity to the precise extent of China's official claims in the disputed waters  Instead of dotted lines, as reflected in China's U-shaped Nine-Dash Line claim to nearly all of the South China Sea, the newly discovered map provides a solid "continuous national boundary line and administrative region line " The Chinese researchers claim that through analysis of historical maps, the 1951 solid-line map "proves" beyond dispute that the "U-boundary line is the border of China's territorial sea" in the South China Sea  They also claim that the solid administrative line overlaying the U-boundary "definitely indicated that the sovereignty of the sea" enclosed within the U-boundary "belonged to China " The study, edited by the Guanghua and Geosciences Club and published by SDX Joint Publishing Company, has not been formally endorsed by the Chinese government  April 2018 Press Report of Proposal for Continuous Boundary Line in SCS An April 22, 2018, press report states the following: Researchers are proposing a new boundary in the South China Sea that they say will help the study of natural science while potentially adding weight to China's claims over the disputed waters, according to a senior scientist involved in the government-funded project  The new boundary will help to define more clearly China's claims in the contested region, but it is not clear whether or when it will be officially adopted by Beijing, the scientist said  A precise continuous line will split the Gulf of Tonkin between China and Vietnam, go south into waters claimed by Malaysia, take a U-turn to the north along the west coast of the Philippines and finish at the southeast of Taiwan  For decades, China's sovereign claim in the South China Sea has been murky, in large part because of the use of a segmented, vaguely located borderline known as the 'nine-dash line'  A United Nations tribunal ruled in July 2016 that China had no legal basis to claim the area within the dash lines  One reason for China losing the case was that it could not define the territory precisely  However, analysts said Beijing was unlikely to officially change the nine-dash line any time soon, in the face of potential international opposition     The vast area of blue outlined by the new boundary, hanging on a map like a Christmas stocking under South China, overlaps the dashes and fills in the gaps  It includes all contested waters, such as the Paracel Islands, the Spratly Islands, James Shoal and Scarborough Shoal  The boundary would determine for the first time the exact area that China claimed to own with historic rights in the South China Sea, according to the researcher  Its purpose was partly the study of natural science and partly driven by a political motivation "to strengthen China's claims" over the waters to prepare for possible changes in its South China Sea policy in the future, the researcher said  Within the boundary, China would claim the right to activities ranging from fishing, prospecting and mining for energy or mineral resources to the construction of military bases with deep water ports or airports  Other countries' access to these rights would, however, be open for discussion, as is the case at Scarborough Shoal, which China controls but allows Philippine fishing boats to access  While Beijing would consider the area within the boundary its territory, other countries would still have freedom of navigation, the researcher said     "Soon we will have a clear idea of what belongs to us in the South China Sea and what does not," said the researcher  "This will allow us to better plan and coordinate the efforts to protect our national interest in the region while reducing the risk of conflict with other countries caused by the absence of a border over the ocean "    "More often, when we are sending vessels out to the sea or looking down at an area via satellite, we are not sure whether it was our water," said the researcher in the boundary-drawing project  "The nine-dash line can no longer meet the demands of increasing Chinese activities in the South China Sea "    The continuous boundary was generated not only by curve-extending, gap-filling algorithms on computer  It was also based on a solid piece of historic evidence, according to the project team  In 1951, an official map approved by the central government of China marked the China-claimed area in the South China Sea with a pair of non-stopping lines  There was an inner black line indicating the sovereign boundary and an outer red line representing where China could exercise administrative power  "We were thrilled when we found the map," the researcher said  "It is something we can show the world " A detailed description of the map was published by the project team in a paper in domestic academic journal China Science Bulletin in March this year  Its authors recommended using the continuous U-shape boundary line as a replacement for the nine-dash line  The "U-boundary is the border of China's sea in the South China Sea, and its sovereignty belongs to China", the authors wrote in the paper  It "can further express the certainty of the integrity, continuity and border of China's seas in the South China Sea", they wrote, adding that it was "more vivid, accurate, complete and scientific"  Professor Yu Minyou, director of the China Institute of Boundary and Ocean Studies at Wuhan University, said that if the old map was published with government approval, which was usually the case in China, "it surely will add legal weight to China's claim" in the region     But other countries should bear in mind that it did not represent the Chinese government's position as long as the dash lines stayed on official maps, Yu said, adding that China's strategy for the South China Sea was "open and clear"  "China wants to achieve peace, stability, harmony and prosperity in the region," he said  "We are willing to share natural resources with other countries and leave the disputes to be solved in the future  "What we are doing now is creating a suitable environment for the final settlement of the issue " A government expert at the National Institute for South China Sea Studies in Haikou, Hainan, said the continuous boundary would serve as a useful tool for some studies of natural science  But it was highly unlikely to be printed on an official map, said the expert, who requested not to be named because he was not allowed to speak to overseas media about sensitive issues  "To my knowledge, the Chinese government currently has no plan to change the dash lines," he said  "Most diplomats and ocean law experts will oppose joining the dashes " The tension in the South China Sea has eased significantly in recent times, with neighbouring countries such as the Philippines and Vietnam no longer seeking direct confrontation with China over disputed areas  "Things are moving towards the right direction," the government expert said  "It is not the best time to cut a boundary " September 2017 Press Report of Potential New "Four-Sha" Legal Claim A September 21, 2017, press report states the following: The Chinese government recently unveiled a new legal tactic to promote Beijing's aggressive claim to own most of the strategic South China Sea  The new narrative that critics are calling "lawfare," or legal warfare, involves a shift from China's so-called "9-Dash Line" ownership covering most of the sea  The new lawfare narrative is called the "Four Sha"—Chinese for sand—and was revealed by Ma Xinmin, deputy director general in the Foreign Ministry's department of treaty and law, during a closed-door meeting with State Department officials last month  China has claimed three of the island chains in the past and recently added a fourth zone in the northern part of the sea called the Pratas Islands near Hong Kong  The other locations are the disputed Paracels in the northwestern part and the Spratlys in the southern sea  The fourth island group is located in the central zone and includes Macclesfield Bank, a series of underwater reefs and shoals  China calls the island groups Dongsha, Xisha, Nansha, and Zhongsha, respectively  Ma, the Foreign Ministry official, announced during the meetings in Boston on Aug  28 and 29 that China is asserting sovereignty over the Four Sha through several legal claims  He stated the area is China's historical territorial waters and also part of China's 200-mile Exclusive Economic Zone that defines adjacent zones as sovereign territory  Beijing also claims ownership by asserting the Four Sha are part of China's extended continental shelf  U S  officials attending the session expressed surprise at the new Chinese ploy to seek control over the sea as something not discussed before     A State Department notice at the end of what was billed as an annual U S -China Dialogue on the Law of the Sea and Polar Issues made no mention of the new Chinese lawfare tactic  The statement said only that officials from foreign affairs and maritime agencies "exchanged views on a wide range of issues related to oceans, the law of the sea, and the polar regions " A September 25, 2017, blog post about the claim states the following: While dropping or even de-emphasizing China's Nine-Dash Line claim in favor of the Four Shas has important diplomatic and political implications, the legal significance of such a shift is harder to assess  The constituent parts of China's Four Sha claims have long been set forth publicly in Chinese domestic law and official statements  Based on what we know so far, these new Chinese legal justifications are no more lawful than China's Nine-Dash Line claim  The challenge for critics of Chinese claims in the South China Sea, however, will be effectively explaining and articulating why this shift does not actually strengthen China's legal claims in the South China Sea  The Four Sha claim has a long pedigree in Chinese law and practice  China's 1992 law on the territorial sea and contiguous zone, for example, declared that China's land territory included the "Dongsha island group, Xisha island group, Zhongsha island group, [and] Nansha island group " A 2016 white paper disputing the Philippines' claims in the South China Sea arbitral process similarly claimed that: China's Nanhai Zhudao (the South China Sea Islands) consist of Dongsha Qundao (the Dongsha Islands), Xisha Qundao (the Xisha Islands), Zhongsha Qundao (the Zhongsha Islands) and Nansha Qundao (the Nansha Islands)  These Islands include, among others, islands, reefs, shoals and cays of various numbers and sizes     In a 2016 white paper, Beijing stated that, "China has, based on Nanhai Zhudao [the "Four Sha"], internal waters, territorial sea, contiguous zone, exclusive economic zone and continental shelf " Neither the white paper nor the Beacon's report explain how China derives these maritime zones from the four island groups     Because China is not constituted "wholly by one or more archipelagos" (think Indonesia or the Philippines), the U S  and most countries would view straight baselines around an island group as contrary to the UN Convention on the Law of the Sea (UNCLOS)     For this reason, this new Chinese legal strategy is even weaker than the Nine-Dash Line given that it clearly violates UNCLOS (e g , Articles 46 and 47)  Most Chinese defenses of the Nine Dash Line argued that the claim predated China's accession to UNCLOS and therefore not governed by it  Despite the legal weaknesses of its possible new strategy, China may still reap some benefits from trading the Nine-Dash Line for the Four Shas  First, the Chinese leadership may have realized that the Nine Dash Line has become too much of a diplomatic liability  The Nine-Dash Line is completely sui generis and no other state has made a historic maritime claim anything like it  For this reason, the Nine-Dash Line makes China an easy target for foreign criticism in a way that straight baselines around island groups probably will not  Second, by adopting language more similar to that found in UNCLOS, China may be betting that it can tamp down criticism, and win potential partners in the region     Third, and most intriguingly, China may have concluded that it can better shape (or undermine, depending on your point of view) the law of the sea by adopting UNCLOS terminology     So while we might be encouraged to see the Nine-Dash Line pass into the (legal) dustbins of history, we should be skeptical about whether the Four Shas herald a new more modest Chinese role in the South China Sea  China's legal justification for the Four Shas is just as weak, if not weaker, than its Nine-Dash Line claim  But explaining why the Four Shas is weak and lawless will require sophisticated legal analysis married with effective public messaging  Comparison with U S  Actions Toward Caribbean and Gulf of Mexico Some observers have compared China's approach toward its near-seas region with the U S  approach toward the Caribbean and the Gulf of Mexico in the age of the Monroe Doctrine  It can be noted, however, that there are significant differences between China's approach to its near-seas region and the U S  approach—both in the 19 th and 20 th centuries and today—to the Caribbean and the Gulf of Mexico  Unlike China in its approach to its near-seas region, the United States has not asserted any form of sovereignty or historical rights over the broad waters of the Caribbean or Gulf of Mexico (or other sea areas beyond the 12-mile limit of U S  territorial waters), has not published anything akin to the nine-dash line for these waters (or other sea areas beyond the 12-mile limit), and does not contest the right of foreign naval forces to operate and engage in various activities in waters beyond the 12-mile limit  Appendix F  U S  Position on Operational Rights in EEZs This appendix presents additional background information on the U S  position on the issue of operational rights of military ships in the EEZs of other countries  Operational Rights in EEZs Regarding a coastal state's rights within its EEZ, Scot Marciel, then-Deputy Assistant Secretary, Bureau of East Asian and Pacific Affairs, stated the following as part of his prepared statement for a July 15, 2009, hearing before the East Asian and Pacific Affairs Subcommittee of the Senate Foreign Relations Committee: I would now like to discuss recent incidents involving China and the activities of U S  vessels in international waters within that country's Exclusive Economic Zone (EEZ)  In March 2009, the survey ship USNS Impeccable was conducting routine operations, consistent with international law, in international waters in the South China Sea  Actions taken by Chinese fishing vessels to harass the Impeccable put ships of both sides at risk, interfered with freedom of navigation, and were inconsistent with the obligation for ships at sea to show due regard for the safety of other ships  We immediately protested those actions to the Chinese government, and urged that our differences be resolved through established mechanisms for dialogue—not through ship-to-ship confrontations that put sailors and vessels at risk  Our concern over that incident centered on China's conception of its legal authority over other countries' vessels operating in its Exclusive Economic Zone (EEZ) and the unsafe way China sought to assert what it considers its maritime rights  China's view of its rights on this specific point is not supported by international law  We have made that point clearly in discussions with the Chinese and underscored that U S  vessels will continue to operate lawfully in international waters as they have done in the past  As part of his prepared statement for the same hearing, Robert Scher, then-Deputy Assistant Secretary of Defense, Asian and Pacific Security Affairs, Office of the Secretary of Defense, stated that we reject any nation's attempt to place limits on the exercise of high seas freedoms within an exclusive economic zones [sic] (EEZ)  Customary international law, as reflected in articles 58 and 87 of the 1982 United Nations Convention on the Law of the Sea, guarantees to all nations the right to exercise within the EEZ, high seas freedoms of navigation and overflight, as well as the traditional uses of the ocean related to those freedoms  It has been the position of the United States since 1982 when the Convention was established, that the navigational rights and freedoms applicable within the EEZ are qualitatively and quantitatively the same as those rights and freedoms applicable on the high seas  We note that almost 40% of the world's oceans lie within the 200 nautical miles EEZs, and it is essential to the global economy and international peace and security that navigational rights and freedoms within the EEZ be vigorously asserted and preserved  As previously noted, our military activity in this region is routine and in accordance with customary international law as reflected in the 1982 Law of the Sea Convention  As mentioned earlier in the report, if China's position on whether coastal states have a right under UNCLOS to regulate the activities of foreign military forces in their EEZs were to gain greater international acceptance under international law, it could substantially affect U S  naval operations not only in the SCS and ECS (see Figure F-1 for EEZs in the SCS and ECS), but around the world, which in turn could substantially affect the ability of the United States to use its military forces to defend various U S  interests overseas  As shown in Figure F-2 , significant portions of the world's oceans are claimable as EEZs, including high-priority U S  Navy operating areas in the Western Pacific, the Persian Gulf, and the Mediterranean Sea  Some observers, in commenting on China's resistance to U S  military survey and surveillance operations in China's EEZ, have argued that the United States would similarly dislike it if China or some other country were to conduct military survey or surveillance operations within the U S  EEZ  Skeptics of this view argue that U S  policy accepts the right of other countries to operate their military forces freely in waters outside the 12-mile U S  territorial waters limit, and that the United States during the Cold War acted in accordance with this position by not interfering with either Soviet ships (including intelligence-gathering vessels known as AGIs) that operated close to the United States or with Soviet bombers and surveillance aircraft that periodically flew close to U S  airspace  The U S  Navy states that When the commonly recognized outer limit of the territorial sea under international law was three nautical miles, the United States recognized the right of other states, including the Soviet Union, to exercise high seas freedoms, including surveillance and other military operations, beyond that limit  The 1982 Law of the Sea Convention moved the outer limit of the territorial sea to twelve nautical miles  In 1983, President Reagan declared that the United States would accept the balance of the interests relating to the traditional uses of the oceans reflected in the 1982 Convention and would act in accordance with those provisions in exercising its navigational and overflight rights as long as other states did likewise  He further proclaimed that all nations will continue to enjoy the high seas rights and freedoms that are not resource related, including the freedoms of navigation and overflight, in the Exclusive Economic Zone he established for the United States consistent with the 1982 Convention  DOD states that the PLA Navy has begun to conduct military activities within the Exclusive Economic Zones (EEZs) of other nations, without the permission of those coastal states  Of note, the United States has observed over the past year several instances of Chinese naval activities in the EEZ around Guam and Hawaii  One of those instances was during the execution of the annual Rim of the Pacific (RIMPAC) exercise in July/August 2012  While the United States considers the PLA Navy activities in its EEZ to be lawful, the activity undercuts China's decades-old position that similar foreign military activities in China's EEZ are unlawful  In July 2014, China participated, for the first time, in the biennial U S -led Rim of the Pacific (RIMPAC) naval exercise, the world's largest multilateral naval exercise  In addition to the four ships that China sent to participate in RIMPAC, China sent an uninvited intelligence-gathering ship to observe the exercise without participating in it  The ship conducted operations inside U S  EEZ off Hawaii, where the exercise was located  A July 29, 2014, press report stated that The high profile story of a Chinese surveillance ship off the cost of Hawaii could have a positive aspect for U S  operations in the Pacific, the head of U S  Pacific Command (PACOM) said in a Tuesday [July 29] afternoon briefing with reporters at the Pentagon  "The good news about this is that it's a recognition, I think, or acceptance by the Chinese for what we've been saying to them for sometime," PACOM commander Adm  Samuel Locklear told reporters  "Military operations and survey operations in another country's [Exclusive Economic Zone]—where you have your own national security interest—are within international law and are acceptable  This is a fundamental right nations have " One observer stated the following: The unprecedented decision [by China] to send a surveillance vessel while also participating in the RIMPAC exercises calls China's proclaimed stance on international navigation rights [in EEZ waters] into question    During the Cold War, the U S  and Soviets were known for spying on each other's exercises  More recently, Beijing sent what U S  Pacific Fleet spokesman Captain Darryn James called "a similar AGI ship" to Hawaii to monitor RIMPAC 2012—though that year, China was not an official participant in the exercises         the spy ship's presence appears inconsistent with China's stance on military activities in Exclusive Economic Zones (EEZs)     That Beijing's AGI [intelligence-gathering ship] is currently stationed off the coast of Hawaii suggests either a double standard that could complicate military relations between the United States and China, or that some such surveillance activities are indeed legitimate—and that China should clarify its position on them to avoid perceptions that it is trying to have things both ways     In its response to the Chinese vessel's presence, the USN has shown characteristic restraint  Official American policy permits surveillance operations within a nation's EEZ, provided they remain outside of that nation's 12-nautical mile territorial sea (an EEZ extends from 12 to 200 nautical miles unless this would overlap with another nations' EEZ)  U S  military statements reflect that position unambiguously     That consistent policy stance and accompanying restraint have characterized the U S  attitude toward foreign surveillance activity since the Cold War  Then, the Soviets were known for sending converted fishing ships equipped with surveillance equipment to the U S  coast, as well as foreign bases, maritime choke points, and testing sites  The U S  was similarly restrained in 2012, when China first sent an AGI to observe RIMPAC     China has, then, sent a surveillance ship to observe RIMPAC in what appears to be a decidedly intentional, coordinated move—and in a gesture that appears to contradict previous Chinese policy regarding surveillance and research operations (SROs)  The U S  supports universal freedom of navigation and the right to conduct SROs in international waters, including EEZs, hence its restraint when responding to the current presence of the Chinese AGI  But the PRC opposes such activities, particularly on the part of the U S , in its own EEZ     How then to reconcile the RIMPAC AGI with China's stand on surveillance activities? China maintains that its current actions are fully legal, and that there is a distinct difference between its operations off Hawaii and those of foreign powers in its EEZ  The PLAN's designated point of contact declined to provide information and directed inquiries to China's Defense Ministry  In a faxed statement to Reuters, the Defense Ministry stated that Chinese vessels had the right to operate "in waters outside of other country's territorial waters," and that "China respects the rights granted under international law to relevant littoral states, and hopes that relevant countries can respect the legal rights Chinese ships have " It did not elaborate  As a recent Global Times article hinted—China's position on military activities in EEZs is based on a legal reading that stresses the importance of domestic laws  According to China maritime legal specialist Isaac Kardon, China interprets the EEZ articles in the United Nations Convention on the Law of the Sea (UNCLOS) as granting a coastal state jurisdiction to enforce its domestic laws prohibiting certain military activities—e g , those that it interprets to threaten national security, economic rights, or environmental protection—in its EEZ  China's domestic laws include such provisions, while those of the United States do not  Those rules would allow China to justify its seemingly contradictory approach to AGI operations—or, as Kardon put it, "to have their cake and eat it too " Therefore, under the Chinese interpretation of UNCLOS, its actions are neither hypocritical nor illegal—yet do not justify similar surveillance against China  Here, noted legal scholar Jerome Cohen emphasizes, the U S  position remains the globally dominant view—"since most nations believe the coastal state has no right to forbid surveillance in its EEZ, they do not have domestic laws that do so " This renders China's attempted constraints legally problematic, since "international law is based on reciprocity " To explain his interpretation of Beijing's likely approach, Cohen invokes the observation that a French commentator made several decades ago in the context of discussing China's international law policy regarding domestic legal issues: "I demand freedom from you in the name of your principles  I deny it to you in the name of mine " Based on his personal experience interacting with Chinese officials and legal experts, Kardon adds, "China is increasingly confident that its interpretation of some key rules and—most critically—its practices reinforcing that interpretation can over time shape the Law of the Sea regime to suit its preferences " But China is not putting all its eggs in that basket  There are increasing indications that it is attempting to promote its EEZ approach vis-à-vis the U S  not legally but politically  "Beijing is shifting from rules- to relations-based objections," Naval War College China Maritime Studies Institute Director Peter Dutton observes  "In this context, its surveillance operations in undisputed U S  EEZs portend an important shift, but that does not mean that China will be more flexible in the East or South China Seas " The quasi-authoritative Chinese commentary that has emerged thus far supports this interpretation     [A recent statement from a Chinese official] suggests that Beijing will increasingly oppose U S  SROs on the grounds that they are incompatible with the stable, cooperative Sino-American relationship that Beijing and Washington have committed to cultivating  The Obama Administration must ensure that the "new-type Navy-to-Navy relations" that Chinese Chief of Naval Operations Admiral Wu Shengli has advocated to his U S  counterpart does not contain expectations that U S  SROs will be reduced in nature, scope, or frequency     China's conducting military activities in a foreign EEZ implies that, under its interpretation, some such operations are indeed legal  It therefore falls to China now to clarify its stance—to explain why its operations are consistent with international law, and what sets them apart from apparently similar American activities  If China does not explain away the apparent contradiction in a convincing fashion, it risks stirring up increased international resentment—and undermining its relationship with the U S  Beijing is currently engaging in activities very much like those it has vociferously opposed  That suggests the promotion of a double standard untenable in the international system, and very much at odds with the relationships based on reciprocity, respect, and cooperation that China purports to promote     If, however, China chooses to remain silent, it will likely have to accept—at least tacitly, without harassing—U S  surveillance missions in its claimed EEZ  So, as we watch for clarification on Beijing's legal interpretation, it will also be important to watch for indications regarding the next SROs in China's EEZ  In September 2014, a Chinese surveillance ship operated in U S  EEZ waters near Guam as it observed a joint-service U S  military exercise called Valiant Shield  A U S  spokesperson for the exercise stated the following: "We'd like to reinforce that military operations in international commons and outside of territorial waters and airspace is a fundamental right that all nations have     The Chinese were following international norms, which is completely acceptable " Appendix G  Options Suggested by Observers for Strengthening U S  Actions This appendix presents a bibliography of some recent writings by observers who have suggested options (or are reporting on options suggested by others) for strengthening U S  actions for responding to China's actions in the SCS and ECS, organized by date, beginning with the most-recent item  Andrew S  Erickson, "Maritime Numbers Game, Understanding and Responding to China's Three Sea Forces," Indo-Pacific Defense Forum , January 28, 2019  James R  Holmes, "Use It or Lose It: Seagoing Nations Must Defend Embattled Waterways," The Hill , January 27, 2019  Gregory Poling and Eric Sayers, "Time to Make Good on the U S -Philippine Alliance," War on the Rocks , January 21, 2019  Gregory Poling and Bonnie S  Glaser, "How the U S  Can Step Up in the South China Sea," Foreign Affairs , January 16, 2019  Zack Cooper and Gregory Poling, "America's Freedom of Navigation Operations Are Lost at Sea, Far Wider Measures Are Needed to Challenge Beijing's Maritime Aggression," Foreign Policy , January 8, 2019  Andrew S  Erickson, "Shining a Spotlight: Revealing China's Maritime Militia to Deter its Use," National Interest , November 25, 2018  Eric Sayers, "Assessing America's Indo-Pacific Budget Shortfall," War on the Rocks , November 15, 2018  Patrick N  Cronin and Richard Javad Heydarian, "This Is How America and the Philippines Can Upgrade Their Alliance," National Interest , November 12, 2018  John Lee, Freedom of Navigation and East Asian Stability: Countering Beijing's Campaign of Historical Revisionism ," Hudson Institute, November 2018, 8 pp  Ryan Martinson and Peter Dutton, "Chinese Scientists Want to Conduct Research in U S  Waters—Should Washington Let Them?" National Interest , November 4, 2018  Hunter Stires, "Understanding and Defeating China's Maritime Insurgency in the South china Sea," National Interest , November 1, 2018  Robert D  Kaplan, "How President Trump Is Helping Beijing Win in the South China Sea," Washington Post , October 9, 2018  Tuan Pham, "China's Worth Nightmare: RIMPAC 2020 in the South China Sea?" National Interest , September 29, 2018  Patrick M  Cronin, "China is Waging a Maritime Insurgency in the South China Sea  It's Time for the Unitd States to Counter It " National Interest , August 6, 2018  Shigeki Sakamoto, "China's South China Sea Project Must Not Succeed; The International Community Shouldn't Quietly Let China Ignore the 2016 [Arbitral Tribunal] Decision " Diplomat , August 6, 2018  James Amedeo, "America Needs a Clear Strategy to Counter China's Expansion in the South China Sea," National Interest , August 1, 2018  Lynn Kuok, "Countering China's Actions in the South China Sea," Lawfare , August 1, 2018  Timothy Perry, "Use Maritime-Law Trends to Offset Beijing's Gains in the South China Sea," Defense One , July 24, 2018  J  Michael Cole, "It's Time to Stop China's Seaward Expansion," National Interest , July 21, 2018  Lindsey W  Ford, "Was China's RIMPAC Exclusion An Opening or a Wasted Shot?" East Asia Forum , July 20, 2018  Lynn Kuok, "China Is Winning in the South China Sea," Wall Street Journal , July 17, 2018  "Washington and Its Allies Need to Contain Beijing," Financial Times , July 1, 2018  Patrick M  Cronin and Melodiw Ha, "Toward a New maritime Strategy in the South China Sea," The Diplomat , June 22, 2018  (A similar version was posted as: Patrick M  Cronin and Melodie Ha, "Toward a New Maritime Strategy in the South China Sea," CSIS, June 21, 2018 (PacNet #42)  Paul J  Leaf, "Taiwan and the South China Sea Must Be Taken Off the Back Burner," National Interest , June 18, 2018  Robert E  McCoy, "A Better Way to Repel China in the South China Sea," Asia Times , June 8, 2018  Robert Farley, "The South China Sea Conundrum for the United States," The Diplomat , June 5 2018  Joel Gehrke, "Marco Rubio: US Must Develop Plan to 'Destroy' Chinese Assets in South China Sea," Washington Examiner , June 4, 2018  Duncan DeAeth, "Taiwan Should Invite US to Open Military Base on Taiping Island, Says DPP Think-Tank," Taiwan News , June 4, 2018  Julian Ku, "It's Time for South China Sea Economic Sanctions," Lawfare , June 1, 2018  Eric Sayers, "Time to Launch a Combined Maritime Task Force for the Pacific," War on the Rocks , June 1, 2018  Matthew Krull, "America's Annual Naval Patrol Report and How to Fix It," National Interest , May 29, 2018  Tuan N  Pham, "A Sign of the Times: China's Recent Actions and the Undermining of Global Rules, Pt  3," CIMSEC (Center for International Maritime Security), May 24, 2018  Ryan D  Martinson and Andrew Erickson, "Re-Orienting American Seapower for the China Challenge," War on the Rocks , May 10, 2018  Ben Cipperley, "In the Era of Great Power Competition, the US Needs to Step Up Its Game," The Diplomat , May 8, 2018  Stephen Bryen, "How to Counter China's Fortified Islands in South China Sea," Asia Times , May 5, 2018  Ely Ratner, "Exposing China's Actions in the South China Sea," Council on Foreign Relations, April 6, 2018  Shawn Lansing, "A White Hull Approach to Taming the Dragon: Using the Coast Guard to Counter China," War on the Rocks , February 22, 2018  Dean Cheng, "Wanted: A Strategy to Limit China's Grand Plans for the South China Sea," National Interest , January 30, 2018  Hal Brands, "China Hasn't Won the Pacific (Unless You Think It Has)," Bloomberg , January 5, 2018 

ground_truth: In October 2017, the Department of Commerce (Commerce) announced that the projected life-cycle cost of the 2020 Census had climbed to $15.6 billion, a more than $3 billion (27 percent) increase over its 2015 estimate. A high-quality, reliable cost estimate is a key tool for budgeting, planning, and managing the 2020 Census. Without this capability, the Bureau is at risk of experiencing program cost overruns, missed deadlines, and performance shortfalls. GAO was asked to evaluate the reliability of the Bureau's life-cycle cost estimate. This report evaluates the reliability of the Bureau's revised life-cycle cost estimate for the 2020 Census and the extent to which the Bureau is using it as a management tool, and compares the 2015 and 2017 cost estimates to describe key drivers of cost growth. GAO reviewed documentary and testimonial evidence from Bureau officials responsible for developing the 2020 Census cost estimate and used its cost assessment guide ( GAO-09-3SP ) as criteria. Since 2015, the Census Bureau (Bureau) has made significant progress in improving its ability to develop a reliable cost estimate. While improvements have been made, the Bureau's October 2017 cost estimate for the 2020 Census does not fully reflect all the characteristics of a reliable estimate. (See figure.) Specifically, for the characteristic of being well-documented, GAO found that some of the source data either did not support the information described in the cost estimate or was not in the files provided for two of its largest field operations. In GAO's assessment of the 2015 version of the 2020 Census cost estimate, GAO recommended that the Bureau take steps to ensure that each of the characteristics of a reliable cost estimate is met. The Bureau agreed and has taken steps, but has not fully implemented this recommendation. A reliable cost estimate serves as a tool for program development and oversight, helping management make informed decisions. During this review, GAO found the Bureau used the cost estimate to inform decision making. Factors that contributed to cost fluctuations between the 2015 and 2017 cost estimates include: Changes in assumptions. Among other changes, a decrease in the assumed rate for self-response from 63.5 percent in 2015 to 60.5 percent in 2017 increased the cost of collecting responses from nonresponding housing units. Improved ability to anticipate and quantify risk. In general, contingency allocations designed to address the effects of potential risks increased overall from $1.3 billion in 2015 to $2.6 billion in 2017. An overall increase in information technology (IT) costs. IT cost increases, totaling $1.59 billion, represented almost 50 percent of the total cost increase from 2015 to 2017. GAO is not making any new recommendations but maintains its earlier recommendation—that the Secretary of Commerce direct the Bureau to take specific steps to ensure its cost estimate meets the characteristics of a high-quality estimate. In its response to this report, Commerce generally agreed with the findings related to cost estimation improvements, but disagreed that the cost estimate was not reliable. However, until GAO's recommendation is fully implemented the cost estimate cannot be considered reliable.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: A high-quality, reliable cost estimate is a key tool for budgeting, planning, and managing the 2020 Census  According to OMB, programs must maintain current and well-documented estimates of program costs, and these estimates must encompass the full life-cycle of the program  Among other things, OMB states that generating reliable program cost estimates is a critical function necessary to support OMB’s capital programming process  Without this capability, agencies are at risk of experiencing program cost overruns, missed deadlines, and performance shortfalls  A reliable cost estimate is critical to the success of any federal government program  With the information from reliable estimates, managers can: make informed investment decisions, allocate program resources, measure program progress, proactively correct course when warranted, and ensure overall accountability for results  To be considered reliable, a cost estimate must meet the criteria for each of the four characteristics outlined in our Cost Estimating and Assessment Guide  According to our analysis, a cost estimate is considered reliable if the overall assessment ratings for each of the four characteristics are substantially or fully met  If any of the characteristics are not met, minimally met, or partially met, then the cost estimate does not fully reflect the characteristics of a high-quality estimate and cannot be considered reliable  Those characteristics are: Well-documented: An estimate is thoroughly documented, including source data and significance, clearly detailed calculations and results, and explanations of why particular methods and references were chosen  Data can be traced to their source documents  Accurate: An estimate is unbiased, the work is not overly conservative or overly optimistic, and is based on an assessment of most likely costs  Few, if any, mathematical mistakes are present  Credible: Any limitations of the analysis because of uncertainty or bias surrounding data or assumptions are discussed  Major assumptions are varied, and other outcomes are recomputed, to determine how sensitive they are to changes in the assumptions  Risk and uncertainty analysis is performed to determine the level of risk associated with the estimate  The estimate’s results are cross- checked, and an independent cost estimate (ICE) is conducted to see whether other estimation methods produce similar results  Comprehensive: An estimate has enough detail to ensure that cost elements are neither omitted nor double counted  All cost-influencing ground rules and assumptions are detailed in the estimate’s documentation  Meeting best practices outlined in our Cost Estimating and Assessment Guide for a reliable cost estimate has been a long-standing challenge for the Bureau  In 2008 we reported that the 2010 Census cost estimate was not reliable because it lacked documentation and was not comprehensive, accurate, or credible  For example, in our 2008 report on the Bureau’s cost estimation process, Bureau officials were unable to provide documentation that supported the assumptions for the initial 2001 life-cycle cost estimate as well as the updates  Consequently, we recommended that the Bureau establish guidance, policies, and procedures for estimating costs that would meet best practices criteria  The Bureau agreed with the recommendation and said at the time that it already had efforts underway to improve its future cost estimation methods and systems  Moreover, weaknesses in the life-cycle cost estimate were one reason we designated the 2010 Census a GAO High- Risk Area in 2008  In 2012 we reported that, while the Bureau was taking steps to strengthen its life-cycle cost estimates, it had not yet established guidance for developing cost estimates  We recommended that the Bureau finalize its guidance, policies, and procedures for cost estimation in accordance with best practices  The Bureau agreed with the overall theme of the report but did not comment on the recommendation  During this review we found that the Bureau took steps to address this recommendation, which is discussed later in this report  Such guidance can help to institutionalize best practices and ensure consistent processes and operations for producing reliable estimates  In a 2016 report we found that the October 2015 version of the Bureau’s life-cycle cost estimate for the 2020 Census was not reliable  Overall, we reported that the 2020 Census life-cycle cost estimate partially met two of the characteristics of a reliable cost estimate (comprehensive and accurate) and minimally met the other two (well-documented and credible)  We recommended that the Bureau take specific steps to ensure its cost estimate meets the characteristics of a high-quality estimate  The Bureau agreed with this recommendation, and took steps to improve the reliability of its cost estimate, which we focus on later in this report  Consequently, an unreliable life-cycle cost estimate is one of the reasons we designated the 2020 Census a GAO High-Risk Area in 2017  In October 2015, the Bureau estimated the cost of the 2020 Census to be $12 3 billion  According to the Bureau, the October 2015 version was the Bureau’s first attempt to model the life-cycle cost of its planned 2020 Census, in contrast to its earlier 2011 estimate, which the Bureau said was intended to produce an approximation of potential savings and to begin developing the methodology for producing decennial life-cycle cost estimates covering all phases of the decennial life cycle  To help control costs while maintaining accuracy, the Bureau introduced significant change to how it conducts the decennial census in 2020  Its planned innovations include reengineering how it builds its address list, improving self-response by encouraging the use of the Internet and telephone, using administrative records to reduce field work, and reengineering field operations using technology to reduce manual effort and improve productivity  In contrast to the estimated $12 3 billion in 2015, the 2020 Census would cost $17 8 billion in constant 2020 dollars if the Bureau repeated the 2010 Census design and methods, according to the Bureau’s estimates  In October 2017, Commerce announced that it had updated the October 2015 life-cycle cost estimate, projecting the life-cycle cost of the 2020 Census to be $15 6 billion, an increase of over $3 billion (27 percent) over its 2015 estimate  (See figure 1 ) In developing the 2017 version of the cost estimate, Bureau cost estimators identified cost inputs, their ranges for possible outcomes, and overall cost estimating relationships (i e , logical or mathematical formulas, or both)  To identify cost inputs and the ranges of potential outcomes, the Bureau worked with subject matter experts and used historical data to support assumptions and generate inputs  The Bureau’s cost estimation team used a software tool to generate the cost estimate  Because cost estimates predict future program costs, uncertainty is always associated with them  For example, data from the past (such as fuel prices) may not always be relevant in the future  Risk and uncertainty refer to the fact that because a cost estimate is a forecast, there is always a chance that the actual cost will differ from the estimate  One way to determine whether a program is realistically budgeted is to perform an uncertainty analysis, so that the probability associated with achieving its point estimate can be determined, usually relying on simulations such as those of Monte Carlo methods  This can be particularly useful in portraying the uncertainty implications of various cost estimates  Consistent with cost estimation practices outlined in our Cost Estimating and Assessment Guide, the estimate was compared with two independent cost estimates (ICE), developed by Commerce’s Office of Acquisition Management (OAM) and the Bureau’s Office of Cost Estimation, Analysis, and Assessment  The offices producing the ICEs and the cost estimate team worked together to examine the process each used, an effort known as the reconciliation process  Through this reconciliation, the Bureau identified areas where discrepancies existed and elements that could require additional review and possible improvement  According to Bureau documentation the estimate will be updated as the program meets milestones and to reflect changes in technical or program assumptions  Figure 2 details the Bureau’s cost estimation process  OAM was involved extensively in the development of the 2017 estimate, an increased involvement compared to 2015, according to Bureau officials  OAM participated in regular review meetings throughout the development of the estimate and also developed an independent cost estimate, as shown in the figure below  End-to-end system testing activities for the 2020 Census are currently underway in Providence, Rhode Island  According to the Bureau, information collected from the test, such as overall response rates and the use of administrative records to inform census records, will inform future versions of the life-cycle cost estimate  Some updates from the test will be incorporated into the next cost estimate, which will be available in the first quarter of the coming fiscal year  Since our June 2016 report, in which we reviewed the Bureau’s 2015 version of the cost estimate, the Bureau has made significant progress  For example, the Bureau has put into place a work breakdown structure (WBS) that defines the work, products, activities, and resources necessary to accomplish the 2020 Census and is standardized for use in budget planning, operational planning, and cost estimation  However, the Bureau’s October 2017 cost estimate for the 2020 Census does not fully reflect characteristics of a high-quality estimate as described in our Cost Estimating and Assessment Guide and cannot be considered reliable  Our Cost Estimating and Assessment Guide describes best practices for developing reliable cost estimates  For our reporting needs, we collapsed these best practices into four characteristics for sound cost estimating— comprehensive, well-documented, accurate, and credible—and identified specific best practices for each characteristic  To be considered reliable, an organization must meet or substantially meet each characteristic  Our review found the Bureau met or substantially met three out of the four characteristics of a reliable cost estimate, while it partially met one characteristic: well-documented  When compared to the October 2015 estimate, the 2017 estimate shows considerable improvement  (See figure 3 below ) Cost estimates are considered valid if they are well-documented to the point they can be easily repeated or updated and can be traced to original sources through auditing, according to best practices  The Bureau only partially met the criteria for well-documented, as set forth in our Cost Estimating and Assessment Guide  A cost estimate that does not fully meet the criteria for well-documented cannot be used by management to make informed and effective implementation decisions  The well-documented characteristic comprises five best practices  The Bureau substantially met two out of five best practices (as shown in figure 4)  First, the estimate describes in sufficient detail the calculations performed and the estimating methodology used to derive each element’s cost, and the cost estimate had been reviewed by management  Since cost estimates can inform key decisions and budget requests, it is vital that management review and understand how the estimate was developed, including risks associated with the underlying data and methods  The cost estimate only partially met three best practices for the characteristic of being well-documented  In general, some documentation was missing, inconsistent, or difficult to understand  First, we found that source data did not always support the information described in the basis of estimate document or could not be found in the files provided for two of the Bureau’s largest field operations: Address Canvassing and Non- Response Follow-Up (NRFU)  For example, the cost estimate documentation referred to actual data from the 2010 Census and information obtained from experts as sources for address canvassing rework rates  However, the folder source documents provided as support for the basis of estimate did not include this information  Next, in several cases, we could not replicate calculations, such as for mileage costs, using the description provided  Lastly, we found that some of the cost elements did not trace clearly to supporting spreadsheets and assumption documents  Failure to document an estimate in enough detail makes it more difficult to replicate calculations, or to detect possible errors in the estimate; reduces transparency of the estimation process; and can undermine the ability to use the information to improve future cost estimates or even to reconcile the estimate with another independent cost estimate  The Bureau told us it would continue to make improvements to ensure the estimate is well- documented  For the estimate to be considered well-documented, the Bureau will need to address these issues  An accurate cost estimate supports measurement of program progress by providing unbiased and correct data, which can help management ensure accountability for scheduled results  We found the Bureau’s cost estimate substantially met the criteria for accuracy  As shown in figure 5, and in line with best practices outlined in our Cost Estimating and Assessment Guide, the estimate was not overly optimistic; appeared to be free of errors; was based on historical data or input from subject matter experts; and, according to Bureau officials, is updated regularly as information becomes available  The Bureau can enhance the accuracy of their estimate by increasing the level of detail included in the documentation, such as detail on specific inflation indices used, and by monitoring actual costs against estimates  We identified areas for improvement, which, according to Bureau officials, will be addressed as part of its ongoing efforts  For example, while the basis of estimate document describes different inflation indexes, it was not clear exactly which indexes were applied to the various cost elements in the estimate  Also, evidence of how variances between estimated costs and actual expenses would be tracked over time was not available at the time of our analysis  Tools to track variance enable management to measure progress against planned outcomes  Bureau officials stated that they already have systems in place that can be adapted for tracking estimated and actual costs  All estimates include a certain amount of informed judgment about the future  Assumptions made at the start of a program can turn out to be inaccurate  Credible cost estimates identify limitations due to uncertainty or bias surrounding data or assumptions, and control for these uncertainties by identifying and quantifying cost elements that represent the most risk  We found that the Bureau’s cost estimate substantially met the criteria for credible, as shown in figure 6 below  The Bureau’s cost estimate clearly identifies risks and uncertainties, and describes approaches taken to mitigate them  In line with best practices outlined in our Cost Estimating and Assessment Guide, the Bureau did the following: Sensitivity analysis  The Bureau conducted sensitivity analysis to identify possible changes to estimated costs for the 2020 Census based on varying major assumptions, parameters, and data inputs  For example, the Bureau calculated the likely cost implications for a range of possible response rates to identify a range of projected costs and to calculate appropriate reserves for risk  Bureau officials stated that they also identified the estimate input parameters that contributed the most to estimate uncertainty  Risk and uncertainty analysis  A cost estimate is a forecast, and as such, there is always a chance that the actual cost will differ from the estimate  Uncertainty is the indefiniteness about the outcome of a situation  Uncertainty is assessed in cost estimate models to estimate the risk (or probability) that a specific funding level will be exceeded  We found the Bureau performed an uncertainty analysis on a portion of the estimate to determine whether estimated costs were realistic and to establish the probability of achieving projections outlined in the estimate  The Bureau used a combination of modeling based on Monte Carlo analysis and allocations of funding for risks  The Monte Carlo simulation was performed on a portion of the estimate to account for uncertainty around various operational parameters for which a range of outcomes was possible, including Internet response rates and the extent to which data collection issues might be resolved using administrative records  To account for the inherent uncertainty of assumptions included within the life-cycle cost estimate, the Bureau added funding to the cost estimate totaling approximately $292 million to account for risks based on the results of the Monte Carlo analysis  For other risks, such as acquisition lead time and the possibility of delays in information technology (IT) development, contingency funding was added to the estimate to reflect the potential cost of resolving these issues, through use of a backup system or an alternative approach  These are described as “special risks” in the Bureau’s basis of estimate, and total approximately $171 million  Based on additional sensitivity analysis, the Bureau added approximately $965 million to the cost estimate to reflect discrete risks outlined in the risk register as well as those associated with (1) variability in self-response rates, (2) the effect of fluctuations in the size and wage rate of the temporary workforce on the cost of field operations, and (3) the potential need to reduce the enumerator-to- manager staffing ratio in case expected efficiencies in field operations are not realized  In addition to these provisions, the Secretary of Commerce added a contingency amount of about $1 2 billion to account for what the Bureau refers to as unknown-unknowns  Bureau documentation states that conducting a decennial census is an extremely complex, high-risk operation  In order to mitigate some of the risk, contingency funding must be available to initiate ad hoc activities necessary to overcome unforeseen issues  According to Bureau documentation these include such risks as natural disasters or cyber-attacks  The Bureau provides a description of how the general risk contingency is calculated  However, this description does not clearly link calculated amounts to the risks themselves  In our June 2016 report we reported the Bureau had not properly accounted for risk and recommended the Bureau, in part; improve control over how risk and uncertainty are accounted for  We continue to believe the prior recommendation from our June 2016 report remains valid and should be addressed: that the Bureau properly account for risk in the 2020 Census cost estimate, among other things  As such, risks need to be linked to the $1 2 billion general risk contingency fund  Independent cost estimate  According to best practices outlined in our Cost Estimating and Assessment Guide, an independent cost estimate should be performed to determine whether alternate estimate approaches produce similar results  The Bureau compared their estimate with two independent cost estimates, developed by Commerce’s Office of Acquisition Management and the Bureau’s Office of Cost Estimation and Assessment  As part of their process for finalizing the cost estimate, Bureau officials reconciled differences between the estimates in discussions with the two offices, resulting in more conservative assumptions by the Bureau around risk and uncertainty in both cases  In addition to implementing our recommendation to properly account for risk, going forward, while the Bureau substantially met the credibility characteristic it will be important for them to also integrate regular cross-checks of methodology into their cost estimation process  In our analysis we observed that no specific cross-checks of cost methodology were performed  According to the Bureau, cross- checks were not performed because the Bureau considered the independent cost estimates as overall cross-checks on the reliability of their methodology and did not conduct additional cross-checks  The main purpose of cross-checking is to determine whether alternative methods for specific cost elements within the cost estimate could produce similar results  An independent cost estimate, though important for the credibility of an estimate, does not fulfill the same function as a targeted cross-check of individual elements  Comprehensive estimates have enough detail to ensure that cost elements are neither omitted nor double-counted, all cost-influencing assumptions are detailed in the estimate’s documentation, and a work breakdown structure is defined  Our analysis of the 2017 cost estimate demonstrates improvement over the 2015 cost estimate when the Bureau’s cost estimate only partially met the criteria for comprehensive  We found the Bureau met or substantially met all four best practices for the comprehensive characteristic, as shown in figure 7  For example, all life-cycle costs are included in the estimate along with a complete description of the 2020 Census program and current schedule  We also found that the Bureau substantially met criteria for documenting cost influencing ground rules and assumptions  A standardized WBS (as detailed in table 1) with supporting dictionary outlines the major work of the program and describes the activities and deliverables at the project level where costs are tracked  In 2016, the Bureau’s WBS did not contain sufficient detail and we found significant differences in the presentation of the work between sources  In 2017, based on our review of Bureau documentation and interviews with Bureau officials, we found that the WBS is standardized and cost elements are presented in detail  The WBS is a necessary program management tool because it provides a basic framework for a variety of related tasks like estimating costs, developing schedules, identifying resources, determining where risks may occur, and providing the means for measuring program status  Although the Bureau’s updated life-cycle cost estimate reflects three of the four characteristics of a reliable cost estimate, we are not making any new recommendations to the Bureau in this report  We continue to believe the prior recommendation, made in 2016, remains relevant: that the Secretary of Commerce ensure that the Bureau finalizes the steps needed to fully meet the characteristics of a high-quality estimate, most notably in the well-documented area  The Bureau told us it has used our best practices for cost estimation to develop their cost estimate, and will focus on those best practices that require attention moving forward  Without a reliable cost estimate, the Bureau is limited in its ability to make informed decisions about program resources and to effectively measure progress against operational objectives  OMB, in its guidance for preparing and executing agency budgets, cites that credible cost estimates are vital for sound management decision making and for any program or capital project to succeed  A well- developed cost estimate serves as a tool for program development and oversight, supporting management to make informed decisions  According to the Bureau, the 2020 Census cost estimate is used as a management tool to guide decision making  Bureau officials stated the cost estimate is used to examine the cost impact of program changes  For example, the cost estimate served as the basis for the fiscal year 2019 funding request developed by the Bureau  The Bureau also said it used the 2020 Census life-cycle cost estimate to establish cost controls during budget formulation activities and to monitor spending levels for fiscal year 2019 activities  According to the Bureau, as detailed operational and implementation plans are defined, the 2020 Census life- cycle cost estimate has been and will continue to be used to support ongoing “what-if” analyses in determining the cost impacts of design decisions  Specifically, using the cost estimate to model the impact of changes on overall cost, the Bureau adjusted the scope of the Census Enterprise Data Collection and Processing (CEDCaP) operation  The processes for developing and updating estimates are designed to inform management about program progress and the use of program resources, supporting cost-driven planning efforts and well-informed decision making  Our work has identified a number of best practices for use in developing guidance related to cost estimation and analysis that are the basis of effective program cost estimating and should result in reliable and valid cost estimates that management can use for making informed decisions  In 2012 we reported that the Bureau had not yet established guidance for developing cost estimates  We recommended that the Bureau establish guidance, policies, and procedures for developing cost estimates that would meet best practice criteria  The Bureau agreed with the theme of the report but did not specifically agree with the recommendation  Moreover, in June 2016, we also reported that the cost estimation team did not record how and why it changed assumptions that were provided to it and did not document the sources of all data it used  The documentation of these changes to assumptions did not happen because the Bureau lacked written guidance and procedures for the cost estimation team to follow  During this review we found the Bureau has since established reliable guidance, processes, and policies for developing cost estimates and managing the cost estimation process  The following documents, shown in table 2, establish roles and responsibilities for oversight and approval of cost estimation processes, provide a detailed description of the steps taken to produce a high-quality cost estimate, and clarify the process for updating the cost estimate and associated documents over the life of a project  The Decennial Census Program’s Cost Estimate and Analysis Process, which provides a detailed description of the steps taken to produce a high-quality estimate, is reliable as it met the criteria for 8 steps and substantially met the criteria for 4 steps of the 12 best steps outlined in our Cost Estimating and Assessment Guide, as shown below in figure 8  To avoid cost overruns and to support high performance, it will be important for the Bureau to abide by their newly developed policies and guidance and continue to use the life-cycle cost estimate as a management tool  The 2017 life-cycle cost estimate includes significantly higher costs than those included in the 2015 estimate  In 2015, the Bureau estimated that they could conduct the operation at a cost of $12 3 billion in constant 2020 dollars  The Bureau’s latest cost estimate, announced in October 2017, reflects the same design, but at an expected cost of $15 6 billion  Figure 9 below shows the change in cost by WBS category for 2015 and 2017  The largest increases occurred in the Response, Managerial Contingency, and Census/Survey Engineering categories  Increased costs of $1 3 billion in the response category (costs related to collecting, maintaining, and processing survey response data) were in part due to reduced assumptions for self-response rates, leading to increases in the amount of data collected in the field, which is more costly to the Bureau  Contingency allocations increased overall from $1 35 billion in 2015 to $2 6 billion in 2017, as the Bureau gained a greater understanding of risks facing the 2020 Census  Increases of $838 million in the Census/Survey Engineering category were due mainly to the cost of an IT contract for integrating decennial survey systems that was not included in the 2015 cost estimate  Bureau officials attribute a decrease of $551 million in estimated costs for Program Management to changes in the categorization of costs associated with risks: In the 2017 version of the estimate, estimated costs related to program risks were allocated to their corresponding WBS element  More generally, factors that contributed to cost fluctuations between the 2015 and 2017 cost estimates include: changes in assumptions for census operations, improved ability to anticipate and quantify risk, an overall increase in IT costs, and more defined contract requirements  Several assumptions for the implementation of the 2020 Census have changed since the 2015 cost estimate  Some assumptions contributing to cost changes, mainly in the Response (related to collecting and processing response data) and Frame (the mapping and collecting addresses to frame enumeration activities) categories, include the following: Self-response rates  Changes in assumptions for expected self- response rates contributed to increases in the response category, as the assumed rate decreased from 63 5 percent in 2015 to 60 5 percent in 2017, thereby increasing the anticipated percentage and associated cost of nonresponse follow-up  When the Bureau does not receive responses by mail, phone, or Internet, census enumerators visit each nonresponding household to obtain data  Thus, reduced self-response rates lead to increases in the amount of data collected in the field, which is more costly to the Bureau  Bureau officials attributed this decrease to a forecasted reduction in Internet response due to added authentication steps at log in and the elimination of the function allowing users to save their responses and return later to complete the survey  Productivity rates  The productivity of enumerators collecting data for NRFU is another variable in the cost estimate that was updated, contributing to cost increases in the response category  Expected productivity rates for NRFU decreased from the 2015 estimate of 4 attempts per hour to 2 9  According to Bureau documentation, this more conservative estimate is based on historical data, rather than research and test data  In-office address canvassing rates  The Bureau will not go door-to- door to conduct in-field address canvassing across the country to update address and map information for every housing unit, as it has in prior decennial censuses  Rather, some areas would only need a review of their address and map information using computer imagery and third-party data sources—what the Bureau calls “in-office” address canvassing procedures  However, in March 2017, citing budget uncertainty the Bureau decided to discontinue one of the phases of in-office review address canvassing for the 2020 Census  The cancellation of that phase of in-office review is expected to increase the number of housing units canvassed in-field by 5 percent (from 25 to 30 percent of all canvassed housing units)  In-field canvassing is more labor intensive compared to in office procedures  The 2017 version of the cost estimate reflects this increase in workload for in-field address canvassing, though overall changes in estimated costs for the Frame category, of which Address Canvassing is a part, were minimal  Staffing  Updated analysis resulted in changes to several staffing assumptions, which resulted in decreases across WBS categories  Changes included reduced pay rates for field data collection staff based on current labor market conditions and reductions in the length of staff engagement  In general, contingency allocations increased overall from $1 35 billion in 2015 to $2 6 billion in 2017  This increase in contingency can be attributed, in part, to the Bureau gaining a clearer understanding of risk and uncertainty in the 2020 Census as it approaches  The Bureau developed some of its contingency based on proven risk management techniques, including Monte Carlo analysis and allocated funding for known risk scenarios  The 2017 estimate includes close to $1 4 billion in estimated costs for these risks, almost three times the amount included in the 2015 estimate  The basis of estimate contains detail on the various risks and the process for calculating the associated contingency  The 2017 version also includes a contingency amount of $1 2 billion for general risks, or unknown-unknowns, such as natural disasters and cyber-attacks  Contingency amounts were reallocated within the WBS to more closely reflect the nature of the risk: Bureau officials attribute a decrease from the 2015 estimate of $551 million in estimated costs for program management to changes in the categorization of costs associated with risks  Officials stated that, in 2015, discrete program risks were previously consolidated as program management costs  In 2017, these discrete costs were reallocated to associate risks with the appropriate WBS element  For example, contingency amounts related to the likelihood of achieving a certain response rate previously included in the program management work breakdown category are now a part of the “response” work breakdown category  Increases in IT costs, totaling $1 59 billion, represented almost 50 percent of the total cost increase from 2015 to 2017  The total share of IT costs as a percentage of total census costs increased from 28 percent in 2015 to 32 percent in 2017, or from $3 41 billion to approximately $5 billion  Increases in IT costs are spread across seven cost categories  Figure 10 shows the IT and non-IT cost by WBS for the 2017 cost estimate  IT costs in infrastructure, response data, and census/survey WBSs account for the majority of the approximately $5 billion  The Bureau’s October 2015 cost estimate included IT costs for, among other things, system engineering, test and evaluation, and infrastructure, as well as for a portion of the Census Enterprise Data Collection and Processing (CEDCaP) program  The 2017 estimated IT cost increases were due, in large part, to the Bureau (1) updating the cost estimate for CEDCaP; (2) including an estimate for technical integration services that contributed to increases in the Census and Survey Engineering category; and (3) updating costs related to other major contracts (such as mobile device as a service, field IT services, and payroll systems)  Bureau documents described an overall improvement in the Bureau’s ability to define and specify contract requirements  This resulted in updated estimates for several contracts, including for the Census Questionnaire Assistance (CQA) contract  Assumptions regarding call volume to the CQA were increased by 5 percent to account for expected response by phone after the elimination of the option to save Internet responses and return to complete the form later  The Bureau also cited updated cost data and the results of reconciliation with independent cost estimates as factors contributing to the increased costs of other major contracts, including for the procurement of data collection devices  The Secretary of Commerce provided comments on a draft of this report on August 2, 2018  The comments are reprinted in appendix II  The Department of Commerce generally agreed with our findings regarding the improvements the Census Bureau has made in its cost estimates  However, Commerce did not agree with our assessment that the Bureau’s 2017 lifecycle cost estimate is “not reliable ” Commerce noted that it had conducted two independent cost analyses and was satisfied that the cost estimate was reliable  The Bureau also provided technical comments that we incorporated, as appropriate  We maintain that, to be considered reliable, a cost estimate must meet or substantially meet the criteria for each of the four characteristics outlined in our Cost Estimating and Assessment Guide  These characteristics are derived from measures consistently applied by cost estimating organizations throughout the federal government and industry and are considered best practices for the development of reliable cost estimates  Without a reliable cost estimate, the Bureau is limited in its ability to make informed decisions about program resources and to effectively measure progress against operational objectives  Thus, while the Bureau has made considerable progress in all four of the characteristics, it has only partially met the criteria for the characteristic of being well-documented  Until the Bureau meets or substantially meets the criteria for this characteristic, the cost estimate cannot be considered reliable  As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date  At that time, we will send copies of the report to the appropriate congressional committees, the Secretary of Commerce, the Under Secretary of Economic Affairs, the Acting Director of the U S  Census Bureau, and other interested parties  In addition, this report is available at no charge on the GAO website at http://gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-2757 or goldenkoffr@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix III  The purpose of our review was to evaluate the reliability of the Census Bureau’s (Bureau) life-cycle cost estimate using our Cost Estimating and Assessment Guide  We reviewed (1) the extent to which the Bureau’s life-cycle cost estimate and associated guidance met our best practices for cost estimation using documentation and information obtained in discussions with the Bureau related to the 2020 life-cycle cost estimate and (2) compared the 2015 and 2017 life-cycle cost estimates to describe key drivers of cost growth  For both objectives we reviewed documentation from the Bureau on the 2020 life-cycle cost estimate and interviewed Bureau and Department of Commerce officials  For the first objective, we relied on our Cost Estimating and Assessment Guide as criteria  Our cost specialists assessed measures consistently applied by cost-estimating organizations throughout the federal government and industry and considered best-practices for developing reliable cost estimates  We analyzed the cost estimating practices used by the Bureau against these best practices and evaluated them in four categories: comprehensive, well-documented, accurate, and credible  Comprehensive  The cost estimate should include both government and contractor costs of the program over its full life-cycle, from inception of the program through design, development, deployment, and operation and maintenance to retirement of the program  It should also completely define the program, reflect the current schedule, and be technically reasonable  Comprehensive cost estimates should be structured in sufficient detail to ensure that cost elements are neither omitted nor double counted  Specifically, the cost estimate should be based on a product-oriented work breakdown structure (WBS) that allows a program to track cost and schedule by defined deliverables, such as hardware or software components  Finally, where information is limited and judgments are made, the cost estimate should document all cost-influencing assumptions  Well-documented  A good cost estimate—while taking the form of a single number—is supported by detailed documentation that describes how it was derived and how the expected funding will be spent in order to achieve a given objective  Therefore, the documentation should capture in writing such things as the source data used, the calculations performed and their results, and the estimating methodology used to derive each WBS element’s cost  Moreover, this information should be captured in such a way that the data used to derive the estimate can be traced back to, and verified against, their sources so that the estimate can be easily replicated and updated  The documentation should also discuss the technical baseline description and how the data were normalized  Finally, the documentation should include evidence that the cost estimate was reviewed and accepted by management  Accurate  The cost estimate should provide for results that are unbiased, and it should not be overly conservative or optimistic  An estimate is accurate when it is based on an assessment of most likely costs; adjusted properly for inflation; and contains few, if any, minor mistakes  In addition, a cost estimate should be updated regularly to reflect significant changes in the program—such as when schedules or other assumptions change—and actual costs, so that it is always reflecting current status  During the update process, variances between planned and actual costs should be documented, explained, and reviewed  Among other things, the estimate should be grounded in a historical record of cost estimating and actual experiences on other comparable programs  Credible  The cost estimate should discuss any limitations of the analysis because of uncertainty or biases surrounding data or assumptions  Major assumptions should be varied, and other outcomes recomputed to determine how sensitive they are to changes in the assumptions  Risk and uncertainty analysis should be performed to determine the level of risk associated with the estimate  Further, the estimate’s cost drivers should be cross-checked, and an independent cost estimate conducted by a group outside the acquiring organization should be developed to determine whether other estimating methods produce similar results  If any of the characteristics are not met, minimally met, or partially met, then the cost estimate does not fully reflect the characteristics of a high- quality estimate and cannot be considered reliable  We also analyzed the Bureau’s cost estimation and analysis guidance and evaluated them against a 12-step process outlined in our Cost Estimation and Assessment Guide  A high-quality cost estimating process integrates the following: 1  Define estimate’s purpose  2  Develop estimating plan  3  Define program characteristics  4  Determine estimating structure  5  Identify ground rules and assumptions  6  Obtain data  7  Develop point estimate and compare it to an independent cost estimate  8  Conduct sensitivity analysis  9  Conduct risk and uncertainty analysis  10  Document the estimate  11  Present estimate to management for approval  12  Update the estimate to reflect actual costs and changes  These 12 steps, when followed correctly, should result in reliable and valid cost estimates that management can use for making informed decisions  If any of the steps in the Bureau’s process do not meet, minimally meet, or partially meet the 12 steps, then the cost estimate guidance does not fully reflect best practices for developing a high-quality estimate and cannot be considered reliable  Lastly, to describe key drivers of cost growth, we compared cost information included in the 2015 and 2017 cost estimates  We analyzed both summary and detailed cost information to assess key changes in totals overall, by WBS category, and by information technology (IT) vs  Non-IT costs  We used this analysis in conjunction with information received from the Bureau during interviews and through document transfers to describe overall changes in the cost estimate from 2015 to 2017  We conducted this performance audit from December 2017 to August 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  In addition to the contact named above, Lisa Pearson (Assistant Director), Karen Cassidy (Analyst in Charge), Brian Bothwell, Jackie Chapin, Ann Czapiewski, Jason Lee, Ty Mitchell, Kayla Robinson, and Tim Wexler made significant contributions to this report 


Report 2:  As part of FTC’s resumption of Internet service provider oversight, FCC and FTC entered into a memorandum of understanding in December 2017 spelling out their roles and responsibilities regarding oversight of these companies  FTC staff said that they regularly communicate with FCC and have an agreement to share Internet privacy complaints  As previously discussed, no federal statute comprehensively and specifically governs Internet privacy across all sectors  FTC oversees some aspects of Internet privacy by using its FTC Act section 5 authority to protect consumers from unfair and deceptive practices  FTC also uses its specific COPPA authority to police the collection and use of personal information from children by online services  Some industry representatives said that FTC’s enforcement has been effective because the agency has expertise and experience in privacy issues and has the flexibility to take enforcement action on a case-by-case basis  In addition, a content provider said that FTC has taken enforcement actions against companies of various sizes in different sectors and has a powerful tool by being able to require companies to be audited by outside entities for up to 20 years  Industry stakeholders we interviewed generally said that “direct enforcement” of a statute is preferable to promulgating and enforcing regulations implementing that statute (which constitutes enforcement of the statute as well)  These stakeholders noted several key concerns they believe exist with regulatory versus statutory enforcement of Internet privacy: Regulations can stifle innovation  Two industry stakeholders said that regulations can hinder companies’ ability to innovate  For example, representatives from an Internet service provider said that innovation can stop during the rulemaking process as the industry waits for the regulation to be finalized  Regulations may create loopholes  Representatives from an Internet industry group and a content provider said that regulations can also contain loopholes that can be legally exploited because imprecise language in a regulation may allow a company to legally engage in an action that was originally unforeseen by the regulator  Regulations can become obsolete  Several industry stakeholders said regulations also may become obsolete quickly because the Internet industry is rapidly changing  An Internet industry representative noted that there can be large shifts in the Internet industry from year to year, while it often takes an agency much longer than a year to adopt a rule  Industry stakeholders said the flexibility of FTC’s approach allows FTC to adapt continuously to changing market conditions  Rulemakings can be lengthy  FCC officials said that in some cases, rulemakings can take a long time, especially when the issues are complex and there is no statutory deadline  Our previous work on rulemaking found that length of time required for the development and issuance of final rules varied both within and among agencies  Additionally, while some stakeholders suggested that regulations can clarify acceptable practices, other stakeholders, including from industry and academia, said that enforcement actions can send a similar message  According to both a representative from a content provider and an academic, enforcement actions such as settlement agreements, for example, establish precedents that companies can follow, similar to the way that case law developed by courts provides guidance for companies  Although some industry representatives we interviewed said that FTC’s use of settlement agreements provides companies with guidance, certain trade associations took a different position in a recent case brought before the U S  Court of Appeals for the Third Circuit, FTC v  Wyndham Worldwide Corp  799 F 3d 236 (3d Cir  2015)  However, the court did not agree with the associations’ arguments  The case involved an enforcement action against Wyndham Worldwide Corporation where FTC alleged that data security failures led to three data breaches at the company in less than 2 years  The court considered whether FTC could bring an enforcement case involving cybersecurity using FTC’s section 5 “unfair practices” authority and, if so, whether Wyndham had “fair notice” that its specific cybersecurity practices could be deemed “unfair ” A group of companies and the U S  Chamber of Commerce wrote a friend- of-the-court brief supporting Wyndham, criticizing FTC’s “regulation- through-settlements” approach  The companies argued this approach subjects businesses to “vague, unknowable, and constantly changing data-security standards” and businesses often are unaware of the standards to which they are held until after they receive a notice of investigation from FTC, at which point they must settle or expend considerable resources fighting the agency  Potential Limits on Federal Trade Commission (FTC) Remedies A recently decided federal appeals court case illustrates potential limits on the remedies that FTC can order in an “unfair practices” enforcement proceeding  In this 2018 case, LabMD, Inc  v  FTC, 891 F 3d 1286 (11th Cir  2018), the U S  Court of Appeals for the Eleventh Circuit found that FTC could not direct a medical laboratory to create and implement wholesale data-security protective measures as a remedy to the laboratory’s alleged unfair practices  FTC had filed a complaint against LabMD under section 5 of the FTC Act for allegedly committing an unfair act or practice by failing to provide reasonable and appropriate security for personal information on its computer networks  The commission found that LabMD’s inadequate security constituted an unfair act or practice and ordered LabMD to take various actions, including establishing and maintaining a reasonable and comprehensive information security program  On appeal, the Eleventh Circuit ruled that FTC’s order exceeded its authority because it did not prohibit a specific act or practice but instead, mandated a complete overhaul of the company’s data-security program  FTC had argued that the FTC Act gives it broad discretion to prevent unfair or deceptive acts or practices that injure the general public and that FTC had spelled out standards for LabMD to craft a reasonable security program  The court ruled, however, that such a general approach would make it difficult for a reviewing court to determine if LabMD had complied with the order, in the event of a future FTC challenge  company can reasonably foresee that a court could construe its conduct as falling within the meaning of the statute ” A majority of non-industry stakeholders we interviewed identified limitations in the current Internet privacy oversight approach because they view regulations in conjunction with enforcement as being more effective  These stakeholders include all of the former FTC commissioners we interviewed, three of the four former FCC commissioners we interviewed, and representatives from consumer advocacy groups we interviewed  In addition, a former FCC commissioner said that the current Internet privacy oversight approach is limited in part because he viewed regulations applying equally to all players in the Internet ecosystem in conjunction with enforcement as being more effective  A representative from a consumer advocacy group also said that regulations in conjunction with enforcement are essential for effective privacy protection  Some of these stakeholders noted key ways that they believe Internet privacy regulations can provide clarity to industry and consumers, as well as fairness and flexibility in enforcement: Regulations can provide clarity  An Internet industry group representative said that various companies have favorable views of regulations because they can provide clear expectations about what actions are permissible  Similarly, a former congressional staff member with expertise on privacy issues said that some companies have favorable views of regulations because the regulations often provide clearer expectations about what the companies can do  FCC officials said that with respect to telephone privacy provisions of the Communications Act, the telephone industry wanted rules because it sought greater clarity about what it should be doing, what constituted a violation, how to comply, and what behaviors were acceptable  Regulations may promote fairness  Some other stakeholders discussed the ability of regulations to provide fairness  For example, a former federal enforcement official described regulations as creating a fair and consistent oversight regime across the entire industry in a way that case-by-case enforcement actions do not  Another former federal enforcement official said that regulations give companies fair notice of what actions may be violations and thus help those companies avoid surprising or unexpected enforcement  Regulations can be flexible  An academic said that by targeting behaviors and not specific technologies, regulations can be written in such a way that they do not become obsolete  An academic also said that regulations based on broad performance-standards principles can avoid being overly prescriptive  FCC officials also noted that regulations can be amended to adapt to changes in technology often faster than new laws can be enacted  Furthermore, regulations determined to be obsolete can be repealed  FTC staff told us that the agency systematically reviews all of its regulations every 10 years, even though it is only legally required to review its most significant ones, and that the number of FTC regulations has decreased because the agency determined prior ones were obsolete  The Regulatory Flexibility Act requires federal agencies to analyze the effect of their regulations on small entities  Regulations can be a deterrent  FCC officials said that rules can have a deterrent effect on bad practices in the industry or have a role in mitigating the negative effects of bad practices after they occur  They said, for example, that the practice of pretexting (improperly obtaining people’s telephone records) was greatly curtailed by an FCC regulation prohibiting such practices  They also said that rules can foreclose arguments by companies claiming that because no rule was in place, they had no reasonable notice or awareness that they should behave in a particular way  Consumer advocacy groups and other stakeholders, including some former FTC and FCC commissioners, had concerns about the efficacy of an enforcement approach such as FTC’s approach to Internet privacy oversight, which focuses on enforcing a statute rather than implementing regulations  They said that FTC’s enforcement approach limits the ability of the agency to affect companies’ behavior, and that any enforcement activity occurs after the violation, undesirable behavior, harm, or illegal action has already occurred  A former federal enforcement official also said that regulations can prevent companies from engaging in bad practices in the first instance and thus have a preventive effect  A former FCC commissioner said that by the nature of a direct statutory- enforcement approach (as opposed to rulemaking), an agency would only address a harm after it has occurred  As discussed above, for example, data often cannot be removed from the Internet because copies of the data can exist among many bad actors, and it can be difficult to identify the entity responsible for unwanted disclosures  Therefore, it may be more important to avoid such Internet privacy harms from occurring in the first place  Another former FCC commissioner told us that Internet privacy oversight should be returned to FCC because it has APA section 553 notice-and-comment rulemaking authority and considerable enforcement experience  Representatives from consumer advocacy groups said that FTC’s enforcement action has been insufficient because it investigates only a small portion of actual Internet-privacy violations or takes action regarding only the most egregious or outrageous cases that it can win  FTC has also stated in its strategic plan that it focuses on investigating and litigating cases that cause or are likely to cause substantial injury to consumers and that by focusing on practices that are actually harming or likely to harm consumers, FTC can best use its limited resources  Representatives from an Internet association said that FTC’s Internet- privacy enforcement actions should focus on concrete harms  An FTC staff member from the Division of Privacy and Identity Protection said that the agency has been effective with the limited enforcement resources it has available  Furthermore, the staff member said the agency uses no formal written criteria or template to assess individual cases but considers the size and scale of a company’s effect on consumer privacy when deciding whether to take enforcement action  However, a former FTC commissioner told us that the agency needs more resources to effectively oversee Internet privacy  We asked stakeholders whether it was clear under what circumstances FTC will take Internet privacy enforcement action  In response, some stakeholders said that FTC’s enforcement priorities are reflected in its settlement agreements, which provide information that is similar to a body of case law  Individual commissioners also may issue statements explaining their decisions  Two stakeholders also said that FTC’s closing letters, which the agency sends to companies and posts on its website when it closes an investigation without taking enforcement action, may explain its decisions  Other stakeholders said that more guidance would be helpful to provide additional clarity on how the agency uses its Internet privacy enforcement authority  FTC staff and other stakeholders also said that FTC has provided useful Internet privacy guidance  For example, in 2015, FTC published guidance for businesses on complying with COPPA  Various stakeholders we interviewed said that opportunities exist for enhancing Internet privacy oversight  A key component of FTC’s mission, as specified by the FTC Act, is to protect consumers against unfair and deceptive practices  As discussed earlier, some stakeholders believe that FTC’s reliance on its unfair and deceptive practices authority to address Internet privacy issues has limitations  In addition, although the Fair Information Practice Principles provide internationally recognized principles for protecting the privacy and security of personal information, they are not legal requirements and FTC cannot rely on them to define what constitutes unfair and deceptive practices related to privacy and data security  We stated in our 2013 information resellers report that the current U S  privacy framework is not always aligned with the Fair Information Practice Principles and that these principles provide a framework for balancing the need for privacy with other interests  We found that there are limited privacy protections under federal law for consumer data used for marketing purposes  We said that although the Fair Information Practice Principles call for restraint in the collection and use of personal information, the scope of protections provided under current law has been narrow in relation to: (1) individuals’ ability to access, control, and correct their personal data; (2) collection methods and sources and types of consumer information collected; and (3) new technologies, such as tracking of web activity and the use of mobile devices  Although we recommended in that report that Congress consider strengthening the consumer privacy framework to reflect the effects of changes in technology and the marketplace, this matter for congressional consideration was not specific to Internet privacy or to the oversight authorities of any particular agency or agencies  As noted above, various stakeholders expressed concern about the ability of consumers to control their data and understand how that data are used  These concerns suggest that companies are not always following the Fair Information Practice Principles, such as that companies’ data practices should be transparent, allow consumers the right to access and edit their data, and limit the collection of data to the extent feasible  Those stakeholders who believe that FTC’s current authority and enforcement approach is unduly limited identified three main actions that could better protect Internet privacy: (1) enactment of an overarching federal privacy statute to establish general requirements governing Internet privacy practices of all sectors; (2) APA section 553 notice-and- comment rulemaking authority; and (3) civil penalty authority for any violation of a statutory or regulatory requirement, rather than allowing penalties only for violations of settlement agreements or consent decrees that themselves seek redress for a statutory or regulatory violation  Stakeholders from a variety of perspectives—including from academia, industry, consumer advocacy groups, and former FTC and FCC commissioners—told us that a privacy statute could enhance Internet privacy oversight by, for example, clearly articulating to consumers, industry, and privacy enforcers what behaviors are prohibited, among other things  In addition, a former FCC commissioner said that a new privacy statute could enhance Internet privacy oversight by creating uniform standards for all players in the Internet ecosystem that is focused on the consumer rather than the regulatory legacy of the companies involved (regulations that apply to specific types of companies based on what they are or used to be, such as telecommunications carriers, cable companies, broadcasters, and mobile wireless providers)  The former FCC commissioner said that as companies, technologies, and markets change, there is a question about whether existing law should be modernized  In 2015, FTC staff recommended that Congress enact broad-based legislation that is flexible and technology-neutral, while also providing clear rules of the road for companies about such issues as how to provide choices to consumers about data collection and use practices  Some stakeholders suggested that such a framework could either designate an existing agency as responsible for privacy oversight (such as FTC) or create a new privacy-oriented agency  A representative from a consumer advocacy group mentioned that the European Union, for example, has established the European Data Protection Supervisor, an independent data protection authority, to monitor and ensure the protection of personal data and privacy  Similarly, in Canada, the Office of the Privacy Commissioner, an independent body that reports directly to the Parliament, was established to protect and promote individuals’ privacy rights  Some stakeholders also stated that the absence of a comprehensive Internet privacy statute affects FTC’s enforcement  For example, a former federal enforcement official said that FTC is limited in how it can use its authority to take action against companies’ unfair and deceptive trade practices for problematic Internet privacy practices  Similarly, another former federal enforcement official said that FTC is limited in how and against whom it can use its unfair and deceptive practices authority noting, for example, that it cannot pursue Internet privacy enforcement over exempted industries such as common carriers  In addition, a former FCC commissioner said that it is more difficult for FTC to take effective action because its enforcement comes only after a complaint and after an often lengthy review process  The former FCC commissioner also said that without “ex ante” rules (rules that define prohibited activity before it has occurred), there inevitably will be delay, confusion, and lack of knowledge about what is and is not acceptable behavior  In addition, some stakeholders—including a representative from a consumer group, a former federal enforcement official, and a former FCC commissioner—said FTC’s section 5 “unfair or deceptive practices” authority may not enable it to fully protect consumers’ Internet privacy because it can be difficult for FTC to establish that Internet privacy practices are legally “unfair ” For example, under section 5, FTC has charged companies with committing a “deceptive” practice if their privacy policies said they would not collect or use consumers’ personal information but then did so  However, a former congressional staff member said that companies often write broad and vague policy statements, making it difficult for FTC to charge companies with committing deceptive practices  Instead, according to a representative from a consumer advocacy group, FTC would have to show the companies’ actions were “unfair,” which, according to the representative, is legally difficult to establish  We found in our 2017 report on vehicle data privacy that most automakers’ written privacy notices used vague language  Similarly, we found in our 2012 report on mobile device location data that although companies’ policies stated that they shared location data with third parties, they were sometimes vague about which types of companies these were and why they were sharing the data  Some stakeholders said that FTC relies more heavily on its authority to take enforcement action against deceptive trade practices compared with the agency’s unfair trade practices authority  This was confirmed in our analysis of FTC’s Internet privacy enforcement actions discussed previously  However, a representative from a consumer advocacy group said that FTC’s ability to take such action is limited practically to instances where a company violates its own privacy policy—companies generally can collect and use data in any way they want if they include language in their policies asserting their intent to do so  According to a former FCC commissioner, a privacy statute could clarify the situations in which FTC could take enforcement action  Various stakeholders said that there are advantages to overseeing Internet privacy with a statute that provides APA section 553 notice-and- comment rulemaking authority  As discussed above, that provision lays out the basic process by which so-called informal agency rulemaking shall be conducted, namely, publication of proposed regulations in the Federal Register; an opportunity for public comment (written and possibly oral submission of data and views); and publication of final regulations in the Federal Register with an explanation of the rules’ basis and purpose  Also as noted above, Congress imposed additional rulemaking steps on FTC in the Magnuson-Moss Act when FTC is promulgating rules under section 5 of the FTC Act  These additional steps include providing the public and certain congressional committees with advance notice of proposed rulemaking (in addition to notice of proposed rulemaking)  FTC’s rulemaking under Magnuson-Moss also calls for, among other things, oral hearings, if requested, presided over by an independent hearing officer, and preparation of a staff report after the conclusion of public hearings, giving the public the opportunity to comment on the report  Finally, Congress made it easier for the public to appeal FTC’s Magnuson-Moss rules by making the agency meet a higher standard when the rules are challenged in court  FTC staff said that these additional steps add time and complexity to the rulemaking process  In congressional testimony in 2010, the then-Director of FTC’s Bureau of Consumer Protection said that “if Congress enacts privacy legislation, the commission agrees that such legislation should provide APA rulemaking authority to the commission ” According to FTC, this testimony was voted on and approved by the commissioners and, therefore, constituted the commission’s official position at the time  Moreover, according to stakeholders, in many cases regulations can be used to implement statutes  Officials from other consumer and worker protection agencies we interviewed described their enforcement authorities and approaches  For example, officials from the CFPB and the FDA, both of which use APA section 553 notice-and-comment rulemaking, said that their rulemaking authority assists in their oversight approaches and works together with enforcement actions  OSHA officials said that the standards that the agency promulgates under its authority specify what employers are required to do to reduce safety and health risks to workers  Such standards lay out the workplace conditions that must be maintained by employers and require that employers implement certain practices, operations, or processes that ensure worker protections  EEOC officials said that regulations are used to guide investigations that establish whether enforcement action is appropriate  CPSC officials said that the agency conducts consumer protection not only by establishing and enforcing mandatory regulations, but also through collaborative actions such as educating industry, developing consensus voluntary safety standards, removing defective products from the marketplace through voluntary corrective actions, and litigating when necessary  In addition, in contrast to FTC’s approach, FCC has APA section 553 notice-and-comment rulemaking authority and has issued regulations implementing section 222 of the Communications Act using that rulemaking authority to protect the privacy of telephone users  Some stakeholders suggested that FTC’s current ability to levy civil penalties could also be enhanced  Currently, FTC can levy civil penalties against companies for violating certain regulations, such as COPPA regulations, or if the company violates the terms of a settlement agreement already in place  According to most former FTC commissioners and some other stakeholders we interviewed, FTC should be able to levy fines for initial violations of section 5 of the FTC Act  An academic told us that the power of an agency to levy a fine is a tangible way to hold industries accountable  Another academic noted, however, that fines may be relatively less effective in industries where there is limited competition because the costs of those fines may be more effectively passed on to consumers in the form of higher prices for services  In addition, some stakeholders said that payments required by FTC orders are not large enough to act as a deterrent and that companies may consider them to be a cost of doing business  There is a growing debate about the federal government’s role in overseeing Internet privacy  In a July 2018 congressional hearing, FTC’s new chair testified that the FTC Act cannot address all privacy and data- security concerns in the marketplace  The chair said, for example, that FTC’s lack of civil penalty authority for violations of the FTC Act reduces its deterrent capability  He also noted the agency lacks authority over non-profits and over common carrier activity, even though those entities and activities often have serious implications for consumer privacy and data security  In November 2018, FTC’s chair testified before Congress and urged Congress to consider enacting privacy legislation that would be enforced by FTC  A majority of the commission has indicated support for APA rulemaking and civil penalty authority for privacy  FTC also held hearings in September, November, and December 2018 to advance the discussion around privacy issues, among other topics, and FTC plans to hold an additional hearing on data security and consumer privacy in February 2019  In a Federal Register notice, FTC announced that it is interested in the benefits and costs of various state, federal and international privacy laws and regulations, including the potential conflicts among those standards  FTC also indicated that it is particularly interested in the efficacy of the commission’s use of its current authority and the identification of any additional tools or authorities the commission may need to adequately deter unfair and deceptive conduct related to privacy and data security  Also in July 2018, an NTIA official announced that NTIA, in coordination with the Commerce Department’s International Trade Administration and National Institute of Standards and Technology, had recently started holding stakeholder meetings to identify common ground and formulate core, high-level principles on data privacy  Regarding the development of the Administration’s approach to consumer privacy, in September 2018, NTIA requested comments on ways to advance consumer privacy while protecting prosperity and innovation  Our 2009 report on a framework for assessing proposals for modernizing the financial regulatory system similarly found that regulators should have the authority to carry out and enforce their statutory missions  We further said that a regulatory system should be flexible and forward looking, allowing regulators to readily adapt to market innovations and changes, including identifying and acting on emerging risks in a timely way without hindering innovation  These factors are useful considerations as the federal government explores how it can better oversee privacy and data security  Having sufficient and appropriate authorities and providing flexibility to address a rapidly evolving Internet environment could better ensure that the federal government can protect consumers’ privacy  Recent developments regarding Internet privacy suggest that this is an appropriate time for Congress to consider comprehensive Internet privacy legislation  Although FTC has been addressing Internet privacy through its unfair and deceptive practices authority, among other statutes, and other agencies have been addressing this issue using industry-specific statutes, there is no comprehensive federal privacy statute with specific standards  Debate over such a statute could provide a vehicle for consideration of the Fair Information Practice Principles, which are intended to balance privacy concerns with the need for using consumers’ data  Such a law could also empower a specific agency or agencies to provide oversight through means such as APA section 553 rulemaking, civil penalties for first time violations of a statute, and other enforcement tools  Comprehensive legislation addressing Internet privacy that establishes specific standards and includes APA notice-and-comment rulemaking and first-time violation civil penalty authorities could help enhance the federal government’s ability to protect consumer privacy, provide more certainty in the marketplace as companies innovate and develop new products using consumer data, and provide better assurance to consumers that their privacy will be protected  Congress should consider developing comprehensive legislation on Internet privacy that would enhance consumer protections and provide flexibility to address a rapidly evolving Internet environment  Issues that should be considered include: which agency or agencies should oversee Internet privacy; what authorities an agency or agencies should have to oversee Internet privacy, including notice-and-comment rulemaking authority and first-time violation civil penalty authority; and how to balance consumers’ need for Internet privacy with industry’s ability to provide services and innovate  We provided a draft of this report to FTC, FCC, and the Department of Commerce for their review and comment  FTC and FCC provided technical comments, which we incorporated as appropriate  The Department of Commerce indicated that it did not have comments  As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date  At that time, we will send copies to the FTC chair, the FCC chair, the Secretary of Commerce, and interested congressional committees  In addition, the report will be available at no charge on the GAO website at http://www gao gov  If you or members of your staff have any questions about this report, please contact Alicia Puente Cackley at (202) 512-8678 or cackleya@gao gov or Mark Goldstein at (202) 512-2834 or goldsteinm@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  Major contributors to this report are listed in appendix III  For this review, we interviewed staff from agencies with roles in Internet privacy; officials from other consumer- and worker-protection agencies; stakeholders from consumer advocacy groups, industry groups, Internet service providers, and Internet content providers; academics; and former government officials  To obtain a variety of perspectives, we selected Internet service providers that represented different industry sectors and Internet content providers that provide a variety of information and social media services  Academic stakeholders were selected because of their expertise in privacy, consumer protection, and regulatory issues  We also interviewed former Federal Trade Commission (FTC) and Federal Communications Commission (FCC) commissioners who served during the Barack Obama and George W  Bush administrations and are from different political parties  Consumer Financial Protection Bureau (CFPB) Consumer Product Safety Commission (CPSC) Department of Commerce, National Telecommunications and Information Administration (NTIA) Equal Employment Opportunity Commission (EEOC) Federal Communications Commission (FCC) Federal Trade Commission (FTC) Food and Drug Administration (FDA) Occupational Safety and Health Administration (OSHA) The following table identifies 101 Federal Trade Commission (FTC) Internet privacy enforcement actions filed between July 1, 2008 and June 30, 2018 in which the agency alleged a violation of either the Federal Trade Commission Act (FTC Act) or the Children’s Online Privacy Protection Act (COPPA) and implementing COPPA regulations and subsequently entered into a settlement agreement with the target entity  Although some of these cases may involve both Internet data privacy and security issues, this table does not include cases that involved data security issues only  In addition to the contact names above, Andrew Huddleston, Assistant Director; Kay Kuhlman, Assistant Director; Bob Homan, Analyst-in- Charge; Melissa Bodeau; John de Ferrari; Camilo Flores; Erica Miles; Josh Ormond; and Sean Standley made significant contributions to this report 

ground_truth: In April 2018, Facebook disclosed that a Cambridge University researcher may have improperly shared the data of up to 87 million of its users with a political consulting firm. This disclosure followed other recent incidents involving the misuse of consumers' personal information from the Internet, which is used by about three-quarters of Americans. GAO was asked to review federal oversight of Internet privacy. This report addresses, among other objectives: (1) how FTC and FCC have overseen consumers' Internet privacy and (2) selected stakeholders' views on the strengths and limitations of how Internet privacy currently is overseen and how, if it all, this approach could be enhanced. GAO evaluated FTC and FCC Internet privacy enforcement actions and authorities and interviewed representatives from industry, consumer advocacy groups, and academia; FTC and FCC staff; former FTC and FCC commissioners; and officials from other federal oversight agencies. Industry stakeholders were selected to represent different sectors, and academics were selected because of their expertise in privacy, consumer protection, and regulatory issues. The United States does not have a comprehensive Internet privacy law governing the collection, use, and sale or other disclosure of consumers' personal information. At the federal level, the Federal Trade Commission (FTC) currently has the lead in overseeing Internet privacy, using its statutory authority under the FTC Act to protect consumers from unfair and deceptive trade practices. However, to date FTC has not issued regulations for Internet privacy other than those protecting financial privacy and the Internet privacy of children, which were required by law. For FTC Act violations, FTC may promulgate regulations but is required to use procedures that differ from traditional notice-and-comment processes and that FTC staff said add time and complexity. In the last decade, FTC has filed 101 enforcement actions regarding Internet privacy; nearly all actions resulted in settlement agreements requiring action by the companies. In most of these cases, FTC did not levy civil penalties because it lacked such authority for those particular violations. The Federal Communications Commission (FCC) has had a limited role in overseeing Internet privacy. From 2015 to 2017, FCC asserted jurisdiction over the privacy practices of Internet service providers. In 2016, FCC promulgated privacy rules for Internet service providers that Congress later repealed. FTC resumed privacy oversight of Internet service providers in June 2018. Stakeholders GAO interviewed had varied views on the current Internet privacy enforcement approach and how it could be enhanced. Most Internet industry stakeholders said they favored FTC's current approach—direct enforcement of its unfair and deceptive practices statutory authority, rather than promulgating and enforcing regulations implementing that authority. These stakeholders said that the current approach allows for flexibility and that regulations could hinder innovation. Other stakeholders, including consumer advocates and most former FTC and FCC commissioners GAO interviewed, favored having FTC issue and enforce regulations. Some stakeholders said a new data-protection agency was needed to oversee consumer privacy. Stakeholders identified three main areas in which Internet privacy oversight could be enhanced: Statute . Some stakeholders told GAO that an overarching Internet privacy statute could enhance consumer protection by clearly articulating to consumers, industry, and agencies what behaviors are prohibited. Rulemaking . Some stakeholders said that regulations can provide clarity, enforcement fairness, and flexibility. Officials from two other consumer protection agencies said their rulemaking authority assists in their oversight efforts and works together with enforcement actions. Civil penalty authority. Some stakeholders said FTC's Internet privacy enforcement could be more effective with authority to levy civil penalties for first-time violations of the FTC Act. Comprehensive Internet privacy legislation that establishes specific standards and includes traditional notice-and-comment rulemaking and broader civil penalty authority could enhance the federal government's ability to protect consumer privacy. Congress should consider developing comprehensive legislation on Internet privacy that would enhance consumer protections and provide flexibility to address a rapidly evolving Internet environment. Issues that should be considered include what authorities agencies should have in order to oversee Internet privacy, including appropriate rulemaking authority.