59

was previously aligned by job function, was reconfigured into three core business processes
Trade Compliance (Imporis), Passenger Operations, and Outbound (Exports).

Los Angeles Customs leads the nation in intemational trade, Our ports of entry process more
than $180 billion in two way trade per year providing a significant contribution to the regional
‘economy. The seaport complex is by far the largest in the nation, both in terms of value of cargo
and overall tonnage. Itis the third busiest seaport in the world and is estimated to support
several hundred thousand jobs in the greater Los Angeles area.

‘The explosive growth of trade with the Asian-Pacific region has made Los Angeles and Long
Beach (LA/LB) the number one and number two highest volume containerized cargo ports in the
nation. In FY 1997, 3.3 million import containers entered the LA/LB seaport. This reflects a 20
percent increase over FY 1996, In addition to commercial cargo, approximately one million
international cruise line passengers are processed through the Los Angeles Seaport.

‘The processing of international passengers at LAX has grown from 2.3 million in FY 1987 to
7.3 million in FY 1997, more than tripling in 10 years, Furthermore, the number of international
passenger terminals staffed increased from three in FY 1986 to four in FY 1996. LAX is the third
busiest airport in the United States for international passenger processing, behind JFK and Miami
By the year 2000 the City of Los Angeles Department of Airports estimates that over 8.6 million
international passengers per year will arrive at LAX.

Intemational air cargo is equally significant. LAX is the third busiest air cargo center in the
country. In FY 1997 over 41,000 international aircraft arrived carrying close to 1.2 million air
waybills, representing 950,000 tons of intemational cargo. Using value as a measure, LAX leads
the world with cargo valued at $70 billion

Growth in international trade activity through Los Angeles has outpaced the nation, According to
Commerce Department figures, import and export trade through Los Angeles nearly tripled from
1986 through 1996, climbing from $68.56 billion to $180.8 billion.

STAFFING AND RESOURCE ALLOCATION
During the past decade, full time equivalent (FTE) funding for human resources increased 63

percent from 399 front line positions (Inspectors, Import Specialists, Canine Officers) in 1986 to
650 positions in 1997. The majority of these new positions are located at LAX.

For example, at LAX, the complete complement of inspectors numbers 330, while at the seaport
144 inspectors are authorized. In recent years, we have been able to increase staffing at LAX as a
result of additional Consolidated Omnibus Budget Reconciliation Act (COBRA) funded positions.
As our workload continues to increase at LAX, itis critical that we continue to have access to
COBRA funding. Also, COBRA has enabled us to purchase state-of-the-art technology, such as
x-ray systems and computers, as well as vehicles and radios.

2


25

We have reported on that generally, and the Treasury Inspector
General has had studies done focusing on financial management,
but also talking about internal controls over computer security, and
has identified that as a weakness in the Customs Service.

Our concern, as I discussed in my statement, is that their strate-
gic plan talks a little bit about computer security, but really doesn’t
get into the issue of how and what priority the Customs Service is
placing on ensuring that its computer systems are secure from un-
authorized access.

Mr. Horn. Would you have any comments to make on the Los
Angeles side of it and what part is completed here on resource allo-

cation by GAO?

Mr. Dutton. Yes, Mr. Chairman, we spent most of our time
down at the Otay Mesa cargo facility in San Diego, and we are
about 75 percent complete there in looking at the internal controls
over the entry processes at that particular port. We intend to go
to two more ports on the Southwest border before we conclude that
portion of it, so that is about where we are now.

Mr. Horn. To what degree have you looked into the harbor area
and the airport area? I mean, you are just concentrating mostly on
the borders?

Mr. Dutton. Yes, sir, that is right. This is the specific request
of Senator Feinstein, to look at the cargo operations on the South-
west border, so we have not done the airport or the seaport.

Mr. Horn. Well, we will send over a specific request to broaden
that study, which would include the ports. I would be interested to
know if the GAO has done any studies on the northern ports, such
as Seattle and Canadian crossings, because I would think for east,
Europeans and other groups, a lot of them come through Canada
and just walk across the border into the United States.

Have you ever been asked to look into that?

Mr. RABKIN. We have discussed that with the National Security
Subcommittee staff of the Government Reform and Oversight Com-
mittee. They have a number of concerns with the drug control
along the Northern border. We have talked to them about looking
at both the drug problem and the immigration problem across the
Northern border. Bat at this time, we have not been asked to do
that; and it is in our plans, but I can’t tell you at this point when
we would get to that issue.

Mr. Horn. How many people do you have assigned to a project
like this?

Mr. RABKIN. Right now, there are 60 people that work in the Ad-
ministration of Justice area. That covers issues such as immigra-
tion, the Federal judiciary, the Prison system, drug control,
counterterrorism—we’re getting involved in some counterterrorism
activities at the FBI, et cetera.

Mr. Horn. And how many are located here in the Los Angeles
area?

Mr. DurTon. Right now, we have a complement of 12; and we
have just received some reallocations, so I think we are going to
get some more, maybe up to 25 or so as the new fiscal year pro-
ce ‘S.

Mr. Horn. Good. Well, we are always very proud of the work
that the General Accounting Office does, so we wish you well on


COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York
J. DENNIS HASTERT, Illinois
CONSTANCE A. MORELLA, Maryland
CHRISTOPHER SHAYS, Connecticut
STEVEN SCHIFF, New Mexico
CHRISTOPHER COX, California
ILEANA ROS-LEHTINEN, Florida
JOHN M. McHUGH, New York
STEPHEN HORN, California
JOHN L. MICA, Florida
‘THOMAS M. DAVIS, Virginia
DAVID M. McINTOSH, Indiana
MARK E. SOUDER, Indiana
JOE SCARBOROUGH, Florida
JOHN B. SHADEGG, Arizona
STEVEN C. LATOURETTE, Ohio
MARSHALL “MARK” SANFORD, South
Carolina
JOHN E. SUNUNU, New Hampshire
PETE SESSIONS, Texas
MICHAEL PAPPAS, New Jersey
VINCE SNOWBARGER, Kansas
BOB BARR, Georgia
ROB PORTMAN, Ohio

HENRY A. WAXMAN, California
TOM LANTOS, California
ROBERT E. WISE, Ja., West Virginia
MAJOR R. OWENS, New York
EDOLPHUS TOWNS, New York
PAUL E. KANJORSKI, Pennsylvania
GARY A. CONDIT, California
CAROLYN B. MALONEY, New York
THOMAS M. BARRETT, Wisconsin
ELEANOR HOLMES NORTON, Washington,
De

CHAKA PATTAH, Pennsylvania

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Ilinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

HAROLD E. FORD, Jk., Tennessee

BERNARD SANDERS, Vermont
{Independent}

KEVIN BINGER, Staff Director
Daniet R. Mout, Deputy Staff Director
WILLIAM MoscHELta, Deputy Counsel and Parliamentarian
JupITH McCoy, Chief Clerk
Prut, ScHitino, Minority Staff Director

SuBCOMMITTEE ON GOVERNMENT MANAGEMENT, INFORMATION, AND TECHNOLOGY
STEPHEN HORN, California, Chairman

PETE SESSIONS, Texas

‘THOMAS M. DAVIS, Virginia

JOE SCARBOROUGH, Florida

MARSHALL “MARK” SANFORD, South
Carolina

JOHN E. SUNUNU, New Hampshire

ROB PORTMAN, Ohio

DAN BURTON, Indiana

CAROLYN B. MALONEY, New York
PAUL E. KANJORSKI, Pennsylvania
MAJOR R. OWENS, New York

ROD R. BLAGOJEVICH, Ilinois
DANNY K. DAVIS, Illinois

Ex OFFICIO

HENRY A. WAXMAN, California

J. RUSSELL Geonse, Staff Director and Chief Counsel
Mak Baasier, Senior Policy Director
ANDREA MULLER, Clerk

ay


68

Mr. Horn. Does the special agent in charge have a separate line
item in the budget that goes through that assistant commissioner?
Does your money come out to the region and flow through here? Or
does at all flow through the assistant commissioner for enforce-
ment?

Mr. HENSLEY. It flows from the assistant commissioner for en-
forcement in Washington.

Mr. Horn. So he or she is the one who can move the resources
around if they feel there is a greater need for special agents in one
place or the other? Is that it?

Mr. HENSLEY. With the blessing of the deputy and the commis-
sioner, yes, sir.

Mr. Horn. Are there other situations like that in the regional
area where you have to work closely with the director of the re-
gional area on joint teams and all of that? Are there any other
parts of Customs that have an assistant commissioner, that pipe-
line that they go through?

Mr. HENSLEY. The Strategic Trade Centers here have an assist-
ant commissioner which is separate and apart from——

Mr. Horn. Who is that in this region? Will the Strategic Trade
Center director stand wp?

Mr. HENSLEY. Jean Maguire is our director.

Mr. Horn. Hi, how are you? Where are you based? In the Cus-
toms building? 7

Ms. MaGurIrE. At the World Trade Center.

Mr. Horn. I know my staff has helped—are you part of that
Commerce group that is there or are you separate from them?

Ms. MAGuIRE. No, we are separate. We're cohoused with the Cus-
toms Management Center and we have submitted some data to
your office from time to time.

Mr. Horn. Great. Welcome. I will be glad to talk to you sepa-
rately on this, but if you want to get into this, we will swear you
in. We are very informal in trying to get at the facts and the truth.

Are there any other groups like that? Have we got them all now
in terms of the budgeting operation?

Mr. TROTTER. There are a couple of other groups, sir. I would say
we have seven different organizations in this area. We have a lab-
oratory here that does report to me. We have an Office of the Re-
gional Counsel who reports to our chief counsel in headquarters.
We have an Office of Internal Affairs who reports directly to head-
quarters. So in most major large metropolitan areas there are gen-
erally six or seven different Customs offices represented.

Mr. Horn. Yes, I see here in the U.S. Customs Service annual
report for 1996—and we will put this chart in the record, without
objection.

It includes aviation operations, foreign customs offices, and do-
mestic investigations field offices reporting to an Office of Inves-
tigations; and then reporting to Mr. Trotter’s office you have got
the Customs Management Centers, the ports of entry, and the field
laboratories that you mentioned; then the Office of Strategic Trade
is reported to by the Regulatory Audit Field Offices and the Strate-

ic Trade Centers that were just mentioned; and then Internal Af-
fairs reports to the Office of Internal Affairs. So that chart will
help clarify a few things.


19

‘CALIFORNIA - AREA $

DRUG DPE TTY rae PRET

METHAMPMETAMINE (Powder)

METHAQUALONE (Quaaludes)
Nrraous Ox10t

Orne

Per iCrystal)

Per (Liquid)

Psiwocrsin (Mushrooms Dried)

Rowrrwot
Sttxoros

VauM

“Reported by Los Angeles PD

Reported in San Luis Obispas Co.

Reported tu Santa Barabara Co.

1TAD

a TasLer
LAMPOULE

Learn,

20.40
40-300
20-160

*200-250
4991

5,000-10,000

1020
28
100-150
1090-1500
19,000
10-30
10-18
200-400
1,000
89.200
12
2
30
ts

“17


15

issues requiring agency-specific actions.‘ Customs‘ plan contains
some discussion of the importance of information security but does
not address the Year 2000 problem. Specifically, regarding
information security, the plan briefly mentions that the agency
will follow applicable security-related directives and policies
while providing a secure global network. Also, the plan mentions
the need for secure technology in the context of improving certain
information systems. However, the plan does not describe
information security-related strategies or measures and there is no
comprehensive discussion about the need to focus on information
security issues such as Customs attempts to move to an environment
where the agency increasingly relies on automation and technology

to perform its mission.

With the year 2000 less than 3 years away, federal agencies
including Customs must act quickly to ensure that systems are year
2000 compliant. Necessary steps include identifying and analyzing
mission-critical computer systems, developing date conversion
strategies and plans, and dedicating sufficient resources convert
the computer systems by early 1999 to allow 1 year for testing and
error correction. However, the Customs strategic plan, while
identifying information and technology as a key mission support
process, does not recognize the year 2000 problem. There is no

discussion of the strategies or activities to address the year 2000

SAO. Hi
(GAO/HR-97-9, Feb. 1997)



14



32

the Results Act, especially in the way of performance measurement Measuring one’s success
against an undefinable universe, such as the number of crimes being committed, is difficult.

‘Customs has relied on traditional “workload” and “output” type measures, such as caseload,
seizure and arrest data, to gauge the effectiveness of our law enforcement efforts, Customs is
trying to take these one step further by incorporating meaningful outcome-type measures which
reflect our effectiveness in achieving our enforcement-related strategic goals and enable policy
and budget decision makers to focus resources in those areas with the greatest potential for
impact. The focus of these outcome-oriented law enforcement measures are indicators of our
impact on disrupting the activities of criminal organizations involved in violations of Customs
laws. Examples of the :s of outcome measures being evaluated include: the cost of
conducting criminal activities (such as the cost of laundering money and the cost of transporting
drugs into the U.S.) and disrupting the methods or systems for conducting criminal activities (to
include shutting down money laundering systems and drug smuggling routes).

To measure the performance of Customs ports, an Operational Management Report (OMR) has
been developed. Each month the OMR Data Warehouse provides more than 250 data elements
reflecting port operations in key functional areas. This monthly data is captured from each
Customs major commercial, enforcement, financial and administrative systems, The data is
summarized for all of the ports. Reliable workload and performance measurement data are now
available to all Customs management groups on a monthly basis. The data is used by Directors of
the Customs Management Centers, as part of their oversight responsibility, to insure that port
performance productivity and effectiveness standards are met

Further, Customs is implementing an integrated Information Technology (IT) investment
management process, the Investment Review Board (IRB), which provides for the continuous
identification, selection, control and evaluation of IT instruments. As part of the evaluation
documentation, projects are required to identify performance measures. They will be assessed
against these measures throughout the process.

With respect to financial management, last Spring Customs reached a milestone for which it had
been painstakingly striving for the past several years ~ an unqualified or “clean” audit opinion on
Customs Fiscal Year 1996 financial statements. Further, based on additional supporting
documentation provided by Customs and extended audit procedures, the Treasury Office of
Inspector General removed its prior qualification from the Fiscal Year 1995 balance sheet. These
were significant accomplishments for Customs, which collected approximately $22 billion of
Federal revenue in 1996 (second only to the Internal Revenue Service) and which seized more
narcotics than any other Federal agency (over 1 million pounds -- a record year for Customs).

Customs has engaged actively in consultative efforts on its Strategic Plan with Congressional
committees, OMB, the Department of the Treasury, other federal agencies, and stakeholders.
Further, the Strategic Plan has been posted on Customs Intemet web site

(http: /www.customs treas gov) under “More About Customs,” where it may be accessed by the




39

fromaacin

Page

CUSTOMS INVESTIGATIVE ACTIVITY IN A GEOGRAPHIC AREA BOUNDED TO
‘THE NORTH BY THE MONTEREY - SAN LUIS OBISPO COUNTY LINE, SAN DIEGO
COUNTY TO THE SOUTH, AND THE LOWER PORTION OF NEVADA, INCLUDING
LAS VEGAS, TO THE EAST. THERE ARE FIVE RESIDENT AGENT IN CHARGE.
(RAC) OFFICES IN MY DISTRICT WHICH REPORT TO THE SAC/LA. THESE RAC
OFFICES ARE LOCATED AT LOS ANGELES INTERNATIONAL AIRPORT, IRVINE,
OXNARD, RIVERSIDE, AND LAS VEGAS, NEVADA.

SEVERAL UNIQUE CHARACTERISTICS OF THE LOS ANGELES METROPOLITAN
AREA AND LAS VEGAS, POSE MAJOR CHALLENGES TO ALL LAW
ENFORCEMENT AGENCIES, INCLUDING CUSTOMS, THESE FACTORS INCLUDE
‘THE GEOGRAPHY, ECONOMY, AND DEMOGRAPHICS OF THE AREA.

IMMENSE AND DIVERSE GEOGRAPHY OF OUR JURISDICTIONAL AREA, W ‘WHICH
COVERS OVER 50,000 SQUARE MILES, CONSISTS OF AN EXPANSE OF
INTENSELY POPULATED METROPOLITAN AND SUBURBAN AREAS, SPARSELY
POPULATED DESERT REGIONS, MANY MOUNTAIN RANGES, AND 300 MILES OF
‘SCENIC BUT SOMEWHAT SECLUDED COASTLINE. NOT ONLY LARGE IN SIZE
BUT LARGE IN POPULATION, APPROXIMATELY 17.6 MILLION (1990 CENSUS)
PEOPLE RESIDE IN THE AREA.

‘THE LOS ANGELES AREA IS HOME TO 24 OF THE 500 MAJOR ‘FORTUNE 500°
CORPORATIONS IN THE UNITED STATES. THIS RANKS LOS ANGELES SECOND
IN THE NATION BEHIND THE NEW YORK METROPOLITAN AREA. THE LOS:
ANGELES AREA'S GROSS NATIONAL PRODUCT (GNP) IS $300 BILLION A YEAR.
If THE LOS ANGELES AREA WERE A SEPARATE NATION, IT WOULD BE THE
14TH LARGEST ECONOMIC POWER IN THE WORLD. THIS LEGITIMATE TRADE
AND COMMERCE ALSO MASKS A SIGNIFICANT AMOUNT OF ILLEGAL ACTIVITY
BY VIOLATORS WHO FURTHER THEIR CRIMINAL ENTERPRISES BY TAKING
ADVANTAGE OF THE SOPHISTICATED BUSINESS INFRASTRUCTURE.
ESTABLISHED TO SUPPORT LEGITIMATE BUSINESSES.

LOS ANGELES IS ACCESSED BY A WELL-DEVELOPED FREEWAY SYSTEM THAT
INCLUDES FOUR MAJOR INTERSTATE HIGHWAYS: I-5, I-10, |-40, AND I-15,
‘THESE HIGHWAYS LINK LOS ANGELES WITH MEXICO AND CANADA. THEY
ALSO LINK THE PACIFIC COAST STATES WITH ALL THE STATES ALONG THE
SOUTHWEST BORDER AND THE GULF OF MEXICO, AS WELL AS CONNECTING
SOUTHERN CALIFORNIA WITH THE NORTH, CENTRAL AND EASTERN UNITED.
STATES VIA ARTERIAL FREEWAYS. THESE HIGHWAYS AND FREEWAYS
FACILITATE LEGITIMATE TRAVEL, AS WELL AS CRIMINAL ACTIVITY.

THROUGH THE COMBINED PORTS OF LONG BEACH AND LOS ANGELES, PASS
‘THE MOST OCEAN CONTAINER TRAFFIC IN THE UNITED STATES AND THE
THIRD MOST CONTAINER TRAFFIC IN THE WORLD. THE PORT PROCESSES
MORE CONTAINERS EVERY YEAR THAN ANY OTHER PORT IN THE UNITED.
STATES, WITH MORE THAN 5.3 MILLION CONTAINERS PROCESSED LAST YEAR.


64

and work with her on the budget submission as a group. All the
offices are represented. That is then pushed forward to the Com-
missioner, who would then take it to Treasury, OMB, and that
route.

Mr. Horn. I agree with the kind words that have been said
about your strategic plan. I have looked at a lot of them in the last
couple of months as the drafts have come in, and some people have
said, hey, take a look at this. It is a very good document.

Now, to what extent are your measurement goals in the strategic
plan? Have they become part of the budget process? Tell me a little
bit about what the criteria are that Mr. Heinrich has to take into
account when he is making a budget submission to you, and that
Mr. Hensley has to take into account when he is reporting to the
Assistant Commissioner for Enforcement. Give me a little feeling
for what those criteria are.

Mr. TROTTER. As we said, in fiscal year 1999, it will be our first
year where we really tie this together. We are working on the fiscal
year 1999 budget now, as we speak, and have submitted it at least
through the first level of review.

What happens is, we take the strategic plan and the 5-year plan
and we try to look at where we have our threat, we do a risk analy-
sis, and then assess from the field offices their relationship to that
threat—as Mr. Hensley said, they have done threat analysis, they
have done risk analysis—and then tie that together to where we
want to be in the future.

In other words, if we are focusing on certain specific areas—Mr.
Hensley mentioned some of them, child pornography, narcotics, or
currency—how much of our actual resources are going to be de-
ployed against those threats.

We are working, in addition to that, on a cost management sys-
tem so that we can look at how much it costs us to actually process
through the budget the cost of each individual assigned. We are a
little bit further away from being able to couple that together, but
we look at the overall risk of the organization, where it is fit into
each geographic area, and then we deploy accordingly.

Also, of course, there are other factors involved. There are Presi-
dential initiatives and there are congressional initiatives that we
have to take into account once it gets to our level.

Mr. Horn. Now, it sounds like you are fairly flexible in reassess-
ing the threat, I take it, in each fiscal year; and if you see a major
shift in, say, narcotics activity, child pornography activity, or the
intellectual property, I take it you are willing to move resources
around to help counter some of that threat. Is that right?

Mr. TRoTTER. Well, sir, when we talk of resources, we talk in two
veins; one is human resources, which are people, and the other is
dollars. It is not as easy to move human resources as we would

2.

Mr. Rabkin talked about that this morning, about agreements
that we made with our National Treasury Employees Union, who
represents the folks that—I have about 12,000 people that work for
me who are in the bargaining unit. So we do have obligations to
our “partners” through the National Treasury Employees Unio1

We also have obligations to pick up and move folks. It has just
not been a tradition of what we have done in the organization.



35

Mr. Horn. Next is John Hensley, the special agent in charge,
U.S. Customs Service, for this region. I thank you for your hospi-
tality yesterday to show us part of your operation and how effective
it was. Welcome, and we look forward to your statement.

Mr. HENSLEY. Thank you, Mr. Chairman. Good morning. It’s my
distinct pleasure to appear before you today to discuss the role of
the special agent in charge of the Los Angeles field division.

As the major border enforcement agency, the U.S. Customs Serv-
ice enforces hundreds of laws and regulations related to inter-
national commerce and the protection of the U.S. border. Customs
assesses and collects duties on imported merchandise, ensures that
foreign cargo complies with all entry requirements, protects domes-
tic entry from unfair competition, protects the American public and
environment from hazardous and unsafe products, interdicts nar-
cotics and other contraband, and protects U.S. technology from for-
eign encroachment.

The Office of Investigations is the investigative law enforcement
arm of Customs. Customs special agents perform the full range of
duties as other Federal criminal investigators involved in the viola-
tions of currency, fraud, neutrality in weapons, smuggling, and the
export of critical technology.

These investigations are significant in supporting national en-
forcement efforts in combating narcotics smuggling, international
money laundering, international crime, and safeguarding our na-
tional security. Three major goals are emphasized in all of our in-
vestigations: One, the detection, prosecution, and dismantling of
major criminal enterprises associated with narcotics smuggling and
financial systems employed to launder illicit proceeds; two, the
prosecution of major violators and kingpins of Customs import
laws, including nonnarcotics money laundering and substantial
monetary recoveries; and three, the detection and prevention of il-
legal exports of critical technology, defense articles, weapons of
mass destruction, and the reduction of illegal arms and munitions
traffic.

The Los Angeles Office of Investigations, which is located in the
Customs House on Terminal Island, is 1 of 20 special agent in
charge field offices nationwide. As a special agent in charge of the
district, I am responsible for Customs’ investigative activities in a
geographic area bounded to the north by the Monterey-San Luis
Obispo County line and to the south by the San Diego-Orange
County line, and the lower portion of Nevada including Las Vegas
to the east. There are five resident agents in charge offices within
my district, which include Los Angeles International Airport,
Irvine, Oxnard, Riverside, and Las Vegas.

Several unique characteristics of the L.A. metropolitan area and
Las Vegas metropolitan area pose challenges on all law enforce-
ment agencies, including Customs. These factors include the geog-
raphy, economy, and demographics of the area. The immense and
diverse geography of our jurisdictional area, which covers over
50,000 square miles, consists of an expanse of intensely populated
metropolitan areas and sparsely populated desert regions, includ-
ing mountain ranges and 300 miles of scenic but secluded coastline.
Not only large in size, but large in population, with over 17.6 mil-


67

COMPARISON OF ENTRY AND PASSENGER WORKLOAD

Numoue Per Capita
Inspectors [ Entries | Passenger | Entries | Passenger
Los Angeles/Long Beach | 140 716,498 | 732,655 | 5,118 | 5,233
Los Angeles Airport (LAX) | 313 466,573 | 7,590,169 | 1.491 | 24,250
New York ‘Newark 393 600,312 | 2,357,215 | 1,528 | 5,998
JFK 531 653,312 | 8,812,642 | 1,230 | 16,596
Miami (Seaport) 104 128,908 | 1,775,601 | 1,240 | 17,073
Miami (Airport) 369 248,484 | 7,743,897 | 673 20,986
Detroit 176 1,188,100 | 32,295,324 | 6,750 _| 183,496





45

om-sae fa PHSB}

JURISDICTIONAL AREA. LOS ANGELES INTERNATIONAL AIRPORT ACCOUNTED
FOR THE OVERWHELMING MAJORITY OF REPORTED FILINGS WITH $4.67
BILLION (33,938 CMIR’s), FOLLOWED BY THE LOS ANGELES/LONG BEACH
HARBOR WITH $56.4 MILLION (313 CMIR'S), AND LAS VEGAS INTERNATIONAL,
AIRPORT WITH $7.1 MILLION (94 CMIR'S). WHILE $4.7 BILLION HAS BEEN
PROPERLY REPORTED ON CMIR'S, IT MAY BE ONLY A SMALL FRACTION OF
THE CASH THAT ENTERS OR LEAVES THE COUNTRY WITHOUT BEING.
REPORTED.

WE BELIEVE THAT BILLIONS IN ILLEGAL PROCEEDS GENERATED BY LOS
ANGELES AREA SMUGGLING AND TRAFFICKING ORGANIZATIONS ARE BEING
MOVED BY COURIERS BETWEEN THE U.S. AND MEXICO AND OTHER FOREIGN
COUNTRIES. SUCH ACTIVITY WAS ILLUSTRATED LAST YEAR WHEN ANOTHER
LAW ENFORCEMENT AGENCY ARRESTED A COURIER WHO HAD MADE 14
TRIPS FROM ORANGE COUNTY (IRVINE) TO MEXICO DURING THE YEAR, EACH
TIME CARRYING ABOUT $500,000 IN CASH.

IN RESPONSE TO NARCOTICS TRAFFICKING AND THE RELATED MONEY
LAUNDERING THREAT, THE SAC/LA ESTABLISHED AN UNDERCOVER MONEY
LAUNDERING GROUP. THIS GROUP HAS SUCCESSFULLY IMPLEMENTED
SEVERAL UNDERCOVER OPERATIONS SPECIFICALLY TARGETING
NARCO-GENERATED MONEY LAUNDERERS, AS WELL AS INFILTRATING THE
ORGANIZATIONS WHICH ARE ENGAGED IN LARGE-SCALE SMUGGLING
VENTURES. THIS HAS BEEN ACCOMPLISHED THROUGH THE TARGETING OF
"MONEY LAUNDERING SYSTEMS” OPERATING IN THE LOS ANGELES AREA.
THE PRIMARY METHOD OF IDENTIFYING THESE SYSTEMS IS ACCOMPLISHED
BY THE CULTIVATION OF WELL-PLACED CONFIDENTIAL INFORMANTS HERE.
AND OVERSEAS,

DURING THE PERIOD OCTOBER 1, 1995, THROUGH SEPTEMBER 30, 1997,
MONEY LAUNDERING INVESTIGATIONS CONDUCTED BY THE SAC/LA
UNDERCOVER MONEY LAUNDERING GROUP AND RAC OFFICES RESULTED IN
‘THE SEIZURE OF 7,366 POUNDS OF COCAINE AND $31.6 MILLION IN
LAUNDERED CASH; 155 ARRESTS, 120 INDICTMENTS, 98 CONVICTIONS FOR
MONEY LAUNDERING RELATED VIOLATIONS; AND FOUR TITLE Ill ELECTRONIC
INTERCEPTION OPERATIONS,

‘OUR LASAR GROUP IS PART OF A NATIONAL CUSTOMS PROGRAM THAT
ESTABLISHED ASSET IDENTIFICATION AND REMOVAL GROUPS IN MAJOR SAC
OFFICES. LASAR CONDUCTS BOTH LONG-TERM AND SHORT-TERM
INVESTIGATIONS. LASAR AGENTS INITIATE THEIR OWN FINANCIAL
INVESTIGATIONS OF MAJOR VIOLATORS AND ALSO WORK PARALLELJJOINT
INVESTIGATIONS WITH OTHER CUSTOMS AGENTS. THE PURPOSE OF THE
LASAR GROUP IS TO ENHANCE AND EXPAND CRIMINAL INVESTIGATIONS,
WITH AGENTS WORKING AS A TEAM TO FURTHER THE IDENTIFICATION OF


87

ployees certainly would want to have a say in that, most definitely
have a say in that, and traditionally, sir, we have not done that.

Mr. Horn. Do either Mr. Hensley or Mr. Heinrich want to com-
ment on your problems in trying to bring people to southern Cali-
fornia under either transfers or whatever? Or do you hire directly
and put them through school?

Mr. HENSLEY. We do both, Mr. Chairman. The problem for the
assistant commissioner is the cost per move when they reallocate
living bodies, and the cost for a family move now is around $65,000
per employee, so 10 employees is $650,000. Of course, you can ex-
trapolate that on up. We prefer to recruit——

Mr. Horn. So that comes out of the assistant commissioner's
budget for enforcement?

Mr. HENSLEY. That is correct.

Mr. Horn. He has a pot of money there to solve that problem?

Mr. HENSLEY. Yes, there is an amount of money for moves. But
when you couple that with promotions, which usually entail a
move, that amount of funding is drastically reduced. And then, as
Mr. Trotter spoke to, the drain to the southern border has used up
virtually all of those dollars for moving people.

To address your other point, which is, do we recruit locally, we
prefer to recruit and staff with people from southern California be-
cause they are used to the high cost of living here, they are used
to the West Coast environment, and most importantly, after 2
years they are not in my office asking to move to Des Moines, Boul-
der, CO, or New York City. And we do have some people that actu-
ally do request to go to New York City, but they are prisoners of
their growing-up environment and they want to return back to
where their family is, their mothers, their fathers, and of course
anybody who is over 35 has an aging parent. We hear that all the
time, “my aging parents.” And I, like everyone here, have aging
parents.

But the stability of the work force for an agent in a given area
is about 3 years before we even consider them 100 percent produc-
tive, because of the complexity of an area like Long Beach-Los An-
geles. And so we like the stability of recruiting someone, say, who
has graduated from the University at Long Beach or USC or Stan-
ford, who has a West Coast environmental view of how things work
and is comfortable in this environment so they are up to speed
quicker, we haven't disrupted them, and we're going to get 3 or 4
or 5 years of steady work out of that person before they are looking
for a promotion in another area. So for all of those reasons, we do
like to recruit westerners or southern Californians for this area. It
works for us.

Mr. Horn. Mr. Heinrich, want to add anything?

Mr. HEINRICH. Yes, a couple of comments, Mr. Chairman. No. 1,
what we found when I first got out here in using some of the broad-
based recruitment techniques was that we were bringing people
from all over the country and our attrition rate was well over 50
percent. These folks either would not show up on the day they were
supposed to or when they did show up, they got the lay of the land
and found out that they could barely afford a one-bedroom condo
as opposed to a home for their family.


Mr. Chairman and Members of the Committee:

I am pleased to be here today to discuss our observations on the
Customs Service's strategic plan and its allocation of inspectional
resources. My statement is based on our review of Customs!
September 30, 1997, plan and extensive work we have performed at
the Customs Service over the past few years. It is also based on
the limited amount of work we have done reviewing its system for
allocating inspectional resources to its cargo ports of entry along

the Southwest border.

‘THE CUSTOMS SERVICE'S STRATEGIC PLAN

The Government Performance and Results Act of 1993 (the Results
Act) seeks to shift the focus of federal management and
decisionmaking away from a preoccupation with staffing, activity
levels, and tasks completed to a focus on results--that is, the
real difference that federal programs make in people's lives.

Under the Results Act, executive agencies were to develop by
September 30, 1997, strategic plans in which they defined their
missions, established results-oriented goals, and identified
strategies that they will use to achieve those goals for the period
covering at least 1997 through 2002. These plans are to be updated

at least every 3 years.

‘The Act specifies that all agencies’ strategic plans should have

six critical components: (1) a comprehensive agency mission


OVERSIGHT OF THE MANAGEMENT
PRACTICES OF THE U.S. CUSTOMS SERVICE

THURSDAY, OCTOBER 16, 1997

House OF REPRESENTATIVES,
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY,
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,
Long Beach, CA.

The subcommittee met, pursuant to notice, at 10 a.m., at the
Long Beach City Council, 333 West Ocean Boulevard, Long Beach,
CA, Hon. Stephen Horn (chairman of the subcommittee) presiding.

Present: Representative Horn.

Staff present: J. Russell George, staff director and chief counsel;
Mark Brasher, senior policy director; and Andrea Miller, clerk.

Mr. Horn. The Subcommittee on Government Management, In-
formation, and Technology will come to order. I want to thank the
officials in the city clerk’s office for making available this very fine
council room and the quarters. They have been most helpful, and
we will thank them all by name at end of the hearing.

Today, we will examine several issues surrounding the U.S. Cus-
toms Service. In the past 50 years, a revolution has occurred with
respect to world trade. Any visit to the Ports of Long Beach and
Los Angeles will show the importance of international trade to this
region. The massive growth of world trade led to many high-paying
export industries in California. Jobs in trade typically pay more
than the average job. However, this huge volume of trade has not
been without its difficulties.

For example, the trade in goods has also been accompanied by
a trade in bads—illegal narcotics; pirated fakes of intellectual prop-
erty, including video and music cassettes; and illegal weapons de-
signed for use by international and domestic criminals and terror-
ists.

The primary Federal agency with responsibility in these areas is
the U.S. Customs Service. The Customs Service ensures that trad-
ed goods may be purchased by Americans and attempts to mini-
mize the illegal imports and exports that threaten our citizens in
many ways. The Customs Service assesses the correct duties on
trade, bringing in billions of dollars per year, enforces trade quotas
for certain sensitive goods, and generally enforces the U.S. trade
jaws.

The Customs Service was reorganized in 1995 into various Cus-
toms Management Centers, CMC’s. We are pleased to be here
today in one of the largest Customs Management Centers, which
is southern California. The southern California Customs Manage-

a)


42

Thom-sac fin Fages]

LAUNDERING.

OVER 103 OF THESE ORGANIZATIONS MOVE THEIR NARCOTICS BY LAND.
FACILITATED BY WELL-DEVELOPED FREEWAY SYSTEMS WHICH LINK THE LOS
ANGELES-LAS-VEGAS AREA WITH MEXICO, THE NORTHERN PACIFIC COAST
STATES, AND ALL SOUTHWEST BORDER AND GULF OF MEXICO STATES.

35 ORGANIZATIONS USE AIR CONVEYANCES, BOTH LEGAL AND ILLEGAL, TO
FACILITATE THEIR TRAFFICKING. FOUR OF THE BUSIEST AIRPORTS IN THE.
COUNTRY ARE LOCATED IN THE LOS ANGELES AREA. AS NOTED
PREVIOUSLY, OVER 100 FAA SANCTIONED AIRPORTS AND AN UNDETERMINED
NUMBER OF REMOTE LANDING STRIPS IN OUR DESERT AREAS CREATE
ADDITIONAL FAVORABLE FACTORS FOR THE ILLEGAL TRANSPORTATION OF
NARCOTICS. MARITIME NARCOTIC SMUGGLING IS ALSO A CONCERN.
SEVENTEEN ORGANIZATIONS HAVE BEEN IDENTIFIED AS TRAFFICKING VIA
COMMERCIAL AND PLEASURE CRAFT. SEA TRAFFIC iS DIFFICULT TO
MONITOR AND REGULATE AND WITH OVER 300 MILES OF COASTLINE OPEN
WITHIN OUR AREA FOR SMUGGLING, ENFORCEMENT IS DIFFICULT. THE HIGH
VOLUME OF MARITIME TRAFFIC IN THE LOS ANGELES AND LONG BEACH
SEAPORTS PROVIDES AN EXCELLENT CONCEALMENT OPPORTUNITY FOR
NARCOTICS. THE INCREASING NARCOTIC SMUGGLING THREAT IS REFLECTED
IN THE COMPLEXITY AND RESULTS OF OUR ENFORCEMENT EFFORTS:

0 __ FROM OCTOBER 1, 1995, THROUGH SEPTEMBER 30, 1997, NARCOTICS
RELATED INVESTIGATIONS INITIATED BY CUSTOMS SPECIAL AGENTS IN THE
LOS ANGELES AREA RESULTED IN 483 ARRESTS; 251 INDICTMENTS; 252
CONVICTIONS; AND SEIZURES OF 24,048 POUNDS OF COCAINE, 23,883
POUNDS OF MARMUANA. 34,909 POUNDS OF HASHISH, 99 POUNDS OF HEROIN,
AND 118 POUNDS OF OPIUM. AIRCRAFT, VEHICLES, AND CURRENCY WORTH
$9,385,544 WERE ALSO SEIZED IN NARCOTICS CASES.

QO __ FROM OCTOBER 1, 1995, THROUGH SEPTEMBER 30, 1996, CUSTOMS.
SPECIAL AGENTS ASSIGNED TO THE LA-HIDTA PARTICIPATED IN
INVESTIGATIONS WHICH RESULTED IN 234 ARRESTS, 103 TITLE Itt
OPERATIONS; AND THE SEIZURE OF $20.6 MILLION IN CURRENCY, 7,548
POUNDS OF COCAINE, AND 1,295 POUNDS OF MARIJUANA.

O _AS THE RESULT OF OPERATION ZORRO Il, CUSTOMS SPECIAL AGENTS.
INVOLVED IN A MULTI-AGENCY TASK FORCE ARRESTED 136 PEOPLE, SEIZED
OVER 2.5 TONS OF COCAINE AND $17 MILLION IN ASSETS. LOS ANGELES WAS
A FOCAL POINT DURING THIS OPERATION. COCAINE PRODUCED BY THE

CALI CARTEL AND TRANSPORTED BY MEXICAN TRAFFICKERS WAS TRACED
‘TO STASH HOUSES IN LOS ANGELES FOR DISTRIBUTION ACROSS THE U.S.

© __LOS ANGELES HOLDS THE RECORD FOR THE MOST COCAINE EVER
SEIZED IN THE US. WHEN 20 TONS WAS SEIZED IN A SYLMAR WAREHOUSE IN
1989.


73

The balance of those seized assets or liquidated assets from the
sale of seizures rolls into the Treasury forfeiture fund and is acces-
sible by the Treasury agencies, and is also accessible to a smaller
portion by the drug czar, the ONDCP Director. So those funds can
come back to the field. They come back in limited amounts.

We can seek reimbursement for retooling of official vehicles; we
can use it for the retooling of vessels. We can pay certain overtimes
out of it but we cannot buy positions, we cannot hire new people,
and we cannot subsidize salaries with those funds. So it is for in-
vestigative equipment and keeping things on the road, as opposed
to supplementing staffing as the COBRA funds do.

Mr. Horn. Mr. Trotter, is there a description anywhere of what
happens to that money in that fund?

Mr. TROTTER. Yes, sir.

Mr. Horn. Can we just put it at this point in the record, without
objection? So we get to understand all of these points?

Mr. TROTTER. Yes, sir.

[The information referred to follows:]


(LA-HIDTA) Boor
CALIFORNIA jag

a & f
© F


OVERSIGHT OF THE MANAGEMENT PRACTICES
OF THE U.S. CUSTOMS SERVICE

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY

OF THE

COMMITTEE ON
GOVERNMENT REFORM
AND OVERSIGHT
HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS
FIRST SESSION

OCTOBER 16, 1997

Serial No. 105-107

Printed for the use of the Committee on Government Reform and Oversight

oe

U.S, GOVERNMENT PRINTING OFFICE
48-272 WASHINGTON : 1998

For sale by the U.S. Government Printing Office
‘Superintendent of Documents, Congressional Sales Office, Washington, DC 20402





30

jobs from illegal and unfairly subsidized imports, and 4) regulatory audit and laboratory services.
‘Additionally, recent appropriations legislation directed Customs to fund research on technology to
prevent the illegal export of stolen vehicles and to expand service at existing ports of entry.

The Customs Service is on the front lines in the battle to stem the tide of narcotics being
smuggled into the United States through ever changing methods. It is also an intermediary in a
global trading system that continues to expand and rapidly change as trade barriers are lowered,
bilateral and trilateral agreements are reached, free trade zones are created, and developing
nations continue to industrialize. ‘These external changes, coupled with an austere fiscal climate,
‘growing pressure for reduced government, continuing demands by the public for greater
accountability, efficiency, and effectiveness, and demands by our direct customers for increased
customer service provide a set of unique challenges for the Customs Service to meet as it prepares
to enter the next century. External factors, such as the changing tactics of narcotics smugglers,
the threat of terrorism, the expansion of world trade, the proliferation of trade agreements, and an
austere budgetary outlook, impact the way Customs works. To meet all of these challenges,
Customs has set out an ambitious agenda to reinvent the way it does work,

STRATEGIC PLAN

The U.S. Customs Service has developed a Strategic Plan for Fiscal Years 1997-2002 which
articulates our vision for achieving the Customs Service of the 21st century. It was developed in
collaboration and consultation with our process owners, stakeholders, and customers. The
Strategic Plan is our blueprint for the future, and defines the key objectives and measures of our
three core processes (Trade Compliance, Passenger, and Outbound), our key enforcement
strategies (Narcotics and Money Laundering) and our Mission Support processes (Information
and Technology, Finance, and Human Resources). The goals of each are as follows:

Core Processes:

e ‘Trade Compliance: Maximize trade compliance through a balanced program of informed
compliance, targeted enforcement actions, and the processing of complying cargo
efficiently,

© Passenger Processing: Ensure compliance by targeting, identifying and examining high-risk
travelers, and allow the expeditious movement of low-risk travelers;

© Outbound: Process intzmational trade while achieving the highest degree of compliance
with United States export requirements in order to protect the United States national
security, economic interests and the health and safety of the American people;

Enforcement Systems

. rcotics: Prevent the smuggling of narcotics into the United States by creating an
ee tection iets, and investigation capability that disrupts and dismantles
smuggling organizations,

© Money Laundering: Identify, disrupt, and dismantle the systems and criminal organizations
that launder the proceeds generated by smuggling, trade fraud, and export violations.


89

We now go to the last panel. Our witness is Judy Grimsman, the
president of the Los Angeles Customs Brokers and Freight For-
warders Association, Inc.

If you will also stand and take the oath, since you all three are
going to comment on this panel.

{Witnesses sworn.]

Mr. Horn. I didn’t know there would be three of you. Let us
identify each of you so we can get it straight.

Mr. Kimoto. My name is Paul Kimoto. I am the treasurer of
the—

Mr. Horn. You want to spell the last name, Mr. Kimoto.

Mr. Kinoro. K-I-M-O-T-O.

Mr. Horn. K-I-M-O- , and you are the treasurer.

Mr. KrmoTo. Of the Brokers Association.

Mr. Horn. And you are Ms. Grimsman?

Ms. GRIMSMAN. I am Judy Grimsman, the president of the Los
Angeles Customs Brokers and Freight Forwarders.

Ms. CASTELLANOS. I am Cecilia Castellanos, and I’m the chair-
man of the board of the association, past president.

Mr. Horn. Just to get the spelling right, would you do both
names for me?

Ms. CASTELLANOS. Cecilia is C-E-C-I-L-I-A , and Castellanos is
C-A-S-T-E-] S.

Mr. Horn. Very good. And you are chairman of the board?

Ms. CASTELLANOS. Yes.

Mr. Horn. Is that a 1-year term or 2 years?

Ms. CASTELLANOS. It is the immediate past president of the asso-
ciation is named chairman of the board.

Mr. Horn. Well, congratulations. Glad to have you all here. I
didn’t mean to take away all of your testimony, Ms. Grimsman, but
I believe when you have the group in front of you that can solve
some of the problems. Often we would have had you and GAO first,
but you happened to be on the last panel, so I thought we would
cover ground on some of that.

STATEMENT OF JUDY GRIMSMAN, PRESIDENT, LOS ANGELES
CUSTOMS BROKERS AND FREIGHT FORWARDERS ASSOCIA-
TION, INC., ACCOMPANIED BY PAUL KIMOTO, TREASURER,
AND CECILIA CASTELLANOS, CHAIRMAN OF THE BOARD

Ms. GRIMSMAN. Thank you. Good morning Mr. Chairman. I am
pleased to have the opportunity to address the Subcommittee on
Government Management, Information, and Technology of the
House Committee on Government Reform and Oversight.

I understand that you are specifically examining the Customs
Service’s strategic plan under the Results Act, the allocation of re-
sources by the U.S. Customs Service and other general manage-
ment issues concerning Customs. These matters are of major con-
cern to the membership of the Los Angeles Customs Brokers and
Freight Forwarders Association because we are directly concerned
with Customs’ workload and entry processing. Indeed, our member-
ship is an integral part of the Customs’ import processings.

As you mentioned, in December 1993 Congress enacted the Cus-
toms Modernization and Informed Compliance Act. As we stated, or
as you stated, this act fundamentally changed the allocation of du-



84

And I would not be the one to say that we are going to deliver very
quickly because of funding issues. We are looking at different ways
to do things now.

Just yesterday I was briefed on an issue. The foreign trade zones
and bonded warehouses are asking for an automated system that
we cannot build for them on our mainframe computer. We are look-
ing at using the Internet. We are trying to do things differently
and that, I think, is where we are moving in the future.

Mr. Horn. Does Customs have a chief information officer?

Mr. TROTTER. Yes, sir.

Mr. Horn. Who is that?

Mr. Trorrer. His name is Robert McNamara.

Mr. Horn. Let me read another paragraph. It is along the lines
that you are talking about.

‘The Association perceives the failure to complete the automation process as a re-
sult of Customs headquarters’ failure to focus on its core business—cargo review,
release, duty collection, anti-smuggling and drug interdiction. Unfortunately, Cus-
toms headquarters has allocated too great a portion of its resources in pursuit of
too many new initiatives, and has not directed sufficient resources to its core busi-
nesses. This lack of focus has prevented Customs from utilizing its resources in the
most efficient manner. While these initiatives are laudatory, Customs headquarters
must take one step at a time and complete the basic automation process before di-
verting resources to new programs. Its focus on “sexy” initiatives should not detract
from its key concerns—cargo processing, anti-smuggling, and drug interdiction.

Would you say that is a fair statement?

Mr. TROTTER. That is all according to which side you are on, sir.

Mr. Horn. Well, you are following Miles’ law: Where you sit de-
pends on where you stand.

Mr. TROTTER. I think, sir, that if I were observing it from that
position, I would say that. I think if you saw the pressure that is

eing applied on us by other countries, the pressure that is being
applied on us for outbound work, for changing our Automated Com-
mercial Environment, it is a very difficult arena to juggle all of
these complex systems; and then couple that with the reductions
we have had to take. I don’t know that it could have managed
much better.

We are trying and are looking very closely at that to say. The
Customs Service has always been an agency that took on what was
given to it. We never said, “We can’t do that.” But we are reaching
that point. Now we say, that, sir, “I’m sorry to hear that, but that
is just how it is, and we have not been very good at that.” But I
think if I were in those people’s shoes I would say that.

Mr. Horn. I will note her praise here, and then I will go back
to another question she raises:

In closing I would like to affirm the fact that Customs Service officials and per-
sonnel at the Port of Los Angeles, Long Beach, and Los Angeles International Air-
pe have been model partners in forging a strong and amiable relationship between

S. Customs and the importing community.

Now I go to the second problem perceived by the association as
a result of Customs’ reorganizatio:

In doing away with districts and regions, Customs headquarters sought to “em-
power” the ports and create review directly from the port to headquarters, The end
result of “empowering” these Customs ports is a lack of uniformity in Customs ad-
ministration at the port level, and excessive delays in administrative review by

headquarters, which is inundated by port officials’ requests for review. While Cus-
toms itself has moved to informally create “super” ports, this lack of uniformity is



12

Fifth, the plan discusses some key factors, external to Customs and
beyond its control, that could significantly affect achievement of
the strategic goals. These factors range from the level of
cooperation of other countries in reducing the supply of narcotics
to the level of support from what Customs refers to as its

*"customers"-~the trade community and the traveling public.

Finally, Customs’ strategic plan contains a listing of program
evaluations used to prepare the plan and provides a schedule of
evaluations to be conducted in each of the functional areas. For
example, in developing its narcotics strategy, the plan states that
Customs used the 1996 and 1997 National Drug Control Strategy
prepared by the Office of National Drug Control Policy. Similarly,
in developing strategies for its mission support processes, the

plan states that Customs used one of our reports.’

In addition to the six elements required by the Results Act, there
are several other areas where agencies’ strategic plans can provide
Congress and other stakeholders important insights into whether the
agency will be able to achieve its goals. First, there is the
recognition of how the agency will work with other federal agencies
to achieve common goals. Customs’ plan recognizes that the agency
shares responsibilities for carrying out many of its core functions
with other agencies. For example, Customs is one of over 50
“Improving Mission Performance Through Strategic Information
_ = i 4

in:
(GAO/AIMD-94-115, May 1994).


fRomsaa tn Page)

OF JURISDICTION. IN THIS ROLE, WE WILL CONTINUE TO BE A VITAL AGENCY
IN PROTECTING THE CITIZENS OF THE UNITED STATES FROM PHYSICAL
HARM, AS WELL AS ECONOMIC INJURY.

MR. CHAIRMAN, THAT CONCLUDES MY STATEMENT. THANK YOU FOR THE
OPPORTUNITY TO APPEAR BEFORE YOU TODAY. { WOULD BE HAPPY TO.
ANSWER ANY QUESTIONS YOU MAY HAVE.


96

Mr. Horn. Well, we thank you for taking the time to come with
your colleagues on the board. As you know, I read what I thought
were some of your key points to the Customs officials and they
gave a tentative answer and, of course, the record is all open for
them and for you if you would like a further discussion of that.

I am curious, if you waved a wand, what would be your first pri-
ority of what you would do in the Customs Service, looking at it
from the clientele view, since you are their clientele in many ways,
just as the shipper is in many ways.

Ms. GRIMSMAN. I think the first project would be to finish the au-
tomation that they have started, the automated manifest, the in-
bond processing. The processing, because it is not complete, tends
to cause much more ‘band-aidine”—Customs has to take and pull
their expert inspectors to sit and talk to the trade on kind of redun-
dant issues. For example, why this airbill number doesn’t match
the airline’s manifest. That seems like a great loss of resources. To
me, that seems like a great loss of resources. They could be doing
something else.

Mr. Horn. Do either of your colleagues have additional thoughts
on this? If you waved a wand or I waved a wand, what would you
do to the Customs Service first?

Ms. CasTELLANOS. Now, that has always been my personal view,
that when, as Mr. Trotter mentioned, Mr. Von Raab said “automate
or perish,” many of us were sort of dragged into that. But once we
got into that we saw there were great advantages to that, and we
couldn’t possibly handle the volume of transactions that occur in
this port without automation.

However, it is not complete, and there are many steps that are
missing in that view, and it seemed like it wasn’t very long before
we got into this that they were already moving into other projects
that didn’t have anything to do with the completion of this system
as we were given to understand at the beginning.

Mr. Horn. That is a very important point, I think just as Ms.
Grimsman’s statement on getting with your core reason for exist-
ence, and I think you made the point very well.

Mr. Kimoto, do you have anything to add to this?

Mr. Kimoro. No. It is rather glaring, the deficiencies. Once you
are used to the automation and how it works in most areas, it is
glaring when it is not working properly, and so——

Mr. Horn. Have there been breakdowns within the system?

Mr. Kimoto, Basically with the air manifest system. It just does
not operate at the same efficiency as the ocean manifest system.
That needs to be addressed.

Mr. Horn. Is this a means of a different type of operation? Is it
More quantified? What goes wrong?

Mr. KimoTo. Well, in the air environment there are more consoli-
dated shipments and it has to be handled differently than in the
ocean environment. So the programming has to be different, and
that is just the area that needs to be addressed right now.

wt, [oRN. What is the programming? What sort of data goes in
there?

Mr. KimoTo. Manifest information, the bill of lading information,
and the quantities, all of those issues have to be addressed in the
air environment.


1

Mr. Horn. We are also interested—well, let’s put it this way—
are current staffing levels simply a 40-year-old hangover from the
1950’s when California’s population was smaller relative to the rest
of the Nation? And how does the Customs Service justify regional
disparities when these can have a great impact on law enforce-
ment, the quality of life in a region, and obviously the collection of
money? What is your feeling on that? Do we have a regional imbal-
ance because it just hasn’t been adjusted?

Mr. TROTTER. Well it has been adjusted over the years. I think—
I don’t want to use New York—as you said, I don’t want to dispar-
age New York the advantage of California, but our country was
first founded on the East Coast, and that is where Customs jobs
were needed. There is no doubt about it. As the country moved
westward, there was never ever the number of jobs in the West as
there is in the East. Never.

There is some holdover to that, but I will tell you ports like Nor-
folk, VA, at one time, and these are gross numbers, but they had
80 or 90 Customs inspectors. They are down to 25 now. So we have
drawn down those East Coast ports. New York itself has been re-
duced over 1,000 positions over the last decade.

But those positions have not gone to the West Coast, sir. They
have either gone to the southern land border or, as for example last
year, our share of the Balanced Budget Act was 775 positions. This
year it looks like it is going to be 550 positions. We have to attrite
a lot of positions to get to that level, and that doesn’t give us the
ability to move those positions to places where the work may have
changed.

So, yes, sir, you are right in that assumption. I don’t think it is
as bad as we have never looked at it or talked about it. We have.
We had a Commissioner from the West Coast, Carol Hallett, who
was very interested in that and tried to readjust some of those
numbers over a number of years. But I believe in a fairness doc-
trine, and I think you do want to look at this fairly, if you can see
how many positions we have attrited and what has happened with
those, I think you will see that we're trying to do an honest ioe

Mr. Horn. You are one of the last agencies that they should be
cutting staff on, when you deliver the money to the Treasury. I
mean, that must work for you for some people on Capitol Hill. How
about the Appropriations Committee? Are they sympathetic to that
argument?

Mr. TROTTER. No, sir, not at all.

Mr. Horn. A bunch of hard heads? I will deal with my friends
over there, then.

Mr. Trotrer. If you look at what is happening with the GATT
and free trade, many folks in this country predict that duty reve-
nues and taxes will continue to decline. They will, as we grow into
a more and more free trade. Free trade is really a managed trade.
We still have to put in a lot of resources into that, but money
doesn’t sway the day. The $22 billion is not a lot for this Govern-
ment anymore.

Mr. Horn. You call it a rounding number in the House Appro-
priations Committee?

Mr. TROTTER. Yes, sir.


36

lion people in the 1990 census, this equates to approximately
130,000 residents and 370 square miles per agent.

The Los Angeles area is home to 24 of the 500 major “Fortune
500” corporations in the United States. This ranks Los Angeles sec-
ond in the Nation behind New York. The L.A. area’s gross national
product is $300 billion a year. If L.A. were a separate nation, it
would be the 14th largest economic power in the world. This legiti-
mate trade and commerce also masks a tremendous amount of ille-
gal activity by violators who further their criminal enterprises by
taking advantage of the sophisticated business infrastructure es-
tablished to support legitimate business.

Los Angeles is facilitated by a well-developed freeway system
that includes four major interstate highways, I-5, -10, —40, and
~15. These highways link Los Angeles with Mexico and Canada.
They also link the Pacific Coast with all of the Southwest border
and the gulf coast regions of Mexico, as well as connecting southern
California with the north, central, and eastern parts of the United
States. These highways facilitate legitimate travel as well as crimi-
nal activity.

Through the combined ports of Los Angeles and Long Beach pass
the most container traffic in the United States and third most in
the world. These ports process more containers every year than any
other port in the Gnited States.

The Los Angeles Harbor is undergoing a terminal expansion
which, when completed, will result in the largest container termi-
nal in the Nation. This project parallels others in Long Beach,
which will expand landfill, portage, and railhead facilities planned
to double cargo volume in the next 5 years. Additionally, work has
begun on the Alameda corridor, which will provide high-speed rail
connections through the heart of Los Angeles, joining the city’s
mail-rail arteries with the twin ports of Long Beach and Los Ange-

les.

The Los Angeles International Airport is third in the country in
cargo processing and is also one of the busiest airports in the world
for passenger processing. There are approximately 62 municipal
airports in the SAC/Los Angeles jurisdiction, and many small, un-
controlled airports, private airstrips, desert roadways, and dry lake
beds. This, coupled with numerous coves and harbors along the
300-plus miles of coastline, presents a formidable air and sea
smuggling threat over and above that of the ports. As a con-
sequence of the large geographic area and investigative priorities
for which we’re responsible.

We also are faced with the challenges associated with coordinat-
ing our enforcement efforts with the large number of other Federal,
State, and local law enforcement agencies, which number more
than 125 organizations. The current authorized staffing level for
my office, including the five RAC offices, is 198 employees. At

resent, we have approximately 165 people on board and that num-

r is slated to grow. We anticipate filling several vacancies in the
near future.

The investigative priority areas within the office of the special
agent in charge, Los Angeles, are narcotics smuggling, money laun-
dering, Customs fraud, and Exodus Strategic, which includes weap-
onry. On a scale of 1 to 10, the threat level within each of these


48

Trae a Faget]

EFFORTS TO COMBAT COUNTERFEITING AND IS THE FIRST OF ITS KIND IN THE
COUNTRY. SINCE THE STATE OF CALIFORNIA'S RECENT ENACTMENT OF A
STATE CRIMINAL STATUTE THAT ALLOWS FOR MISDEMEANOR AND FELONY
PROSECUTIONS FOR COUNTERFEITING, CASES THAT DO NOT MEET THE.
FEDERAL PROSECUTION THRESHOLD ARE REFERRED TO LOCAL LAW
ENFORCEMENT AGENCIES FOR INVESTIGATION AND STATE PROSECUTION.
SINCE ITS INCEPTION, THE PROGRAM HAS RESULTED IN SIX CONTROLLED
DELIVERIES, THE EXECUTION OF FIVE STATE SEARCH WARRANTS, SEIZURES
‘OF COUNTERFEIT PRODUCTS TOTALING $5 MILLION, AND THREE ARRESTS,

ADDITIONALLY, WE HAVE SEEN INCREASING INSTANCES OF MONEY
LAUNDERING VIOLATIONS IN CUSTOMS FRAUD CASES. THERE HAVE BEEN
NUMEROUS CASES WHERE THE VALUE OF THE IMPORTED MERCHANDISE IS
OVERSTATED TO DISGUISE ILLICIT REVENUE GAINED THROUGH OTHER
FRAUDULENT SCHEMES. IF EVIDENCE OF MONEY LAUNDERING VIOLATIONS
1S OBTAINED DURING OUR FRAUD INVESTIGATION, WE WILL ACTIVELY
PURSUE INCORPORATING THOSE VIOLATIONS IN THE CRIMINAL
PROSECUTION OF THE VIOLATOR. IN THIS REGARD, 70 PERCENT OF THE
FORFEITURE CASES INITIATED BY OUR ASSET FORFEITURE AND
IDENTIFICATION GROUP IN THE SAC/LA OFFICE DEAL WITH FRAUD RELATED
INVESTIGATIONS INVOLVING MONEY LAUNDERING. THE U.S. ATTORNEY, LOS
ANGELES, HAS SUPPORTED THAT APPROACH. FOR INSTANCE, IN ONE CASE,
A VIOLATOR IN LOS ANGELES IMPORTED MILLIONS OF DOLLARS WORTH OF
ILLEGAL CHINESE MEDICINES WHICH HE THEN DISTRIBUTED THROUGHOUT
‘THE UNITED STATES. THESE MEDICINES WERE KNOWN TO HAVE CAUSED
SERIOUS INJURY AND, IN SOME CASES, SEVERAL DEATHS. OUR
INVESTIGATION RESULTED IN THE EXECUTION OF SIX FEDERAL SEARCH
WARRANTS AND THE SEIZURE OF $3.3 MILLION IN CASH; SEVEN VEHICLES
VALUED AT $180,000; AND THREE REAL PROPERTIES VALUED AT $924,000,
WHICH WERE PURCHASED WITH THE PROFITS FROM THE SALE OF THE
MEDICINES. ADDITIONALLY, $21,550,000 IN ILLEGAL MEDICINES WERE ALSO
SEIZED.

‘THE PROFITS INVOLVED IN THESE FRAUD RELATED SCHEMES CAN BE
ASTRONOMICAL AS EVIDENCED BY A MULTIMILLION-DOLLAR INVESTIGATION
‘THAT WAS INITIATED AS A RESULT OF A LOS ANGELES BASED IMPORTER
FILING PRIOR DISCLOSURES WITH OUR LOS ANGELES PORT DIRECTOR,
ALTHOUGH THESE PRIOR DISCLOSURES OSTENSIBLY DISCLOSED.
ADDITIONAL DUTIABLE COSTS FOR THE IMPORTERS HEALTH PRODUCTS,
INVESTIGATION REVEALED THAT THE IMPORTER FILED THE DISCLOSURES TO
COVER A SCHEME WHEREBY HE OVERVALUED HIS IMPORTATIONS TO
SIGNIFICANTLY REDUCE HIS FEDERAL INCOME TAX LIABILITY, THE IMPORTER
LAUNDERED MUCH OF THE PROFITS THAT HE DERIVED FROM THIS SCHEME,
THROUGH MISLEADING MONEY TRANSFERS TO FOREIGN BANKS; BY
PURCHASING REAL ESTATE IN THE UNITED STATES; AND BY PURCHASING $20
MILLION WORTH OF CHINESE ANTIQUES. NOT CONTENT WITH MERELY


Porn-sae te Page)

‘AS PART OF OUR EFFORTS IN THE CHILD PORNOGRAPHY AREA, THE SAC/LA
ALSO PARTICIPATES IN THE SOUTHERN CALIFORNIA REGIONAL SEXUAL
ASSAULT FELONY ENFORCEMENT (SAFE) TEAM, A MULTI-AGENCY TASKFORCE
HEADED BY THE U.S. ATTORNEY. LOS ANGELES, AND FUNDED UNDER THE
1994 OMNIBUS CRIME BILL. THE SAFE TEAM FOCUSES PRINCIPALLY ON
DOMESTIC CHILD ENDANGERMENT/ASSAULT RELATED VIOLATIONS. IN.
CALENDAR YEAR 1996, THE SAFE TEAM INITIATED 97 CASES, A FOUR
HUNDRED AND FOUR PERCENT INCREASE OVER 1995.

ANOTHER AREA OF CONCERN IN THE SOUTHERN CALIFORNIA AREA IS
RUSSIAN ORGANIZED CRIME (ROC). IMMIGRATION OF ROC GROUPS FROM
THE FORMER SOVIET UNION (FSU) TO THE UNITED STATES HAS RESULTED IN
AN ACCELERATION OF CRIMINAL ACTIVITY IN MANY AREAS, PARTICULARLY
SOUTHERN CALIFORNIA. IN MARCH 1995, THE CALIFORNIA DEPARTMENT OF
JUSTICE INDICATED THAT AT LEAST 200,000 LEGAL FSU IMMIGRANTS WOULD
BE ARRIVING IN THE UNITED STATES IN THE NEXT TWO YEARS, WITH AT
LEAST 40 PERCENT EVENTUALLY LOCATING IN CALIFORNIA. IN JANUARY
1996, THE FBI ESTIMATED THAT THERE WERE APPROXIMATELY 2,000
MEMBERS OF RUSSIAN AND EURASIAN GANGS OPERATING IN THE UNITED
‘STATES, PRINCIPALLY IN SOUTHERN CALIFORNIA, MIAMI, AND NEW YORK
CITY. AS OF JUNE 1996, 600 TO 800 ROC MEMBERS RESIDED IN THE LOS
ANGELES AREA. THEY ARE INVOLVED IN EXTORTION, CHECK FRAUD,
LOANSHARKING, SMUGGLING, CREDIT CARD FRAUD, NARCOTICS, MONEY
LAUNDERING, MURDER, AND/OR INSURANCE AND MOTOR FUEL TAX FRAUD.

IN RESPONSE TO THIS THREAT. THE SAC/LA HAS INITIATED SEVERAL JOINT
INVESTIGATIONS WITH OTHER LOCAL AND FEDERAL LAW ENFORCEMENT
AGENCIES IN THE LOS ANGELES AREA. IN ADDITION, WE HAVE ALSO
ESTABLISHED A WORKING RELATIONSHIP WITH THE MINISTRY OF INTERNAL
AFFAIRS OF THE RUSSIAN FEDERATION. IN 1995, SPECIAL AGENTS FROM
SAC/LA AND AN ASSISTANT U.S. ATTORNEY WERE INVITED TO RUSSIA TO
MEET WITH INVESTIGATORS FROM THE OFFICE OF PROCURATOR GENERAL
OF THE RUSSIAN FEDERATION, IN ORDER TO OPEN LINES OF
COMMUNICATION BETWEEN U.S. AND RUSSIAN LAW ENFORCEMENT
OFFICIALS,

‘THE SAC/LA HAS ALSO MOVED TO ADDRESS NUMEROUS OTHER AREAS OF
CRIMINAL ACTIVITY, INCLUDING FORMING AN ASIAN ORGANIZEO CRIME UNIT
‘AND A MARITIME SMUGGLING TASKFORCE, AND WILL CONTINUE FOCUSING
ITS RESOURCES ON STOPPING ILLEGAL DRUGS AND CONTRABAND FROM
ENTERING THE UNITED STATES; IN ATTACKING THE MONEY LAUNDERING.
SYSTEMS BY WHICH NARCOTIC AND OTHER VIOLATORS MOVE THEIR ILLICIT
PROFITS THROUGHOUT THE WORLD; AND IN PROTECTING U.S. INDUSTRY AND
TECHNOLOGY FROM FOREIGN ENCROACHMENT. THE U.S. CUSTOMS SERVICE
IN LOS ANGELES IS PROACTIVELY ADDRESSING ITS RESPONSIBILITIES IN
MEETING THE TREMENDOUS MULTIFACETED CRIMINAL THREAT IN ITS AREA


49

Tomsae te Paget)

DEFRAUDING CUSTOMS AND THE IRS THROUGH HIS “OVERVALUATION’
SCHEME, THIS IMPORTER ALSO SMUGGLED OR UNDERVALUED THE CHINESE
ANTIQUES WHEN HE BROUGHT THEM INTO THE UNITED STATES. CUSTOMS
AND IRS EVENTUALLY SEIZED $25 MILLION IN ASSETS FROM THIS IMPORTER
AND INDICTED HIM AND HIS WIFE ON NUMEROUS COUNTS OF SMUGGLING
AND TAX EVASION CHARGES. THE IMPORTER RECENTLY AGREED TO PAY
‘THE IRS $140 MILLION IN BACK TAXES AND PENALTIES AND HAS PLED GUILTY
TO ALL CHARGES,

SINCE 1994, THE FRAUD INVESTIGATIONS PROGRAM IN THE SAC/LA AREA OF
JURISDICTION HAS TAKEN A QUANTUM LEAP IN SUCCESS AND PRODUCTIVITY.
CUSTOMS SPECIAL AGENTS HAVE ESTABLISHED UNPRECEDENTED USE OF
PROACTIVE TECHNIQUES AND TECHNOLOGY, SUCH AS TITLE III ELECTRONIC
INTERCEPTIONS, TRASH RUNS, CONTROLLED DELIVERIES, MAIL COVERS,
POLE CAMERAS, INFORMANTS, AND OTHER "TRADITIONAL" INVESTIGATIVE
TOOLS IN THE FRAUD AREA. BY FOCUSING THEIR EFFORTS ON MAJOR FRAUD
VIOLATORS OR “KINGPINS,” OUR SPECIAL AGENTS HAVE CONSISTENTLY
GENERATED HIGH QUALITY CRIMINAL FRAUD INVESTIGATIONS RESULTING IN
CRIMINAL CONVICTIONS, ASSET FORFEITURES, AND SUBSTANTIAL MONETARY
RECOVERIES.

© __INFY 1995, 65 PERCENT OF OUR FRAUD CASES WERE FOCUSED ON THE
NATIONAL TRADE ENFORCEMENT PRIORITY AREAS OF ANTIDUMPING, IPR,
HEALTH AND SAFETY, TRADE AGREEMENTS (QUOTAMVISA), AND VALUE. THIS
TREND CONTINUED IN FY 1996.

© _ FROM OCTOBER 1, 1995, THROUGH SEPTEMBER 30, 1997, OUR FRAUD
EFFORTS RESULTED IN 59 ARRESTS; 59 INDICTMENTS; 17 CONVICTIONS;
SEIZURES TOTALING $ 24.5 MILLION; CIVIL PENALTIES OF $3,341,000; AND 61
FEDERAL SEARCH WARRANTS ON OVER 80 DIFFERENT LOCATIONS. AS OF
SEPTEMBER 30, 1997, RECOVERIES FROM OUR FRAUD CASES EXCEED $10
MILLION.

© __ALLEGATIONS OF POTENTIAL FRAUD VIOLATIONS THAT DO NOT
WARRANT FORMAL INVESTIGATIONS BY THE OFFICE OF INVESTIGATIONS ARE
ROUTINELY REFERRED TO THE IMPORT SPECIALIST ENFORCEMENT TEAM
(SET) IN THE LOS ANGELES PORT DIRECTOR'S OFFICE FOR ACTION AND
INQUIRY, OF THE 66 TRADE RELATED MATTERS REFERRED TO ISET BY THE
‘SAC/LOS ANGELES BETWEEN OCTOBER 1, 1994, AND JUNE 1996, 27 RESULTED
IN CIVIVADMINISTRATIVE PENALTIES TOTALING $53 MILLION BY ISET.

4 EXPORT:

CALIFORNIA IS THE NATION'S LEADING EXPORTER WITH $68.1 BILLION IN
GOODS SOLD ABROAD IN 1993. THIS FIGURE ACCOUNTS FOR 15 PERCENT OF
TOTAL U.S. EXPORTS DURING THAT PERIOD. LOS ANGELES/LONG BEACH IS


8

CALIFORNIA - AREA S

PRBUG DE QUANTITY. FRICE PURITY
‘Cocamme (Crack? 20 ROCK (92 CRAM 35-20
49 200K (0A GRAM 3049
Coraline Gewder Bora oy
Toman 48-225
. BAL B.S cand 330
oz 500-1000
is £,000-10,000
ixio 34,990-18,000
‘CODEINE Tras Bs
DraupD Fenty 25-75
asm ora 10-50
oz 150-400
iu 2.996-5,000
Hexow (Mexican Brown) IRLLO $0,000-109,009
Hienown (Southeast Aciant 7199,000-152,000
loz *2)s00-5,000
Hexown (Tar) 25.cham *20-75,
cea ‘s0-t28
oma “150-300
Jor 1200
Ieegonstau Jocuam 20-30
loz $00-1,250
LSD (Lorre) LDOSACE UNTT 2s
Moma 25 cRaM S20
Mansuana A clcaxerre 23
ASTaRTeLANT 35-58
‘TSTARTPLANT. +
100 stant rants a
‘naruae FANT, 3.000-4,800
‘LMNTURE PLANT $300-500
Mantruawa (California) toz 300
1 3.200
Maniuana (Commerciat tor 60-200
Manyuana (Green) cease (su0) 40
102 140-200
ta 41,200-1.800
MantuaNa (Mexican? cram (30) S10
loz 40-190
tu 300-800
MARYUANA (Sincemillad Teram tau0) 15-23
oz 329.850 :
brey 1300-6,000
METH Parcunsons:
TeMconi 10 1,000-1,500
10 +3,300-4,000


88

So we began to recruit locally, and particularly through the local
colleges and universities, the outstanding scholar programs, the
VRA, veterans’ readjustment program, as well as. the typical test-
ing, and we were able to bring that down considerably. Of course,
the regional pay differential was helpful as well.

But I just saw some recent statistics indicating—and of course
this would be just for Los Angeles International Airport—last year
we lost 24 inspectors that we had brought on as a result, and that
equals an attrition rate of 8 percent. That was actually in fiscal
year 1996. In fiscal year 1997 we lost 49 inspectors, representing
an attrition rate of 15 percent. So it is serious, You go to all the
trouble of screening and recruiting and in many cases sending peo-
ple away to about 12 weeks of schooling, I believe, and then these
folks want out.

Mr. Horn. Where do they go, Glynco?

Mr. HEINRICH. That is the training for our inspectors, yes, the
11- or 12-week training.

Mr. Horn. Any other comments on this aspect?

Mr. TROTTER. Yes, sir. You should know that Congress is looking
at this very closely from the integrity aspects. Our overseers at
Treasury, Assistant Commissioner Kelly is looking at this very
closely, and in fact has put money into our budget from the Omni-
bus crime bill for movement of personnel.

When I say the integrity issue, there is a feeling among some
that people who are recruited in local areas tend to be more prone
to have integrity problems. We have not found that to be the case,
but yet there is the perception that that is the case. We are build-
ing a brand-new recruitment system for the U.S. Customs Service
as we speak. Congress is involved and Treasury is involved. Not to
address the issues that we are speaking about but to address integ-
rity issues. So it is a multifaceted problem for us.

Mr. Horn. Well, when you say “integrity issues,” I assume you
are talking about the potential to be corrupted?

Mr. TROTTER. Yes, sir, the potential for being corrupted.

Mr. Horn. And do you find there is a regional issue? Is there any
evidence that that exists?

Mr. TROTTER. I think it is premature to say there is evidence. We
have worked with the FBI. We have worked with other Federal law
enforcement agencies. As I say, it is a feeling by some that there
is. It is a feeling by some that there is not.

Our problem is we are a national law enforcement organization.
And what happens is if you go into a city, people will say if you
work in Miami, New York, or Chicago, you rotate precincts and
that is the integrity issue. For us to rotate a precinct would mean
you have to leave L.A. to go to Chicago or you have to leave Chi-
cago to go to Memphis or Miami. It creates a problem for an orga-
nization like ours, but it is a priority in the Congress and they are
trying to address those issues.

Mr. Horn. That’s all I have. You have been a very fine panel.
And the staff might be working with your staff on a few more ques-
tions that we really don’t have time for, since we are supposed to
vacate this room at 1 o’clock and we have the last panel to go.
Thank you very much for coming and flying out here, Mr. Trotter.


43

Remsae fr Pages]

© ___ AT LAX, ONE TON OF COCAINE WAS SEIZED IN A SHIPMENT OF PVC PIPE
ARRIVING FROM MEXICO. ‘THIS SHIPMENT WAS THE TENTH AND FINAL
SHIPMENT FROM THE SMUGGLING ORGANIZATION,

TWO MAJOR INVESTIGATIONS BY OUR RAC/OXNARD OFFICE RESULTED
IN THE SEIZURE OF OVER 7,000 POUNDS OF MARIJUANA, THREE ZODIAC
BOATS, AND 2.2 TONS OF COCAINE.

©__IN 1995,15,600 POUNDS OF HASHISH WERE SEIZED AT THE PORT OF
LONG BEACH FROM A SHIPMENT OF MEN'S DENIM TROUSERS WHICH
ARRIVED FROM UGANDA VIA SINGAPORE.

O__ ANINVESTIGATION BY OUR RAC/LAS VEGAS OFFICE RESULTED IN THE
CONVICTION OF A FIVE TIME CONVICTED AIR SMUGGLER FOR SMUGGLING
1,700 KILOS OF COCAINE.

© __ FROM OCTOBER 1, 1994, THROUGH MARCH 31, 1996, 199 SEIZURES OF
NARCOTICS WERE MADE AT LAX. THESE SEIZURES WERE COMPRISED OF 23
HEROIN SEIZURES TOTALING 109.11 POUNDS; 29 COCAINE SEIZURES
TOTALING 436.26 POUNDS; 86 SEIZURES OF MARIJUANA FOR 1,381 POUNDS;
17 SEIZURES OF HASHISH FOR 0.17 POUNDS; 12 SEIZURES OF OPIUM
‘TOTALING 41.22 POUNDS; AND 32 SEIZURES OF OTHER DRUGS AND.
BARBITURATES. OF THE 353 NARCOTICS SEIZURES MADE DURING THIS TIME
FRAME AT THE SEVEN MAJOR INTERNATIONAL AIRPORTS IN THE PACIFIC
AREA, LAX'S 199 SEIZURES COMPRISED MORE THAN 56 PERCENT OF THE
TOTAL. OVERALL, THE SEVEN AIRPORTS SEIZED 1,950.56 POUNDS OF
NARCOTICS AND 164,057 UNITS. LAX ACCOUNTED FOR 89 PERCENT OF THE
TOTAL POUNDS AND 75 PERCENT OF THE UNITS SEIZED.

© _THE SAC/LA WAS ONE OF THE FIRST CUSTOMS OFFICE TO IMPLEMENT
AN INVESTIGATIVE GROUP DEDICATED SOLELY TO THE IDENTIFICATION AND
FORFEITURE OF ASSETS DERIVED FROM NARCOTICS AND MONEY
LAUNDERING ACTIVITIES. FROM OCTOBER 1, 1995, THROUGH SEPTEMBER 30,
1996, OUR LOS ANGELES SEIZURE AND ASSET REMOVAL GROUP (LAZAR) HAS
IDENTIFIED AND SEIZED ASSETS TOTALING $14,799,141 MORE THAN ANY
OTHER CUSTOMS OFFICE IN THE COUNTRY.

___INFY 1996 AND FY 1997, THE SAC/LA SHARED A TOTAL OF $5,598,148 IN
FORFEITED ASSETS WITH LOCAL LAW ENFORCEMENT AGENCIES,

2, MONEY LAUNDERING

ACCORDING TO THE CALIFORNIA DEPARTMENT OF JUSTICE, CALIFORNIA IS
RECOGNIZED AS THE MONEY LAUNDERING CAPITAL OF THE UNITED STATES.
SOUTHERN CALIFORNIA IS CONSIDERED THE WEST COAST COLLECTION


CONTENTS

Hearing held on October 16, 1997 ....
Statement of:

Grimsman, Judy, president, Los Angeles Customs Brokers and Freight
Forwarders Association, Inc., wan of the 8 by Paul Kimoto, treasurer,
and Cecilia Castellanos, Chairman of the Board ..

Rabkin, Norman J., Director, Administration of Justice Issues, General
‘Government Division, accompanied by Darryl Dutton, Assistant Direc-
tor, Los Angeles Office, U.S. General Accounting Office .

Trotter, Robert S., Assistant Commissioner for Field ‘Operations: John
Hensley, special agent in charge, Los Angeles; and John H. Heinrich,
Director, South Pacific Management Center, . Customs Service, ac-
companied by Irene Jankov, port Director, port of Los Angeles-Long
Beach; and Thomas S. Winkowski, port Director, Los Angeles Inter-
national Airport ..

Letters, statements, ete., submit yy:

Grimsman, Judy, president, Los Angeles Customs Brokers and Freight
Forwarders Association, Inc., prepared statement of ...

Heinrich, John H., Director, South Pacific Management enter,
toms Service, prepared statement of

Hensley, John, special agent in charge, Los Angel

Information concernil ng street prices of drugs
Prepared statement o

Horn, Hon. Stephen, a Representative in Congress from the State of
California, prepared statement of
Rabkin, Norman Director, Administration of Justice Issues, Generai
‘Government Division, U.S. General Accounting Office:

Information concerning proportion of total resources allocated to the
Southwest border
Prepared statement of
Trotter, Robert S., Assistant Commissioner for Field Operatiot
‘Comparison of entry and passenger workload
Forfeiture fund expenditures summary
Prepared statement of ..

an

Page
1

89


66

lion outbound in Los Angeles in 1996. I don’t have those figures
right at my hand, but certainly what we look at are currency out-
bound. Drugs inbound, currency outbound; those are the types of
issues that we look for.

Mr. Horn. Have those been pretty consistent criteria over the
last few years? What are the newer ones that are added?

Mr. TROTTER. Pretty much those are the consistent criteria that
we have followed over the last few years. Newer ones, we haven’t
really changed course that much. I think that is what has made de-
veloping the strategic plan easier for us. We have stuck with what.
we have been doing, and it has worked pretty well for us.

Mr. Horn. What I would like at this point in the record—and we
will leave it open for several weeks and then we will have a hear-
ing in Washington with most of our top brass, or maybe wait until
there is a new commissioner—I would like to have the ports of Los
Angeles-Long Beach complex, the New York complex, the Miami-
Dade complex, and if fou want to throw Detroit in, be my guest,
as to the return per officer, some typical budget criteria. The area
we'd cover, let’s say, the collections last year based on illegal activ-
ity, that kind of thing. What I would just like to get is a compari-
son, which I think most budget officers would know and run the
numbers through, so you have already got it. I would just like to
know what you are doing and then how those people compare in
those regions. And if you want to throw in some other regions, be
my guest.

I am not trying to throw it in one way, but it is obvious that we
have two major port complexes, New York and these ports. Detroit
is sort of a new one for me to think about, and I hadn’t thought
about it until you raised it, but I have long been worried, as I said
earlier, about that Northern border. Not only are illegals coming
over there and have for most of the century, but they are coming
at increasing rates, and certainly I wouldn’t be surprised that the
drugs are coming across there, because they know that we are try-
ing to really use massive manpower on parts of the Southern bor-
der, so why not try the northern one?

Mr. TROTTER. Yes, sir. We will be glad to provide you those facts,
and agree completely with your analysis.

Mr. Horn, My staff will work with you on that in terms of what
the Members have said they want to know about this.

Let me now just go through a number of questions that might
have some relevance here, but without objection, that exhibit you
are going to prepare will be put in the record at this point.

[The information referred to follows:]


52

Roracsae fa yg Pages}

‘OUR OBJECTIVE IN THE EXPORT ENFORCEMENT AREA IS TO FOCUS
INVESTIGATIVE EFFORTS ON QUALITY CRIMINAL CASES INVOLVING THE
EXPORT OF DEFENSE ARTICLES COVERED BY THE DEPARTMENT OF STATE
MUNITIONS LIST; ARTICLES SUBJECT TO EXPORT CONTROLS ADMINISTERED
BY THE DEPARTMENT OF COMMERCE; SANCTIONS ADMINISTERED BY THE
DEPARTMENT OF THE TREASURY'S OFFICE OF FOREIGN ASSETS CONTROL
(OFAC); PRECURSORS AND ESSENTIAL CHEMICALS ADMINISTERED BY THE
DRUG ENFORCEMENT ADMINISTRATION; HAZARDOUS CHEMICALS AND
WASTE; AND STOLEN VEHICLES.

FROM OCTOBER 1, 1995, THROUGH SEPTEMBER 30, 1997, SAC/LOS ANGELES
AREA CUSTOMS AGENTS HAVE ACHIEVED EXCELLENT RESULTS IN THE.
EXODUS/STRATEGIC AREA WITH 58 ARRESTS; 30 INDICTMENTS: 26
CONVICTIONS; SEIZURES VALUED AT $6.6 MILLION; AND 24 SEARCH
WARRANTS,

5. OTHER THREATS:

AS MENTIONED PREVIOUSLY, NARCOTICS, MONEY LAUNDERING, CUSTOMS
FRAUD, AND ILLEGAL EXPORTS ARE NOT THE ONLY THREATS TO WHICH WE
MUST RESPOND. FOR INSTANCE, CUSTOMS IS ALSO THE FIRST LINE OF
DEFENSE AGAINST THE ILLEGAL IMPORTATION OF CHILD PORNOGRAPHY.
THE SAC/LA IS CHARGED WITH ENFORCING THE LAWS PROHIBITING THE
IMPORTATION AND TRAFFICKING OF CHILD PORNOGRAPHY, PRINCIPALLY
VIOLATIONS OF THE CHILD PROTECTION ACT.

CHILD PORNOGRAPHY ENTERS THE UNITED STATES IN VARIOUS FORMS.
TRADITIONALLY, THE MOST COMMON MEANS OF SMUGGLING WAS THROUGH
THE MAIL SYSTEM. HOWEVER, IN RECENT YEARS, THE ADVENT OF HIGH
‘TECHNOLOGY EQUIPMENT, SUCH AS DIGITAL SCANNERS, COMPUTERS,
MODEMS, AND SUPER VGA COLOR MONITORS HAVE PROVIDED
INTERNATIONAL TRAFFICKERS WITH A NEW AND INSTANTANEOUS WAY OF
REACHING DOMESTIC MARKETS WITH THEIR PRODUCTS. THE SAC/LA WAS
THE FIRST CUSTOMS OFFICE TO BECOME INVOLVED WITH THIS HIGH-TECH
MARKETPLACE IN 1993 DURING OPERATION LONGARM. LONGARM FOCUSED
‘ON SEVERAL COMPUTER BULLETIN BOARD SYSTEMS IN DENMARK THAT
WERE BEING USED TO RECEIVE AND DISTRIBUTE CHILD PORNOGRAPHY.
FROM FY 1993 THROUGH FY 1995, LONGARM INVESTIGATIONS BY THE SAC/LA
AND OTHER DOMESTIC OFFICES OF U.S. CUSTOMS RESULTED IN 156
ARRESTS, 160 CONVICTIONS, AND MORE THAN 200 SEIZURES PERTAINING TO
CHILD PORNOGRAPHY. IN FY 1998, WE INITIATED 18 INVESTIGATIONS
INVOLVING THE INTERNATIONAL TRANSFER OF CHILD PORNOGRAPHY. FROM
OCTOBER 1994 THOUGH SEPTEMBER 1996, SAC/LA AGENTS MADE FOUR
ARRESTS, OBTAINED TWO INDICTMENTS AND THREE CONVICTIONS, AND
EXECUTED FOUR FEDERAL SEARCH WARRANTS FOR CHILD PORNOGRAPHY
RELATED VIOLATIONS.


101

fly planes in and they have to have space. So if cargo sits on those

docks, that costs them more money than they would actually collect

in storage. So I can’t imagine any carrier, any port authority would

object, but maybe I’m wrong.

4 Mr. Horn. ts there a backlog in clearing air shipments off the
locks?

Ms. GRIMSMAN. Only the textile, the quota visa, because that
goes through several different stages. In this port, because it is a
large port, there are several layers. I don't know if you saw the in-
spectors and then the commercial operation people, the import spe-
cialists. You have to have three, I believe, different divisions of
Customs process one of these, so that takes a lot longer because it
goes from one group to the next to the next, and then back.

That is one that cannot clear paperless, which is an advance
clearance that—we like the advanced type of clearance. That is a
very large commodity in this port, the textiles and the wearing ap-
parel, and that does clog up the air cargo space.

Mr. Horn. Is that a problem with whether it is made in China
and being snuck in under the Thai quota or something?

Ms. GRIMSMAN. Yes, but it is a national method of clearance.
This is a large port for that commodity, so that compounds the
issue. It is maybe triple what any other port percentage wise would
probably handle.

Mr. Horn. Well, we will ask Customs to respond for the record
on this, to see if they can have a team or some other grouping that
would expedite matters.

Ms. Grimsman. I am sure the wearing apparel people would love
that.

Ms. CASTELLANOS. You know, Congressman, just a thing on the
user fee. When that was first proposed, it was proposed by Cus-
toms and—and it was supposed to be a fee that was going to come
into their coffers, so to speak. At that time, our National Brokers
Association objected to it because we felt very strongly that it
would go into the general Treasury and it would not get into the
Customs funds, and that is exactly what did happen.

What you have is, an importer is now paying, not only the user
fee, but they are also paying a harbor maintenance fee for a dif-
ferent purpose. So it seems easy to stick fees on imports. The only
thing that happens, though, is that the importers of goods do not
get any benefit out of it as far as being able to add additional facili-
ties, personnel, or whatever to facilitate cargo movement.

Mr. Horn. Well, yee raise a good point, and I am interested to
know that you would be happy as long as the money went to the
Customs Service and resulted in human resources to clear cargo.
That’s understandable.

Any other comments on Customs’ testimony? Is that it? Well, we
thank you all for coming. Your testimony and contribution has
been very helpful. So if you have any further thoughts, write them
to me in Washington or Mr. Brasher, senior policy director, who is
responsible for this hearing, and we will try to be helpful. So
thanks a lot.

Ms. GRIMSMAN. Thank you.

Mr. Horn. Now I am going to thank the people who helped set
up this hearing. We have J. Russell George, I guess he is in the


26

these studies, and the sooner they are completed in a responsible
way, the better off I think things will be. Because I, for years, have
been talking about the Northern border, we just have not gotten
to do it yet. We will. So we might as well get the whole bundle sort-
ed out as to rationality here on allocation of resources.

Well, I thank you both for coming, Mr. Rabkin, and coming out
here in particular. So thank you and we will followup with you. It
was a very good statement.

We will now have panel two. The first witness will be Bob Trot-
ter, Assistant Commissioner for Field Operations, U.S. Customs
Service coming out from Washington; the next will be Mr. John
Hensley, the special agent in charge, U.S. Customs Service, in the
Los Angeles region; and John Heinrich, Director of the Customs
Management Center, U.S. Customs Service, for this area.

So gentlemen, if you will come and raise your right hands.

[Witnesses sworn.]

Mr. Horn. All three witnesses have affirmed, and we will begin
with Mr. Trotter.

STATEMENTS OF ROBERT S. TROTTER, ASSISTANT COMMIS-
SIONER FOR FIELD OPERATIONS; JOHN HENSLEY, SPECIAL
AGENT IN CHARGE, LOS ANGELES; AND JOHN H. HEINRICH,
DIRECTOR, SOUTH PACIFIC MANAGEMENT CENTER, U.S.
CUSTOMS SERVICE, ACCOMPANIED BY IRENE JANKOV,
PORT DIRECTOR, PORT OF LOS ANGELES-LONG BEACH; AND
THOMAS S. WINKOWSKI, PORT DIRECTOR, LOS ANGELES
INTERNATIONAL AIRPORT

Mr. TROTTER. Good morning, Mr. Chairman. It is a pleasure to
appear before you today to address the Customs Service’s strategic
plan under the Government Performance and Results Act, the allo-
cation of resources based on workload and performance, and other
general management issues. I hope that this information will assist
the subcommittee in its oversight responsibilities.

As you are aware, the mission of the Customs Service is to en-
sure that all goods and persons entering and exiting the country
do so in compliance with law and regulation. Since our testimonies
have been read into the record, I would just like to touch on the
high points.

‘ith 19,000 Customs employees at more than 300 ports of entry
and with an increase in the number of laws to protect citizens, the
responsibilities of Customs Service has become greater and greater
in recent years. This challenge can be observed in the port of Los
Angeles and Long Beach, where the seaport and airport link the
area with the rest of the world and major highways linking the
ports with Mexico and Canada. Customs’ focus is on balancing its
multiagency and international enforcement responsibilities with
the need to efficiently process legitimate trade.

Customs has developed a strategic plan for fiscal year 1997
through 2002 which articulates our vision for the 21st century. It
was developed in collaboration and consultation with our process
owners, stakeholders, and customers. The strategic plan is a blue-
print for our future and defines the key objectives and measures
of our three core processes.


22

cally did with the request for additional inspectors. We have talked
to officials at OMB, we have mapped the process out, and we will
be reporting that to Senator Feinstein, I expect this spring.

you can imagine, it gets reviewed at each level, there are
changes made, there are reclamas made, and there are arguments
made. I think the Customs Service’s arguments were listened to in
fiscal years 1997 and 1998, but their request was only for Oper-
ation Hardline. It was for the Southwest border, along the border
between Mexico and the United States, in fiscal year 1997, and
then it expanded along the whole southern tier into the southern
Florida area. The resources for fiscal 1998 are being allocated
among those ports.

So it was focused on those ports and that is where the buildup
has been taking piace.

Mr. Horn. To what degree have you looked at New York and the
comparison of tonnage, narcotics, intellectual property, and other
things that Customs deals with in relation to Los Angeles? It
sounds like you are not including New York.

Mr. RABKIN. No, we are not. Again, we are focusing on the cargo
ports along the Southwest border. I think what you are talking
about is the same process, but focusing on different ports.

Mr. Horn. I am interested in the whole operation, but particu-
larly in New York. Not that I want to cut New York; I do not. Mrs.
Maloney, who is the ranking Democrat is from New York. She will
be here tomorrow, but she was unable to make it today. I am not
going to do anything to damage New York.

But on the other hand, I want fairness in allocations between the
ports. Part of that is a border problem, however much of it is what
is flowing in on the various ships and how we handle and inspect
those, which we will get into this morning. When I went through
the Customs operation yesterday, my attitude was, if you look at
it from the standpoint of a major narcotics king, it is the cost of
doing business. So you lose $5 million. Meanwhile, they have got
through billions that we haven’t caught and we haven’t caught
them because we don’t have the manpower to do it while inspecting
the containers.

Mr. RABKIN. Well, it is not just manpower, sir. I think, and the
Customs Service, I am sure, will tell you that the formidable task
they face is not going to be dealt with just by putting more people
on at the ports. I think it is also an issue of getting better intel-
ligence as to where the drugs are coming in. It is an issue of devel-
oping better technology to x-ray containers, to be able to tell the
various hiding places that the smugglers use in trucks, and to be
able to detect this without havi: e resource-intensive use of in-
spectors investing in research. The Customs Service, and other
agencies as well, are investing in research to try to develop this
technology.

If you go down to the border, you will see the x-ray machines,
the big x-ray machines they are putting in place. They have mobile
x-ray units, handheld instruments that they use. I think they have
a long way to go to be able to become as efficient as they would
like to, but I think they are moving in the right direction.

Mr. Horn. What do you figure, on the Southwest border portion
that you have worked on, is the manpower need? I am all for the


34

On a final note, Customs budget stibmission for fiscal year 1999 reflects new

measures. For the first time the budget is being presented in alignment with Customs three core
processes and single business component as well as the two new budget activities of
‘“Commercias” and “Drug and Other Enforcement.” This further strengthens the linkage between
the resources requested and the outcomes expected from the application of those resources.

Mr. Chairman, this concludes my statement, Again, thank you for the opportunity to appear
before the subcommittee today to discuss issues of concer to the subcommittee and Customs. I
will be happy to answer any questions you may have.


58

Statement of John H. Heinrich
Director, South Pacific Management Center
USS. Customs Service

Before the
House Subcommittee on Government Management,
Information, and Technology

October 16, 1997

Good morning, Mr. Chairman and members of the committee. 1 am John Heinrich, Director of
the South Pacific Customs Management Center serving the Los Angeles area, With me today are
Irene Jankov, Port Director for the Los Angeles/Long Beach Seaports, and Thomas Winkowski,
Port Director for the Los Angeles International Airport. We are privileged to appear before you
to discuss U.S. Customs Service operations in Los Angeles. My remarks will include a profile of
Los Angeles Customs ports of entry as well as elaborating on our workload and staffing
allocations and assessing our enforcement threat.

As the Los Angeles District Director of Customs from 1986 to 1995, I am proud to have been
associated with formulating and implementing Customs policies which contributed to Los
‘Angeles’ emergence as the number one revenue producing district in the Customs Service.

Mr. Chairman, on behalf of the Customs family in Los Angeles please accept our appreciation for
your Committee’s support of the Customs Service.

PORT PROFILE

ur nation’s West Coast is the preeminent gateway to the Pacific Rim. Los Angeles Customs
collected over $4.2 billion in duties, fees and taxes in FY 1997. This represents 19 percent of the
$22 billion Customs collected for our nation’s treasury last year.

1Los Angeles Customs provides services for an area encompassing eight California counties, from
San Luis Obispo county, south through Orange County and east to the state line, plus Clark
‘County, Nevada. In addition to LAX and the Los Angeles and Long Beach Seaports, other
Customs facilities under our jurisdiction include Port Hueneme, the Port of San Luis, Ontario
International Airport, Palm Springs Regional Airport, and McCarren Intemational Airport in Las
Vegas.

As part of Customs national reorganization in October 1995, our former Los Angeles District's
administrative structure was eliminated, leaving two primary ports: Los Angeles International
Airport (LAX) and Los Angeles/Long Beach Seaport. Moreover, in keeping with Customs
recently adopted philosophy of Process Management, our internal organizational structure, which


76

Mr. Horn. Well, it is still big money to some of us out in the
countryside.

One area consistently quoted by the General Accounting Office as
a high risk area is that seized property and the manner in which
it is accounted for. Do you feel there are any material weaknesses
in the Customs controls that they have in that area? And if yes,
what are we doing to remedy those problems?

Mr. TROTTER. Well, we are working very hard to maintain our
clean opinion in that area. It is one that has caused us difficulty
over the last several years, but I think you will see we have been
making progress. We have tried to implement a new automated
system. At one time we had five different systems tracking seized
property, moneys, and narcotics as well as goods. We have com-
bined that into one.

Sir, I will tell you we have had a very difficult time with that.
Many people in this room will snicker when I mention the word
SEACATS. That’s what we call it. We tried to bring 5 systems into
one, and we have paid a tremendous price, and the people in this
room should be thanked for the price they have paid to try to bring
that around. And we feel that we're going to do that again for this
year, a tremendous price.

One thing we have learned from that is that when you automate
huge systems like we have, the impact is really unknown. That is
what GAO was talking about with our architecture. We have
learned those lessons sir, and I think we have got that under con-
trol. It is not a perfect system yet, when you talk about 300 ports
of entry and the amounts of money and merchandise that we seize,
but I think we have gone a long way in that area. It is still on the
watch list as a material weakness, but I believe that the Chief Fi-
nancial Officer Act, GPRA, and all those things feel that we’re mov-
ing in the right direction.

Mr. Horn. At least you are not up to the Internal Revenue Serv-
ice’s $4 billion, and that has worried me. Of course over in another
department it is also $4 billion down the drain for computers. So
I take it you feel you're on top of that situation?

Mr. TROTTER. Sir, you heard about our year 2000 [Y2K] compli-
ance. That is a great deal of concern for us. We have 30 million
lines of code in our automated commercial system and our enforce-
ment system and administration system. About 7 million lines have
to be brought into compliance. That is one thing that you will hear
folks in the trade and others say that Customs hasn’t been deliver-
ing on promised projects, have not delivered on the Mod Act. Part
of that reason, sir, is that we have had to pull moneys away to get
ourselves ready for Y2K compliance. So that is a tough issue that
we face.

Mr. Horn. On that topic, did you use reprogrammed money at
the end of the year to get on top of that?

Mr. TROTTER. We are trying that, sir; up on the Hill just yester-
day, again. talking to those folks. I think you will see an alignment
from the Treasury Department, OMB, Customs, and the trade to
help push that forward. As you well know, sometimes those issues
are balanced by other things, but we are trying to use whatever
funds are available.


28

sources requested and the outcomes expected for the application of
those resources. These are questions that you had asked earlier
from the GAO.

Mr. Chairman, this concludes my statement. Mr. Hensley and
Mr. Heinrich will & further into detailed operations of the Ports
of Los Angeles and Long Beach. Again, thank you for the oppor-
tunity to appear before the subcommittee today to discuss issues of
concern. I will be happy to answer any questions you may have.

Mr. Horn, Thank you very much, Mr. Trotter. We are going to
go through the other two witnesses and then combine the questions
for all three of you.

[The prepared statement of Mr. Trotter follows:]


94

A second problem perceived by the Association is a result of Customs
reorganization. In doing away with districts and regions, Customs Headquarters
sought to “empower” the ports, and create review directly from the port to
Headquarters. The end result of “empowering” these Customs ports is a lack of
uniformity in Customs administration at the port level, and excessive delays in
administrative review by Headquarters, which is inundated by port officials’
requests for review. While Customs itself has moved to informally create “super”
ports, this lack of uniformity is pervasive. One of the goals of Customs
reorganization and the Act was to discourage “port shopping” as a result of
Customs processing, and to ensure importers would choose ports based on the
nature of the transaction being processed. The result of Customs reorganization
and its “empowerment” of ports is to sacrifice uniformity, and to create new
reasons for port shopping unrelated to the collection of duties.

The reorganization has also resulted in a loss of expertise within the
agency. In the past, Customs commercial operations personnel developed an
indepth understanding of the businesses of importers whose entries they
reviewed. As a result of the reorganization, and the frequent adoption of new
projects such as Customs Management Centers, Account Managers, and other
organizational adaptations, the personnel directly involved in entry processing
has been and is being reduced. In addition, many of the most expert Customs
personnel have left the U.S. Customs Service to join private industry. Customs
has not replaced this expertise, and under its current organizational structure it is

not likely to develop the same product expertise that it possessed in the past.


statement; (2) agencywide long-term goals and objectives for all
major functions and operations; (3) approaches (or strategies) to
achieve the goals and objectives and the various resources needed
to do so; (4) a description of the relationship between the long-
term goals/objectives and the annual performance plans required by
the Act; (5) an identification of key factors, external to the
agency and beyond its control, that could significantly affect
achievement of the strategic goals; and (6) a description of how
program evaluations were used to establish and revise strategic

goals and a schedule for future program evaluations.

The plan developed by the Customs Service addresses the six
requirements of the Results Act.’ However, its discussion of the
management challenges it faces does not adequately recognize the
agency's need to improve its financial management and internal
control systems, its controls over seized assets, its plans to
alleviate year 2000 problems, and its plans to improve computer

security.

Concerning the elements required by the Results Act, Customs’
mission statement is results oriented and covers its principal
statutory mission--“"ensuring that all goods and persons entering

and exiting the United States do so in compliance with all United

‘The Customs Service is not a separate executive branch agency and
therefore is not required under the Results Act to develop its own
strategic plan.


17

Our problem is, and GAO spoke about it again this morning, is
our Automated Commercial Environment [ACE], the system we
would like to migrate to, with the fencing off of that money, that
is going to make it difficult for us to do both of those things. Y2K

ACE are different, but yet it is the environment that we need
to move to, to go to account management, to change the way we
do work.

Mr. Horn. Well, my understanding with the Director of OMB is
that he very much wanted reprogrammed money used, not going
through the congressional budgeting process and the executive
budget, which just wastes a year getting to the problem.

Mr. TROTTER. Yes, sir.

Mr. Horn. So, I don’t know how much was available in Treasury
to get reprogrammed at the end of the fiscal year, but that is where
it should come from. I take it Treasury would be receptive to that;
isn’t that true?

Mr. TROTTER. Yes, sir.

Mr. Horn. I thought it would. They seemed to be on board to
saying yes to that question when we asked them. Yesterday in our
briefing, Mr. Hensley, you mentioned a reluctance to rely on con-
tractors. Obviously any agent who uses force or carries a weapon
should be a Federal employee. Do you ever rely on contractors for
low risk duties to free up agents for higher risk operations?

Mr. HENSLEY. Only in the seizure area, in handling seizures. We
do use a seizure contractor. EG&G Dynatrend handles the seizures.
But beyond that we do not, because it is a requirement of our oper-
ating systems that Mr. Trotter just spoke of. Because of the secure
nature of all of the computers, virtually everything we do is com-
puterized, and so even the low volume things such as doing back-
ground checks, brokers’ licenses, which are basically a background
investigation, still involve systems and access to systems which
also contain very critical criminal records, investigative records,
and sensitive documents. So we have not been able to find an area
where we can use contractors in the investigative area.

Mr. Horn. Does Customs track the street price of cocaine in var-
ious American cities such as Miami, Chicago, L.A., and New York?

Mr. HENSLEY. Yes, we do.

Mr. Horn. Is that available for the record or is that confidential?

Mr. HENSLEY. No, we can supply that for the record.
wt Horn. Without objection, that will be put in the record at
this point.

[The information referred to follows:]


83

Mr. Horn. What I want to get to is just a few more items here,
and I want to pick up in advance of her giving it, a few of the
points raised by Judy Grimsman, the president of the Los Angeles

‘ustoms Brokers and Freight Forwarders Association. She notes
here in part of her testimony, with reference to the Customs Mod-
ernization and Informed Compliance Act as Title VI of the North
American Free Trade Implementation Act, she states that the act:

Fundamentally changed the allocation of duties and responsibilities between Cus-
toms and the importing community. In particular, it placed substantial responsibil-
ity on importers and Customs brokers to make legal determinations that were for-
merly made by United States Customs Service personnel,

Has this led, in the Customs’ judgment, your judgments, to more
fraud or less going to that system? Have we detected more? Less?
What is the feeling on that?

Mr. TROTTER. Well, sir, we don’t have those numbers. We haven't
been in this a long time. All I can tell you is that we are certainly
hoping that it is going to lead to less fraud. Generally speaking,
customs house brokers, very few of them are ever involved in fraud.
It is importers of record that are the difficulty.

We do have some very large fraud cases on the books and more
that we are going to prosecute. But that correlation, I don’t think
we have drawn that, sir. We haven’t been in it long enough. We
do know with some of our informed compliance work which is the
change in the way we do business because we're holding other folks
accountable, that we are seeing voluntary tenders coming in. Peo-
ple come in saying, “We didn’t quite understand the law. We think
we owe this duty or these taxes.” So we are seeing that work, but
in the fraud area, we don’t have those numbers, sir.

Mr. Horn. She notes further on it is the perception of her asso-
ciation that—

Customs’ drive to automation at the port level has been frustrated by Customs
headquarters’ failure to complete the automation process. Customs has in large part
implemented the process of automation at present. However, the final building
blocks in the automation process have not been put in place.

And she cites the automated air manifest system, the automated
in-bond processing.

How are we coming along on those?

Mr. Trotter. I think both of those are inching along. For in-
bond, I think we're a little closer with what we call our tin man,
which is looking at statistical evaluations instead of trying to
match up all the millions of in-bonds that we have each year. The
automated air manifest, once again, is progressing slower than we
would want.

We have changed the way we do business. In the past we used
to build automated systems and people were mandated to use
them. We had a commissioner, William Von Raab, whose orders to
us and the trade were “automate or perish.” What happened then,
we built the systems and the trade had to use them. Now we are
trying to build systems differently. We are trying to build consen-
sus up front, and it takes a lot longer. It takes a lot longer to sat-
isfy people.

teil agree with what was said, sir. We have not had the fund-
ing. Once again, the reduction in our automated services at head-
quarters has been dramatic, so we have not been able to deliver.


5

Mr. Horn. I might say what the ground rules are with the wit-
nesses. I have mentioned it to some of them.

We have a rule in the full committee that we administer the oath
to all witnesses. We will go panel by panel. We automatically put
the full statement in the record after we introduce you. What we
would like you to do is look us in the eye and summarize your
statement.

Unfortunately, we have to be out of here in 2% hours. The most
important time will be time for questions, so we would like you to
summarize—as I say, within 5 minutes—the key points of your
statement. Then we will move to the next panel after each panel
has finished with questions.

Now, we will start with the General Accounting Office as panel
one, and I believe Mr. Rabkin is here. If you will come forward. He
is Director of the Administration of Justice Issues in the General
Government Division of the U.S. General Accounting Office, which
is Congress’ arm to evaluate financial audits and programmatic au-
dits in all Federal agencies.

So, Mr. Rabkin, if you would raise your right hand.

{Witness sworn.}

Mr. Horn. The gentleman has affirmed, the clerk will note, and
we will begin with your testimony.

Mr. RABKIN. Mr, Chairman, I have with me Darryl Dutton from
our Los Angeles office. Would you like to swear him in?

Mr. Horn. Fine. Is he going to testify?

Why don’t you come up and be sworn in.

[Witness sworn.]

STATEMENT OF NORMAN J. RABKIN, DIRECTOR, ADMINISTRA-
TION OF JUSTICE ISSUES, GENERAL GOVERNMENT DIVI-
SION, ACCOMPANIED BY DARRYL DUTTON, ASSISTANT DI-
RECTOR, LOS ANGELES OFFICE, U.S. GENERAL ACCOUNTING

Mr. RABKIN. Chairman Horn, I am pleased to be here to discuss
our observations on the Customs Service's strategic plans and its
allocation of inspectional resources. With me is Darryl Dutton, an
assistant director of the Los Angeles office, who is responsible for
the law enforcement work we perform at the Customs Service.

First, I would like to address the strategic plan. Although Cus-
toms is not required under the Government Performance and Re-
sults Act to develop its own plan, it has chosen to do so. GAO has
been reviewing the strategic plans prepared by over 20 executive
agencies covered by the Results Act. We have determined whether
the plans contain the six elements required by the act and assess
whether they adequately discuss management challenges that the
agencies will face in successfully carrying out their plans. Overall,
the Customs Service’s plan addresses all six elements required by
the Results Act.

First, the plan lists Customs’ overall mission: to ensure that all
goods and persons entering and exiting the United States do so in
compliance with applicable laws and regulations. Second, it in-
cludes goals and objectives for what Customs has described as its
three basic functions: processing cargo entering the United States,
processing passengers entering the country, and processing cargo


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92

Bofors the Subcommittee on
Government Management, Information and Technology

| am pleased to have this opportunity to address the Subcommittee on
Government Management, Information and Technology of the House Committee
‘on Government Reform and Oversight. | understand that you are specifically
examining the Customs Service's Strategic Plan under the Results Act, the
allocation of resources by the U.S. Customs Service, and other general
management issues concerning Customs. These matters are of major concern
to the membership of the Los Angeles Customs Brokers and Freight Forwarders
Association, inc. (the “Association’) because we are directly concemed with
‘Customs workload and entry processing — indeed our membership is an integral
part of Customs import processing.

In December, 1993, Congress enacted the Customs Modemization and
Informed Compliance Act (“the Act") as Title VI of the North American Free Trade
Implementation Act. This Act fundamentally changed the allocation of duties and
responsibilities between Customs and the importing community. in particular, it
placed substantial responsibility on importers and Customs brokers to make legal
determinations that were formerly made by U.S. Customs Service personnel,
The Association's membership has complied with the reforms contained in the
Modemization Act, notwithstanding the additional responsibilities it has imposed

on our membership.


60

Recently , LAX deployed 14 new inspector positions to address the country’s anti-terrorism
efforts, an additional responsibility for Customs. The 14 positions have been filled and are
currently deployed. In addition to these positions, LAX will be receiving two state-of-the-art
x-ray vans and a too! van. This equipment will greatly enhance our enforcement efforts.

In order to cope with the growth in workload, Customs has developed and deployed an array of
innovative technologies and programs. Customs is truly on the cutting edge in the Federal
government in working smarter to handle increased responsibilities and workloads. We have been
recognized by the White House and the National Performance Review, receiving several
“Hammer Awards” from the Vice President for our innovative approach to making government
work better and cost less.

Customs new automated systems electronically accept and process information from shipping
manifests, Customs entries, entry summaries, duty collections, liquidations, billings and refunds.
For example, in Los Angeles, approximately 98 percent of all ocean cargo manifest information is
transmitted to Customs electronically, rather than by paper. In addition to reducing paper
handling and storage costs, this enables us to use automated screening and analysis tools to
identify high potential enforcement targets. One such tool is the Automated Targeting System
(ATS) which is used to assist Customs officers in identifying importations that pose a substantial
risk of containing narcotics or other contraband. ATS is currently deployed in Newark, Laredo
and Seattle, We utilize a similar, less sophisticated automated targeting system at the seaport, but
expect to deploy ATS here by the end of 1997.

In addition to manifest information, over 98 percent of all entry declarations filed in Los Angeles
are transmitted to Customs electronically through the Automated Broker Interface (ABI). This
enables us to electronically screen import transaction data in order to identify those shipments
presenting the highest enforcement risk. Most shipments, representing legitimate commerce, are
released electronically with minimal intervention, often without paper documents. Customs
‘Automated Clearing House (ACH) allows payment of duties and fees through electronic funds
transfer, directly from the importer’s or broker’s bank account to the Customs account.
Approximately 80 percent of duties and fees collected in Los Angeles during FY 1997 were paid
through ACH.

Customs automated systems include mainframe computer housed in Newington, Virginia, which
is connected to field units throughout the country through local area networks, personal
computers and computer terminals. Los Angeles is equipped with eight local area networks tying
together approximately 939 personal computers.

Customs does not rely solely on computers and automated processing to improve its efficiency
and effectiveness. Informed Compliance and Account Management are key elements in our quest
to improve overall regulatory compliance. We are also utilizing statistical sampling and

compliance measurement techniques, which enable us to measure compliance as required by the

3


56

In recent years, we have been able to increase staffing at LAX
as a result of the Consolidated Omnibus Budget Reconciliation Act,
commonly known as COBRA. As our workload continues to in-
crease at LAX, it is critical that we continue to have access to this
COBRA funding. I might add here that the COBRA funding at the
airport relates to the $6.50 passenger fee collected on all pas-
sengers entering the country, and that has provided that open pipe-
line which has enabled us to increase the staffing there commensu-
rate with the heavy increase in traffic. We have also, with the
COBRA funding, been able to purchase x-ray systems and comput-
ers, as well as vehicles and radios.

Recently, LAX deployed 14 new inspector positions to address the
country’s antiterrorism efforts as a result of legislation passed by
Congress; and we will also be receiving state-of-the-art x-ray equip:
ment to assist those teams. In order to cope with the growth in
workload, certainly, over the last 10 years, Customs has developed
and deployed an array of automated systems.

For example, in Los Angeles, 98 percent of all ocean cargo mani-
fest information is transmitted electronically to Customs—and I be-
lieve you saw one of the electronic manifests—all of that informa-
tion residing in our mainframe computer, to which we have access
through our PCs and local area networks.

In addition to manifest information, over 98 percent of all entry
declarations in Los Angeles are transmitted to Customs electroni-
cally through what is called the automated broker interface. This
enables us to electronically screen import transactions in order to
identify those shipments presenting to the Customs Service the
highest enforcement risk. Those shipments representing legitimate
commerce are released electronically with minimal intervention,
often without paper documents.

We also introduced the automated clearing house, and under the
automated clearing house—basically we are talking about elec-
tronic funds transfer—approximately 80 percent of that 4.2 billion
in revenue is transmitted electronically to the Customs Service;
and I can tell you it has been a tremendous boom to us in Customs.

When I arrived here in 1986, we had no automated manifest sys-
tem; everything was paper. We had a tiny percentage of import en-
tries coming to us, and virtually every entry document for every
shipment had a check attached to it, and you can imagine how time
consuming that was. So that is where most of our productivity in-
creases have come from in the last 10 years.

We are also using statistical sampling and compliance measure-
ment techniques, as required by the Government Performance and
Results Act, to evaluate the relative effectiveness of our various
targeting methods. Customs’ automated systems includes a main-
frame computer housed in Newington, VA. Los Angeles now has 8
local area networks and 939 PCs. I’m sorry, but I’d like to hearken
back to 1986; when I arrived here, we had five of the most elemen-
tary PCs that you would ever want to see. You can imagine what
a tremendous change has occurred in automation over those years.

U.S. Customs is the Nation’s first line of defense against drug
smugglers. There is no higher priority than narcotics enforcement,
and to address this threat, we initiated locally here in Los Angeles
plans to revitalize our enforcement presence. At the seaport, this


18

At the request of this Subcommittee, we have obtained data from
Customs on the total number of inspectors assigned to its major
cargo and passenger ports, as well as on the latest workloads at
those ports. However, Customs did not provide these data in time
for us to complete our analysis and include our results in this
statement. We are working with the data and hope to have the

results for you soon.

Mr. Chairman, this concludes my prepared statement. I will be

pleased to answer any questions.

(264440)

a


47

Trormsac fn

Paget}

100 MILLION METRIC TONS OF CARGO VALUED AT $100 BILLION TO UPWARDS
OF $256 BILLION BY THE YEAR 2020, INCLUDING $180 BILLION IN HIGH VOLUME
CONTAINERS.

NINETY-FOUR PERCENT OF THE GOODS IMPORTED INTO THE LOS ANGELES
AREA ORIGINATE FROM PACIFIC RIM COUNTRIES. THE MAJORITY OF THIS
GLOBAL TRADE IS WITH NINE ASIAN-PACIFIC COUNTRIES AND GERMANY IN
EUROPE. IMPORTS FROM JAPAN, THE PEOPLE'S REPUBLIC OF CHINA, AND
TAIWAN COMPRISE THE LARGEST DOLLAR VALUE. COMMODITIES WITH THE
HIGHEST DOLLAR VALUE AT BOTH PORTS INCLUDE VEHICLES, COMPUTERS:
AND COMPONENTS, CONSUMER ELECTRONICS, TELEPHONE EQUIPMENT,
FOOTWEAR, AND TEXTILES AND WEARING APPAREL.

IN ADDITION TO THE LONG BEACH-LOS ANGELES SEAPORTS, ANOTHER
MAJOR PORT OF ENTRY FOR FOREIGN MERCHANDISE IS THE LOS ANGELES
INTERNATIONAL AIRPORT (LAX). IN 1995, LAX WAS THE THIRD BUSIEST
AIRPORT IN THE WORLD IN TERMS OF CARGO, HANDLING MORE THAN 1.6
MILLION METRIC TONS. THE VOLUME OF LANDED FOREIGN GOODS ($27
BILLION IN FY 1995) AT LAX AND THE ABUNDANCE OF AIR CARGO FACILITIES,
PUTS LAX SECOND ONLY TO JFK INTERNATIONAL AIRPORT iN NEW YORK.

OF THE MORE THAN 55,000 IMPORTERS LOCATED IN THE UNITED STATES,
ALMOST TEN PERCENT ARE BASED IN CALIFORNIA. ALMOST EIGHTY
PERCENT OF THESE CALIFORNIA COMPANIES IMPORT THROUGH PORTS:
WITHIN THE SAC/LA AREA OF JURISDICTION. OF THE TOP 500 IMPORTERS
NATIONWIDE (BASED ON TOTAL VALUE OF IMPORTED MERCHANDISE), 40 ARE
LOCATED IN THE GREATER LOS ANGELES AREA. TEN OF THESE COMPANIES
ARE RATED WITHIN THE TOP 109.

THIS HUGE VOLUME OF INTERNATIONAL TRADE THROUGH LOS ANGELES
AREA PORTS CONTRIBUTES TO CONSIDERABLE AND VARIED THREATS IN THE
CUSTOMS FRAUD AREA. BASED ON HISTORICAL INVESTIGATIVE ACTIVITY,
THE GREATEST FRAUD THREATS IN THE LOS ANGELES CUSTOMS DISTRICT
ARE IN TRANSSHIPMENT OF MERCHANDISE TO EVADE IMPORT
REQUIREMENTS, TEXTILES AND WEARING APPAREL (QUOTA AND VISA
FRAUD); FOODS AND MEDICINES (HEALTH AND SAFETY); CHEMICALS (HEALTH
AND SAFETY); COUNTRY OF ORIGIN VIOLATIONS; PRODUCT DUMPING; FALSE.
VALUATION; AND COUNTERFEIT MERCHANDISE (INTELLECTUAL PROPERTY
RIGHTS). THESE THREATS REPRESENT A SIGNIFICANT LOSS OF REVENUE TO
THE UNITED STATES GOVERNMENT; A LOSS OF MARKETS TO DOMESTIC
INDUSTRIES; AND AN INCREASE OF POTENTIAL HEALTH AND SAFETY
HAZARDS TO AMERICAN CONSUMERS.

THE PROTECTION OF INTELLECTUAL PROPERTY RIGHTS (IPR) CONTINUES TO
BE A TOP PRIORITY OF THE CUSTOMS SERVICE AND THE SACILA. IN FACT.
THE SAC/LA IMPLEMENTED A PROGRAM THAT HAS GREATLY ENHANCED OUR


51

Reraaae fi

TO COMBAT THIS THREAT, IN FY 1995, THE SAC/LA INITIATED OPERATION
POSTAL GEMINI, UNDER THIS PROGRAM, 600 BROCHURES WERE
DISTRIBUTED TO HIGH-TECHNOLOGY, DEFENSE, AND AEROSPACE FIRMS IN
‘THE GREATER LOS ANGELES METROPOLITAN AREA EXPLAINING U.S.
CUSTOMS EXPORT ENFORCEMENT EFFORTS AND SOLICITING COMMUNITY
ASSISTANCE IN IDENTIFYING POTENTIAL VIOLATORS AND SUSPECT
TRANSACTIONS. OPERATION OVERRUN, WHICH WAS INITIATED IN FY 1995,
TARGETED THE ILLEGAL EXPORT OF MILITARY SURPLUS {TEMS REGULATED
BY THE INTERNATIONAL TRAFFICK AND ARMS REGULATION (ITAR) AND HAS
IDENTIFIED NETWORKS WHICH ILLEGALLY EXPORT THESE ITEMS. THIS
OPERATION RESULTED IN NUMEROUS SEIZURES OF MILITARY SURPLUS,
EQUIPMENT VALUED AT $8,685,712; TWO ARRESTS, AND ONE CONVICTION. IN
FY 1996, THE SAC/LA ALSO INITIATED OPERATION RAVEENA TO IDENTIFY
ILLEGAL EXPORTERS OF U.S. MILITARY SURPLUS EQUIPMENT.

ACCORDING TO THE NATIONAL AUTO THEFT BUREAU AND THE FEDERAL
BUREAU OF INVESTIGATIONS, THE GREATER LOS ANGELES AREA IS THE
LEADER IN THE NUMBER OF STOLEN CARS WHICH ARE ILLEGALLY EXPORTED
TO MEXICO, THE FAR EAST, MIDDLE EAST, AND RUSSIA. OF THE 300,000
VEHICLES STOLEN IN CALIFORNIA IN 1994. 60,000 WERE EXPORTED ILLEGALLY
FROM SOUTHERN CALIFORNIA PORTS. 20,000 OF THESE VEHICLES WERE.
DRIVEN OR SHIPPED TO MEXICO AND 40,000 WERE SHIPPED OVERSEAS,
MAINLY OUT OF THE LOS ANGELES/LONG BEACH HARBOR. ONE IN 50
VEHICLES EXPORTED FROM LONG BEACH-LOS ANGELES IS STOLEN.

‘THE TASK OF IDENTIFYING STOLEN CARS BEING ILLEGALLY EXPORTED FROM
THE LONG BEACH-LOS ANGELES SEAPORTS IS A FORMIDABLE ONE. 5,000 TO
7,000 CARS ARE REGISTERED EACH MONTH WITH THE LOS ANGELES PORT
DIRECTOR'S OUTBOUND ENFORCEMENT TEAM FOR EXPORT. THE SAC/LA
‘AND THE OUTBOUND ENFORCEMENT TEAM ARE WORKING TOGETHER WITH
‘THE CALIFORNIA DEPARTMENT OF INSURANCE AND THE REGIONAL AUTO
‘THEFT PREVENTION GROUP (TRAP), A MULTI-AGENCY TASK FORCE
CONSISTING OF LOCAL LAW ENFORCEMENT AND CALIFORNIA HIGHWAY
PATROL OFFICERS, TO IDENTIFY THESE STOLEN VEHICLES. SINCE 1995, OUR
ENFORCEMENT EFFORTS RESULTED IN 237 STOLEN VEHICLES WORTH $10.5
MILLION BEING SEIZED BEFORE THEY LEFT THE UNITED STATES; RETURNED
‘TO THE UNITED STATES FOR SEIZURE BY SHIPPING LINES; OR LOCATED IN
FOREIGN COUNTRIES. THIS FIGURE IS A 50 PERCENT INCREASE OVER 1994
(150) AND A 150 PERCENT INCREASE OVER 1993 (90). SINCE FY 1995, SPECIAL
AGENTS FROM SACILA HAVE TRAVELED TO BEIJING, CHINA; BANGKOK; AND
HONG KONG TO RECOVER STOLEN VEHICLES AND TO PROVIDE INSTRUCTION
TO THE POLICE AGENCIES

AND CUSTOMS SERVICES OF THOSE COUNTRIES IN THE IDENTIFICATION OF
‘STOLEN VEHICLES.


80

CALIFORNIA - AREA 6
DRUG TYPE QUANTITY PRICE PURITY
Cocaine (Crack) BW ROCK (0.2 CRAM) 19-20
‘42 ROCK (04 CHAM) 40-50 _
Cockme tPowder! acum 10-20
Toma 49.80
State G5 cea 100-200
is soo. a0
iu -
xno Prcressty
‘CODEINE 2TAB 16
Draven ‘UTAR 10
HEROIN (Mexiern Brown) inno 30,000-75,000
Hero (Seutheast Asian) Imo (25,000
Herxoin (Tas) 25 cna
2ORAM 79-190
een “275
tez _ 200
lex (Crystad 0c 69-40
Ter 700
LSD (Blotter Loosace unr 2s
MOMA Boam
ta
Mawpuana toca
A startrunr
WO star rianTs
TseaTuRe CLaNT
evi
Maryuana (Chronic) Brty
Manijuana (Domestic loz
Toram (sun)
tu
Manirvann (Mexican) tocar
lor
Tu
MAantiuawa (Sinsemilia) TGRAM (BUD) 10
Mert Precvasons:
SPHEDRINE: BEey 1,900-2,400
METHMAMING = TeINT ry
Meriasetemaine (Powder? 2 crane 20-30
Toren 40-100
ier 190-175,
Tex 400-809
io 4,500-10,000 85%

18+


13

federal agencies involved in drug control activities. Customs’
plan acknowledges the relationships the agency has with the
Departments of Justice, State, and Defense and discusses how it
plans to work with these agencies to achieve its narcotics

smuggling goals.

Customs’ plan also recognizes some of the management challenges
that the agency faces in carrying out its core functions but does
not, in our opinion, cover some important management challenges it
will face in successfully carrying out the plan. The plan

discusses three functions

information and technology, finance, and
human resources management. In a broad sense, the plan references
the problems that we and others have identified regarding Customs’
automated systems modernization efforts and its need to improve its

financial management and internal control systems.’

However, the plan does not provide the detail necessary to
determine how Customs plans to address such challenges so that they
do not continue to hamper its ability to meet stated goals and
objectives. For example, we have reported that Customs’ financial

management problems have hindered its ability to reasonably ensure

owe have included Customs’ financial management and its handling of
seized assets on our list of high-risk areas. In 1990 we began a
special effort to review and report on the federal program areas
our work had identified as high risk because of vulnerabilities to
waste, fraud, abuse, and mismanagement. Our third series of
reports, issued in February 1997, provides the current status of
designated high-risk areas. See High-Risk Series, (GAO/HR-97-20
SET, Feb. 1997), and High-Ri A ation on Sele
High-Risk Areas, (GAO/HR-97-30, May 1997)


55

Mr. Horn. Now our last representative on panel two will be Mr.
John Heinrich, the Director of the Customs Management Center
for the Customs Service which handles this region.

Mr. Heinrich.

Mr. HEINRICH. Good morning, Mr. Chairman. I don’t know
whether I mentioned it yesterday, but I was the Los Angeles dis-
trict director from 1986 to 1995. I brought with me today our new
port director for the port of Los Angeles-Long Beach, Irene Jankov,
and also Tom Winkowski, our port director from the Los Angeles
International Airport. My remarks will include a brief profile of Los
Angeles Customs ports of entry, as well as elaborating on our
workload and our staffing and assessing our enforcement threat.

Our Nation’s west coast is the preeminent gateway to the Pacific
rim. Los Angeles Customs collected over $4.2 billion in duties, fees,
and taxes in fiscal year 1997 which just ended. This represents 19
percent of the total Customs collections of $22 billion last year.

Los Angeles Customs leads the Nation in international trade.
Our ports of entry process more than $180 billion in two-way trade
per year, which provides a significant contribution to the regional
economy.

The seaport complex, as mentioned before, is the largest in the
Nation, both in terms of cargo and tonnage. It is the third busiest
seaport in the world and is estimated to support several hundred
thousand jobs in the greater Los Angeles area. Explosive growth of
trade with the Asia-Pacific region has made Los Angeles and Long
Beach the No. 1 and No. 2 highest volume containerized cargo
ports in the Nation. Last fiscal year, 3.3 million import containers
entered that complex. This represents a 20 percent increase over
the previous year.

In addition to commercial cargo, approximately 1 million inter-
national cruise line passengers were processed through the Los An-
geles seaport. This gave us a ranking of No. 3 behind Miami and
Fort Lauderdale.

The processing of international passengers at LAX has grown
even more significantly, 2.3 million passengers in fiscal year 1987
to, now, 7.3 million passengers in fiscal year 1997, more than tri-
pling in 10 years. LAX is the third busiest airport in the United
States for international passenger processing behind JFK and
Miami. By the year 2000, the city of Los Angeles estimates that
over 8.6 million international passengers will arrive at LAX.

International air cargo is equally significant at LAX. It is the
third busiest air cargo center in the country, and using value as a
measure, LAX leads the world in cargo with $70 billion.

In summary, growth in international trade through Los Angeles
has significantly outpaced the Nation. According to the Commerce
Department, in the last 10 years, it has climbed from $68 billion
to $180 billion.

During the past decade, funding for personnel within the Los An-
geles Customs area increased 63 percent from 399 frontline posi-
tions, which would include the inspectors, the import specialists,
and canine officers in 1986, to 650 positions in 1997. The jori
of these positions, I would like to point out, are located at . For
example, at LAX the complete complement of inspectors now num-
bers 330 while at the seaport 144 inspectors are authorized.

3



2

ment Center has several unique characteristics. It has the largest
border crossing in the entire world in San Ysidro, where an aver-
age of about 1 million human beings cross each week. This Cus-
toms Management Center is adjacent to Mexico, one of the most
important drug source countries which is responsible for the lion’s
share of dangerous drugs entering the United States from South
America. It is home to the largest container port complex in the
world in the form of the Ports of Long Beach and Los Angeles, and
it is the most populous region within the Customs Service.

Despite this unique geographic relationship with Mexico and the
volume of goods that flow through Long Beach, the first port in the
United States, and Los Angeles, the second port in the United
States, and the international’ airports, southern California has not
received resources on a par with the challenges and definitely not
in comparison with other Customs regions. It is as if the resources
given to the Customs Service were frozen at the ratios of the 1950's
when Los Angeles was a small city and the bulk of the trade activ-
ity in California went elsewhere on the Pacific coast.

Well, California overtook New York in population decades ago,
and we certainly have our share of problems with drugs, crime, and
illegal trade activity. As resource allocation has not seemed to
change, it is time for Congress to examine the situation. This is the
first step in what is going to be a long process, both in Washington
and in the field, that will include a detailed examination of how the
Customs Service ailocates its resources.

Based on information provided by the Customs Service, it ap-
pears the average agent in Los Angeles is responsible for more
drug seizures, more inspections of aircraft and passenger traffic,
and more shipping containers. This doesn’t imply that Customs of-
ficers in New York are featherbedding, but it is clear that Califor
nia doesn’t receive resources relative to the threats which face the
Customs Service here. Customs officers in California are forced to
do more with less, to inspect less, to let some suspicious small in-
fractions go uninvestigated because of limited resources.

The marginal benefit of an officer in California may well be
greater than one elsewhere. Taxpayer resources should be focused
where they will have the greatest impact. That was the premise of
the Government Performance and Results Act of 1994. In that law,
we tried to get agencies to focus on their results. Without an exam-
ination of the resources needed to do the job, and their appropriate
geographical distribution, a move toward results-based government
will fail. We do not want that to happen, and that is why we are
here today.

We are joined this morning by witnesses from the General Ac-
counting Office and the Customs Service, as well as from the pri-
vate sector, to explore some of these questions and other Customs.
related issues.

{The prepared statement of Hon. Stephen Horn follows:]


72

Mr. Horn. In terms of the fees imposed on ship traffic, how does
that vary in some way?

Mr. TROTTER. There is a great variance. There is not a correla-
tion. We collect merchandise processing fees, literally hundreds of
millions of dollars, but they go into the general revenue and cannot
be accessed by the Customs Service.

Mr. Horn. That is interesting. So that is one thing we should be
thinking about, the degree to which we can access those fees to get
proper staffing.

Mr TROTTER. Yes, sir, and I think you will hear the trade when
they talk, that is routinely what they say. They bring containers
in and pay hundreds of millions of dollars in user fees and there
is no quid pro quo, that is what you pay and that is the service
you get.

Mr. Horn. The VTS system in this area is sort of shipper main-
tained by a separate fee the ports levy. They reimburse the Coast
Guard, as I remember, for six full-time positions. That helps on the
vessel identification and all the rest in the harbor and related
ocean areas, but they really see a payoff on that fee. And when the
Coast Guard came in to say they wanted $1 billion out of us in
terms of doing this at the other ports I said, “Hey, wait a minute,
we don’t do that in Long Beach and Los Angeles. Why don’t you
model that?” Well, eventually they have been, and saved the tax-
payers $1 billion on that one.

But I think we ought to be looking at all of those things as to
what we can do to get proper staffing levels here. So any informa-
tion you can give us would be helpful on that.

Mr. HEINRICH. Mr. Chairman, if I might just quickly interject, to
underscore what Mr. Trotter said, for example, probably in the last
7 years we have been able to add approximately 139 positions to
LAX. On the other hand, using very discrete Processing fees, spe-
cifically for some of the sea passengers that we have had increased
at the seaport, we have actually added about 16 positions to the
seaport.

Mr. Horn. That is the Los Angeles harbor which has passengers?

Mr. HEINRICH. Yes, that is correct. Although we do collect almost
$100 million overall in merchandise processing fees here at the sea-
ports, and Mr. Hensley has no access to that, either, in terms of
investigations.

Mr. Horn. I understand that the passenger funding under
COBRA has allowed for increased air passenger inspection re-
sources. So that is true, what you have been saying here. Now has
Customs ever looked to self-finance in terms of enforcement
through various asset seizures which you are entitled to as well as
any other enforcement agency? Is that not correct? What happens
to that asset seizure money? When a police department locally is
involved with you, they get a nice check, and I don’t think it is just
put in the city treasury. I think it goes probably to help the police
department. lin error on that?

ir. HENSLEY. No, Congressman, you are not. The asset forfeiture
fund is a Treasury fund now. It used to be a Customs fund. And
the majority of the resources are in fact shared with local agencies.
The SAC Los Angeles has shared over $55 million here in the Los
Angeles area.


27

The strategic plan has been coordinated with the implementation
of the Government Performance and Results Act, GPRA. We be-
lieve that we have made a good beginning, although we recognize
that we still have much to do, as the GAO response just stated.

Performance-based management has been implemented for var-
ious Customs programs. Within the Office of Investigation, a per.
formance-based management system was specifically designed to
provide meaningful and comprehensive information on the produc-
tivity of individual field offices by comparing and evaluating staff-
ing levels in relation to enforcement results and threat. The results
of the investigative performance evaluation system has served as
tool to aid Customs management in decisions pertaining to alloca-
tion and use of investigative resources.

Customs has also been successful in utilizing performance-based
management in the aviation program.

While we realize success in program level, performance-based
management, one area in which our thinking is maturing is in the
strategic planning and evaluation of law enforcement efforts. These
include narcotics smuggling, money laundering, trade fraud, and
export violations.

Customs has relied on traditional workload and output-type
measures, such as caseload seizures and arrest data, to gauge effec-
tiveness. We're now taking these measures one step further by in-
corporating meaningful outcome-type measures which reflect our
enforcement-related strategic goals, thereby enabling policy and
budget decisionmakers to focus resources in those areas with the
greatest potential impact.

These outcome-oriented measures indicate our impact on disrupt-
ing criminal organizations involved in violation of Customs law. To
measure the performance at our Customs ports, an operational
management report, OMR, has been developed. Each month the
OMR data warehouse provides more than 250 elements reflecting
port operations in key functional areas.

Further, Customs is implementing an integrated information
technology investment process which provides for continuous iden-
tification selection control and evaluation of instruments as part of
the evaluation documentation projects that are required to identify
performance measures.

With respect to financial measurements, last spring Customs
reached a milestone, an unqualified or clean audit opinion for fiscal
year 1996. Further, the Treasury Office of Inspector General re-
moved its prior qualification for the fiscal year 1995 balance sheet.
These were significant accomplishments for Customs, which col-
lected approximately $22 billion in 1996, second only to the Inter-
nal Revenue agency, and in which we seized more narotics than
any other Federal agency, over 1 million pounds, which was a
record year for Customs. Customs’ 1998 annual plan is derived
from the strategic plan.

On a final note, Customs’ budget submission for fiscal 1999 re-
flects new performance measures. For the first time, the budget is
being presented in alignment with Customs’ three core processes
and a single business component, as well as two new additional
budget activities of “commercial” and “drug and other enforce-
ment.” This further strengthens the linkage between those re-


70

an apparent imbalance in that staffing, something that I think you
stated in your opening.

There are many other factors that go into that. I can’t defend
them all here, nor do I think you would want me to. But if you talk
about California, and you talk about San Francisco, L.A., and San
Diego, I think you would see it is very well represented across the
board with Customs offices throughout this country.

Mr. Horn. In other words, you are saying the New York Customs
operations within the State of New York would not be out of pro-
portion to all of California?

Mr. TROTTER. Yes, sir, and we have some very Jarge border cross-
ings in New York as well, including Buffalo, NY, Champlain, NY,
and some very large border operations as well. And I think that
that is once again what the GAO was talking about, to try to look
at this in more of a totality of the threat and the workload, and
that is how we would like to address it with you, sir.

Mr. Horn. Well, you can separate out the border operations and
compare them. I am sure our southern border, there is more flow-
ing through there every night than probably the whole rest of the
Nation put together. Maybe Miami-Dade is an exception to that.
But when you compare apples and apples, which are ports in this
case, the ports of New York-New Jersey are all under one author-
ity, and the ports of Long Beach-Los “Angeles are under separate
authorities, however you treat them as one. Your Customs people
are moved back and forth, based on where the action is in terms
of unloading between either Los Angeles or Long Beach. And I
gather from what I have been told over the last 3 years—this is
a 2-year-old hearing that has been on the list that we're finally get-
ting to—that there is an imbalance in just that port relationship.

Now if we want to take JFK, and LAX, I guess, is third after
JFK and Miami airport, I take it. I wondered what happened to
O'Hare as I went down that list, and if there are similar problems
in O’Hare, because I know a lot of people when they take off for
America, certainly on the immigration side, it is either JFK,
O’Hare or LAX that they land at. I am not sure what the drug traf-
fic is and all the rest that is snuck in by way of air. Can you en-
lighten me as to O'Hare and whether they should be in the top
three?

Mr. TROTTER. Well, they are not in numbers of bodies that proc-
ess through there. I think they are a little over 3 million, just
speaking off the top of my head. They are certainly not in the L.A.,
Miami, New York context. I think what is a little more difficult to
understand, sir, and what we would like to clarify, and Mr.
Heinrich spoke about it a little bit, our airports are pretty evenly
matched for staff because we staff under a different set of cir-
cumstances at the airport. We use a user fee concept, and he spoke
to that. COBRA, we call it.

I think when you look at the airports whether it be Miami, New
York, Chicago, or L.A., you are going to see them commensurate to
the workload and threat. There is no doubt about that. There will
be some differences but not great numbers of differences for pas-
sengers processed for threat, for cargo.

at happens when you move away from passenger processing
and you get into the cargo environment, there is no doubt about


63

Mr. Horn. Well, we thank you, Mr. Heinrich. You are correct,
you do have a fine group of people out there. You are the Nation’s
oldest law enforcement agency at the time of the First Congress,
and you paid all the bills of this country, with the exception of the
Civil War when they had a temporary income tax—later thrown
out by the Supreme Court of the United States—right up to the
First World War; and the money you bring in is still important to
the bankroll of the Federal Government.

Let me just get a few things straight for the record on the report-
ing relationship. Mr. Hensley, you as special agent in charge, to
whom do you directly report?

Mr. HENSLEY. I report directly to the Assistant Commissioner for
Investigations in Washington.

Mr. Horn. I see. OK. So that is a direct line to Washington?

Mr. HENSLEY. Yes.

Mr. Horn. What are the relationships with Mr. Heinrich’s oper-
ation and your own operation?

Mr. HENSLEY. We work in a compatible management team con-
cept, and share information, targeting and threat throughout the
year. In fact, our respective employees work in strategic problem-
solving teams to address specifically the issues that we both
brought up here during our opening statements—the smuggling,
the containers at the port, the facilitation of passengers, yet still
targeting narcotics violators. Those are all things we work on joint-
ly on a continuous basis. We meet continuously, and we have a
very close team relationship here.

Mr. Horn. Mr. Heinrich, to whom do you report?

Mr. HEINRICH. I report to the rather tall gentleman to my left,
Mr. Trotter, the Assistant Commissioner for Field Operations.

Mr. Horn. Mr. Trotter, to whom do you report?

Mr. TROTTER. I report to the Deputy Commissioner of Customs,
Mr. Samuel H. Banks, who is now Acting Commissioner of Cus-
toms.

Mr. Horn. With the retirement of the Commissioner?

Mr. TROTTER. Yes. :

Mr. Horn. I talked to the Commissioner, I think his last day in
office, practically. Has there been a new Commissioner rec-
ommended by the President at this point?

Mr. TROTTER. No, sir, not to my knowledge.

Mr. Horn. Knowing that reporting relationship, does the budget
process work the same way? In other words, Mr. Hensley, does
you budget request go directly to the Assistant Commissioner for

inforcement?

Mr. HENSLEY. Yes, it does.

Mr. Horn. And, Mr. Heinrich, yours goes directly in to Mr. Trot-
ter, representing yours?

Mr. HEINRICH. Yes

Mr. Horn. And all of your compatriots in similar positions have
that relationship? Then, Mr. Trotter, what.do you do with the
budget recommendations when they come in from the field? To
whom do you submit that budget? Is it to the Deputy Commis-
sioner or an assistant for management?

Mr. TROTTER. Yes, sir. We do have a Chief Financial Officer, who
is also the Assistant Commissioner for Finance; and we sit down


20

really don’t know what you are missing. One of the challenges for
the Customs Service is to be able to gather data on the overall ex-
tent of the problem.

For example, at a cargo port of entry, Customs will know what
drugs it seizes, how many, the amount, the weight, et cetera. It
will know how the seizures at that port compare to other ports.
What Customs won't know specifically, and the challenge for it, is
how much drugs really came through that port so they will know
whether they got 1 percent of the drugs or 50 percent of the drugs
coming in. That is the real issue.

Mr. Horn. I agree with you completely. That was my reaction
when I read the testimony. They do a fine job in many areas, but
we don’t have what is 100 percent of the universe and what share
is it which we hit, 5 million or 25 million, whatever it may be.

What is your best thinking as to how some agencies have coped
with that problem of what is out there in criminality? Let’s face it,
it is a pretty dicey operation to try to figure that out. What is your
feeling on that?

Mr. RABKIN. Well, I’m more familiar with the drug control as-
pects. I will speak about that a bit.

I think the Federal agencies are just at the beginning of getting
a handle on how to project or estimate the amount of drugs that
are entering the country. There are a number of intelligence infor-
mation sources that are providing information about crops that are
grown in the producing countries and the amount of the crops that
are converted into drugs, the amount that they think is being
shipped from those source countries through the transit zone into
the United States. As those estimates get refined—and these esti-
mates are being gathered through the Intelligence Community, the
military is involved in this, et cetera—we will have a better sense
nationally of the drugs coming in.

Now, where they come in, how many of them come through ports,
how many of them come in between the ports is another story. I
think there is a little less certainty on that issue. And, of course,
the Customs Service’s responsibility being at the ports, they work
in concert with other Federal agencies in trying to achieve the ulti-
mate goal of reducing the supply of drugs in this country.

Mr. Horn. I note in your testimony that I think Senator Fein-
stein has asked for a study of some aspects of allocation of re-
sources. Could you describe what that study is?

Mr. RABKIN. Certainly. About a year ago, Senator Feinstein
asked us to do a lot of work looking at the Customs Service drug
interdiction activities, specifically targeted at cargo ports of entry
along the Southwest border. We looked at a variety of issues from
what Customs’ mission was to the kind of technology they were
using, the kind of intelligence they were gathering, and the kind
of training they were giving to inspectors.

We have refined that work for her and are focusing on three
things now: No. 1 is resource allocation, and I will come back and
explain that in more detail; No. 2 is the entry processes that are
used to facilitate the low-risk traffic through the ports and to en-
sure that the high-risk traffic is more likely to be inspected; and
No. 3 we are also looking at some of the controls over the auto-
mated law enforcement communications system.


37

areas is a 10, and can best be described as overwhelming. This as-
sessment is consistent with threat assessments prepared by the
FBI, the Los Angeles metropolitan high intensity drug trafficking
area, and the Drug Enforcement Administration.

While these investigative priorities reflect the areas of greatest
threat, the SAC/Los Angeles is also responsible for conducting in-
vesti ations into other areas such as child pornography, terrorism,

tussian organized crime.

ante concludes my statement. I have included in my formal writ-
ten presentation for the record more in-depth presentation and dis-
cussion of our four major investigative priorities.

Thank you again, Mr. Chairman, for the opportunity to appear
before the subcommittee today.

Mr. Horn. Well, we thank you and your staff for their fine work.

[The prepared statement of Mr. Hensley follows:]


57

included redeployment of 14 inspectors to our antismuggling unit.
At the airport, we also redeployed an additional 14 positions from
existing resources, focused on this antismuggling problem.

We are very concerned about the internal conspiracy problem
that we know plagues the Nation as a whole, and that is where we
are focusing our energy and our efforts, to beef up these units.
Clearly, our threat continues to be heroin and cocaine smuggling.
Canine enforcement units continue to be used successfully. We
have 26 units now in this area, working in this effort at the airport
and the seaport.

Commercial fraud is another significant threat to our Nation’s
economy, particularly here in Los Angeles with the scope of inter-
national trade. Last fiscal year, we seized over $10 million worth
of illicit imports. Violations include illegal use of patents, trade-
marks, and copyrights, collectively known as IPR [intellectual prop-
erty rights]; false or noncountry of origin; evasion of textile and ap-
parel quotas; hazardous products prohibited by the Consumer
Products Safety Commission, and the FDA.

Our Fines, Penalties, and Forfeitures Division, which is respon-
sible for handling all of the enforcement activities at both of the
ports, as well as for the special agent in charge, handled over 6,100
seizure, liquidated damages, and penalty cases last year, covering
a wide range of violations. The gross revenue raised from the sale
of seized, forfeited, and abandoned property last year was $13.2
million in Los Angeles.

To complement these efforts, I would like to add, since we have
a representative from the trade today, that we have been working
very closely with the trade community. We have an extensive trade
and travel community outreach program. We have a worldwide Net
site. We have an electronic bulletin board that the trade can access.
We have trade fairs, a lot of seminars going on, and we are work-
ing very closely with the trade to raise that level of compliance be-
cause, frankly, as far as we are concerned, Mr. Chairman, the more
legitimate shipments we can get into compliance, the more time we
are going to have to focus on serious, willful violators who are real-
ly trying to beat the system.

In conclusion, you can see we have a big job here in Los Angeles,
as well as across the Nation, and we recognize and support the gov-
ernment’s need to reduce our budget deficit, to cut unnecessary
costs and to work more efficiently and effectively. I would just like
to commend the dedicated men and women of the Customs Service
here in Los Angeles, who every day go out to do an even better job;
and with the help of Congress, I know that we are going to be able
to do that. I am confident that we can live up to the trust placed
in the Customs Service by the American people, who expect us to
ensure a safer and more secure Nation for them.

So thank you for this opportunity to testify, and I would be
happy to take questions also.

(The prepared statement of Mr. Heinrich follows:]


23

technology need. I watched it in action yesterday, and it is impres-
sive. But what is the relationship there between manpower where
you just physically have to open that container, in this case of the
ports, and spread it out so you can examine it?

Mr. RABKIN. I am not in a position to tell you how many they
need. I know they probably need more than they have asked for,
more than they have received. But it depends on what you set as
the level at which they are going to be inspecting the cargo or the
people or the conveyances coming in.

If you talk about inspection rates of all the trucks that cross the
border, what percentage of them should the Customs Service be
emptying and examining in detail? They can do 100 percent of
them; but the trucks will be backed up at the border all the way
through Mexico, and the trade community will say that is not fair
to them.

What the Customs Service is talking about in its strategic plan
is identifying low-risk traffic, letting that go through and inspect-
ing that at a lower rate than the high-risk traffic. The question
then becomes, how good are they at separating high-risk and low-
risk; and second, are they actually then giving the high-risk traffic
the higher inspection rate as they had planned? That is another
one of the issues that we will be looking at for Senator Feinstein.
It comes into play at airports and at the seaports as well.

Overall, they expect that a very high percentage of the goods and
people coming in are in compliance. It’s that small percentage that
is willfully noncompliant, and how does the Customs Service target
that? And they are investigating methods using, as I said, intel-
ligence, knowing what is coming in ahead of time, factoring in the
likelihood that it is coming from a high-risk country or from a high-
risk area or any other information they have about it to be able to
target those high-risk goods and give them more inspectional re-
sources, more inspectional attention than the low-risk.

Mr. Horn. Now, did you look in detail at the automated commer-
cial entry system that they are using on computers?

Mr. RABKIN. Other groups in GAO have looked at their attempts
at automation, and we have issued a few reports over the years on
some of the problems that the Customs Service is having. We have
had some concerns about their ability to define the architecture
that they want for their automated systems. We have reported to
the Ways and Means Committee and the Appropriations Commit-
tee about some of our concerns.

As a result, the Appropriations Committee has fenced off some
of the funds provided | to the Customs Service for its modernization
program until the committees feel that the architecture that the
Customs Service is developing is done appropriately and ade-
quately.

Mr. Horn. When will that be resolved so the Appropriations
Committee can make a decision one way or the other?

Mr. RABKIN. My understanding is that our staff are supposed to
be briefing the Appropriations Committee by the end of this month.
But if you’re asking when the Customs Service will have an ade-
quate architecture, I am not in a position to tell you that now. I
don’t think they have it yet.


90

ties and responsibilities between Customs and the importing com-
munity. In particular, it placed substantial responsibility on im-
porters and Customs brokers to make legal determinations that
were formerly made by the U.S. Customs Service personnel. The
association's membership has responsibly complied with the re-
forms contained in the Modernization Act, notwithstanding the ad-
ditional responsibilities it has imposed.

One of the principal reasons for the enactment of the act was to
improve Customs processing by increasing its reliance on automa-
tion. This drive to automate has benefited both U.S. Customs and
the importing community. However, it is the perception of the asso-
ciation that Customs’ drive to automate at the port level has been
frustrated by Customs headquarters’ failure to complete the auto-
mation process. Customs has in large part implemented the process
of automation at present. However, the final building blocks in the
automation process have not been put in place. Completion of the
automation process is essential to the orderly Processing of Cus-
toms entries, and to Customs and Customs brokers realizing the
full benefits of automation.

The association perceives the failure to complete the automation
process as a result of Customs headquarters’ failure to focus on its
core business—cargo review, release, duty collection, anti-smug-
gling, and drug interdiction. Unfortunately, Customs headquarters
has allocated too great a portion of its resources in pursuit of too
many new initiatives, ‘and. has not directed sufficient resources to
its core businesses. This lack of focus has prevented Customs from
utilizing its resources in the most efficient manner. While these ini-
tiatives are laudatory, Customs headquarters must take one step
at a time and complete the basic automation process before divert-
ing resources to new programs. Its focus on “sexy” initiatives
should not detract from its key concerns, cargo processing, anti-
smuggling and drug interdiction.

A second problem perceived by the association is a result of Cus-
toms reorganization. In doing away with the districts and regions,
Customs headquarters has sought to empower the ports, and create
review directly from the port to headquarters. end result of
empowering these Customs ports is a lack of uniformity in Customs
administration at the port level, and excessive delays in adminis-
trative review by headquarters, which is inundated by port officials’
requests for review.

ile Customs itself has moved to informally create the
superports or the port council, this lack of uniformity is pervasive.
One of the goals of Customs reorganization and the act was to dis-
courage “port shopping” as a result of Customs processing, and to
ensure importers would choose ports based on the nature of the
transaction being processed. The result of Customs reorganization
and its empowerment of the ports is to sacrifice uniformity, and to
Greate new reasons for port shopping unrelated to the collection of

luties.

The reorganization has also resulted in a loss of expertise within
the agency. In the past, Customs commercial operations personnel
developed an in-depth understanding of the businesses of importers
whose entries they reviewed. As a result of the reorganization, and
the frequent adoption of new projects such as the Customs Man-



44

eraeae fa

CENTER FOR NARCOTICS TRAFFICKING PROCEEDS AND THE WESTERN
WAREHOUSE FOR DRUGS SMUGGLED ACROSS THE SOUTHWEST BORDER
FROM EL PASO TO SAN YSIDRO. METROPOLITAN LOS ANGELES HAS BECOME
THE SECOND LARGEST POPULATION CENTER IN THE U.S. FURTHER.GIVEN
THE INTERNATIONAL MAKEUP OF LOS ANGELES, MONEY MOVES QUICKLY AND.
SURREPTITIOUSLY AROUND THE WORLD THROUGH REGULATED AND
UNREGULATED FINANCIAL INSTITUTIONS. IN LOS ANGELES COUNTY ALONE,
THERE ARE OVER 2,800 REGULATED FINANCIAL INSTITUTIONS AND PROBABLY
CLOSE TO A THOUSAND SMALL, NON-BANK FINANCIAL INSTITUTIONS WHICH
OFFER CURRENCY EXCHANGE, CHECK CASHING, MONEY ORDERS, AND WIRE
TRANSFER SERVICES.

MONEY LAUNDERING IN THE LOS ANGELES AREA IS NO LONGER LIMITED TO
‘TRADITIONAL SOUTH AMERICAN NARCOTICS PROCEEDS. EVERY TYPE OF
MONEY LAUNDERING IMAGINABLE 1S OCCURRING IN LOS ANGELES. OUR
EXPANDING FOCUS ON MONEY LAUNDERING INVESTIGATIONS HAS
INCREASED TO INCLUDE GROWING TRANSNATIONAL ACTIVITIES ORIGINATING
IN THE RECENTLY DISBANDED SOVIET UNION, AS WELL AS THE MIDDLE AND
FAR EAST, TASK FORCE INVESTIGATIONS WITH THE DRUG ENFORCEMENT
ADMINISTRATION AND THE INTERNAL REVENUE SERVICE HAVE IDENTIFIED
EXTENSIVE LAUNDERING ACTIVITIES INVOLVING NARCOTICS PROCEEDS THAT
HAVE BEEN TIED TO ONGOING INVESTIGATIONS IN THE NETHERLANDS,
GERMANY, AND THE UNITED KINGDOM. WHILE CUSTOMS CONTINUES TO
ATTACK THE EVER-PERSISTENT FLOW OF NARCOTICS PROCEEDS DESTINED
FOR MEXICO, CENTRAL AND SOUTH AMERICA, RECENTLY REDEFINED
STATUTES EXPANDING SPECIFIED UNLAWFUL ACTIVITIES HAVE MULTIPLIED.
THE TYPE AND NUMBER OF INVESTIGATIONS THAT FALL WITHIN THE
CUSTOMS MISSION

EXAMPLES OF LAUNDERING SCHEMES INCLUDE: INVESTING ILLICIT
PROCEEDS IN ASSETS SUCH AS PROPERTY, VEHICLES, AND BUSINESSES
(LEGITIMATE AND BOGUS), SMUGGLING MONEY INTO AND OUT OF THE
COUNTRY, STOCKPILING CASH IN "STASH PADS" AND DISBURSING PORTIONS
‘TO COURIERS OR BROKERS FOR PLACEMENT, STRUCTURING CASH
‘TRANSACTIONS AT BANKS, AND USING LEGITIMATE COMMERCIAL IMPORTS.
AND EXPORTS AS A MEANS FOR UNDERVALUATION, OVERVALUATION,
INSURANCE FRAUD, AND DOUBLE INVOICING. USING COMMERCIAL IMPORTS
AND EXPORTS HAS BECOME THE FAVORED METHOD OF MOVING LAUNDERED
U.S. DOLLARS INTO THE “LEGITIMATE” COLOMBIAN ECONOMY.

CURRENCY NOT ONLY TRAVELS INSTANTANEOUSLY AROUND THE WORLD
THROUGH THE PUSH OF A WIRE TRANSFER BUTTON, BUT ALSO IS
PHYSICALLY TRANSPORTED IN LARGE AMOUNTS THROUGH OUR PORTS OF
ENTRY. SINCE JANUARY 1995, OVER $4.7 BILLION HAS BEEN PROPERLY
REPORTED IN COMPLIANCE WITH TREASURY REGULATIONS, ON CURRENCY
AND MONETARY INSTRUMENT REPORTS (CMIR) WITHIN THE SAC/LA


85

pervasive. One of the goals of Customs reorganization and the act was to discoura

‘port shopping” as a result of Customs processing, and to ensure importers would
choose ports based on the nature of the transaction being processed. The result of
Customs reorganization and its “empowerment” of ports is to sacrifice uniformity,
and to create new reasons for port shopping unrelated to the collection of duties.

What do you think about that?

Mr. TROTTER. Well, that is very much a concern of ours. I was
a regional commissioner before the reorganization. I was on the re-
organization team, and I know how important uniformity is to the
trade community. One thing that we now realize is that this is to
be partially true. However, we are trying to look at a new way to
manage the organization.

Instead of top down, we are trying to empower our ports, but we
are trying to develop it with a different concept, which we call port
councils. In other words, bring the West Coast ports together, the
port directors, put them in a room, and talk to them about these
very same issues. We are doing that very successfully along the
Northern border.

It is very much of a concern to us. We understand this. I think
that some of it is driven by individuals in the ports, but I think
some of it is a lack of headquarters leadership, so I do not deny
that. I don’t think it is as bad as some would want us to kind of
react to, but I think what it is doing is forcing us to relook at how
we manage this organization. As you know, we have changed this
organization dramatically.

‘What Mr. Weise would like to say is, in the 3 years since we
have changed this organization, our productivity continues to go up
and we are very proud of that. And that is with deep appreciation
to the people in this room, our partners in the National Treasury
Employees Union and the people that we work with. It is a massive
change in this organization. We are trying to streamline it. We’re
trying to flatten it. We're trying to listen to the trade community
as our stakeholders have asked us to. And it is a change, but I am
deeply concerned about that and I spend a lot of my energy work-
ing on that very same issue.

(r. HORN. Well, I can appreciate that. Let me ask you, since you
mentioned a couple of times the employees union and I have
worked with them on a number of their interests. Are we saying
that the only way we would change the imbalance, wherever it is,
Detroit, New York, southern California, our ports here, or what-
ever, is to simply appoint the younger, newer people brought into
the system as they get out of school, or are there promotion oppor-
tunities sufficient that one would want to move across the country
if they get a promotion? I realize they are going from a high cost
area of New York to a high cost area of southern California. It is
about equal, and Seattle would be equal for other reasons.

Mr. TROTTER. Generally speaking, we have quite an opportunity
for people who want to transfer laterally or be promoted within the
organization. We don’t get a lot of that simply because of those
issues that you spoke to. One, they have grown up in an area, or
two, family ties, and the costs involved.

No, I wouldn’t say that, sir. I think the agents have done a re-
markable job in transferring people who are more senior. Some-
times you don’t want just rookies; you want senior people, but they
have a mobility clause in their package when they are hired. Our


62

part of the trade community, traveling public and population at large in order to raise voluntary
compliance with the laws and regulations enforced by the U.S. Customs Service.

In conclusion, Mr. Chairman, you can see we have a big job here in Los Angeles, as well as across
the nation. We recognize, respect and support our government’s need to reduce our budget
deficit, cut unnecessary costs and work more efficiently and effectively. But U.S, Customs, our
country’s oldest law enforcement agency, is also one of only three revenue-praducing agencies in
the Federal government. The dedicated men and women of Customs protect our citizens, our
businesses and our way of life year after year. We are working every day to do an even better job
and to do so with the help of the Congress. I am confident we can live up to the trust placed in
the Customs Service by our citizens who expect us to ensure a safer and more secure nation for
them and future generations. Thank you for the opportunity to testify. We will be happy to take
your questions


86

folks do not. It is very difficult for us as an employer to say, “Well,
you got your job in New York and that is where you want to live,
but now we are going to move you to California.” People are very
valuable to us. We don’t want to lose those folks.

So it does make it more difficult, perhaps, but even on the en-
forcement side where they don’t deal with the union and where
they do have a mobility clause, they are interested in where their
people want to work. We know that people who want to work some-
place are more productive than folks who don’t. But we do offer
those kinds of opportunities. We offer it in our preclearance sites
in Canada. We got a lot of people from around the country who
apply for that.

But it is difficult to recruit people into the Los Angeles-Long
Beach area. They come in here, government salaries are so low,
they cannot afford to live. I talk to these folks. Folks live in their
cars. It is very difficult to do that.

Mr. Horn. Isn’t Los Angeles-Long Beach eligible for a regional
differential under the Civil Service?

Mr. TROTTER. Yes, sir, but I don’t even know what the starting
salaries are now, but they are low. John do you know what the
starting salaries are for GS-5’s coming in?

Mr. HEINRICH. Probably a little above $20,000, I think, and the
cost-of-living is a little greater than 8 percent on top of that.

Mr. Horn. You mean the regional differential?

Mr. HEINRICH. Yes.

Mr. Horn. Why don’t we get a little exhibit here of what is the
salary level here, what is it in Miami, what is it in New York, what
is it in southern California, namely Los Angeles-Long Beach metro-
politan area, and the degree to which the regional differential,
which a lot of us have fought for, is still applied.

And is there a problem in negotiating with the union in terms
of less inflexibility? It seems to me a union is usually interested in
having members, and I would think they would want more people
to be assigned to the Customs Service. That is our job at the con-
gressional level. And I would think they would want some flexibil-
ity so people could take advantage of things.

So you are saying under that union clause it is OK if the person
wants to go, but not OK if Customs says this is where we need you,
you are going?

Mr. TROTTER. Sir, we have two different options. We manage the
Customs Service; the union doesn’t. We have rights given to us by
the executive department and by law and by regulation. But what
we have traditionally done in the past is not force people to take
moves. If they want to voluntarily take a move, whether it be a lat-
eral reassignment or promotion, we encourage that, as well as the
union. But we have traditionally not forced people to take moves.

We are an agency that has held very few Reductions-in-Force
[RIFs] throughout our time. We take a great deal of pride in that.
We think it makes for a better, more productive work force, and we
are small enough that we have been able to do that, sir.

I meet every other week with the president of the National
Treasury Employees Union, Mr. Robert Tobias, in Washington, DC.
We go over what is important to him and what is important to me.
We have never really discussed this at length. I think that the em-


31

Mission Support Processes:

© Information and Technology Process: Maximize the use of information and technology to
enhance productivity, support business processes, and meet the challenges of Customs
missions,

© Finance: To be recognized as a leader in financial management, providing the highest
quality, most cost-effective financial management services through customer involvement,
an empowered workforce, and modern, integrated financial systems.

. ‘Human Resources Management: To be a strategic partner and change agent, to provide
high quality, low cost human resource management services that support the Customs
Service mission and are responsive to the needs of managers.

The Strategic Plan has been closely coordinated with the implementation of the Government
Performance and Results Act (GPRA), otherwise referred to as the Results Act. We believe that
we have made a good beginning, although we recognize that we still have much to do.

PERFORMANCE-BASED MANAGEMENT

Performance-based management has been implemented for various Customs programs. Within
Customs Office of Investigations, a performance-based management system has been in use since
1992, The system was specifically designed to provide meaningful and comprehensive
information on the productivity and results of the individual field offices within the Office of
Investigations by comparing and evaluating staffing levels in relation to enforcement results and
the potential for enforcement results, or the threat. ‘The results of the investigative performance
evaluation system have served as a tool to aid Customs management in decisions pertaining to
allocation and use of investigative resources. Over the years, the system has been routinely
reviewed and modified to ensure the most meaningful and accurate approach to investigative
performance evaluation and resource management, This past year, in fact, the system underwent
comprehensive review and is currently being revised to incorporate the recommendations of that
review.

‘Another enforcement program area in which Customs has realized success utilizing performance-
based management is its Aviation Program. Since the mid 1980's, Customs Air Program has
assessed its domestic air interdiction performance and resource allocation requirements based on
an integrated system of program-level workload, performance, and outcome measures, In the
early 1990's, the Air Program incorporated into this performance measurement system additional
measures to gauge its effectiveness and resource requirements in expanding operational program
areas such as investigative support and international interdiction activities.

While we have realized success in program-leve! performance-based management, one area in
which our thinking is maturing is in the strategic-leve! planning and evaluation of our law
enforcement efforts, to include narcotics smuggling, money laundering, trade fraud, and export
violations, Within these areas, Customs has faced many challenges in meeting the requirements of


Under the Government Performance and Results Act of 1993, executive
agencies are to develop strategic plans in which they define their
missions, establish results-oriented goals, and identify strategies
they will use to achieve those goals for the period covering at
least 1997 through 2002. The Act specifies that strategic plans
should contain (1) a mission statement; (2) agencywide long-term
goais and objectives; (3) approaches (or strategies) and the
various resources needed to achieve the goals and objectives; (4) a
description of the relationship between the long-term
goals/objectives and the annual performance plans; (5) an
identification of key external factors; and (6) a description of
how program evaluations were used to establish and revise strategic
goals.

‘The Customs Service's plan addresses the required elements. It
also contains a discussion of management challenges but, in GAO's
opinion, does not adequately recognize Customs’ need to improve its
financial management and internal control systems, its controls
over seized assets, its plans to alleviate year 2000 problems, and
its plans to improve computer security.

Regarding its resource allocation process, Customs officials told
GAO that they were not aware of any formal agency-wide efforts
prior to 1995 to determine the need for additional cargo and
passenger inspectional personnel for its 301 ports. However,
Customs officials told GAO that in June 1995, in preparation for
its fiscal year 1997 budget request and a new drug enforcement
operation (Hard Line), Customs conducted a formal needs assessment
using factors such as the need to (1) fully staff inspectional
booths and (2) balance enforcement efforts with the need to quickly
move complying cargo and passengers through the ports.


46

omn-sae fr Faged)

BOTH CRIMINAL AND CIVIL VIOLATIONS. THE ULTIMATE GOAL IS TO PREVENT
‘THE LOSS OF FORFEITABLE ASSETS. IF POSSIBLE, LASAR AGENTS OBTAIN
SEIZURE WARRANTS FOR ASSETS, WHICH ARE SERVED AT THE SAME TIME
OTHER AGENTS EXECUTE SEARCH WARRANTS FOR EVIDENCE. THIS
REQUIRES THE LASAR GROUP TO ESTABLISH THE MONEY LAUNDERING
CHARGES AND TO TRACE THE MONEY/PROFIT FLOW TO ESTABLISH
PROBABLE CAUSE FOR SEIZURE WARRANTS, MANY OF THE INVESTIGATIONS
CONDUCTED BY OUR LASAR GROUP INVOLVED A COORDINATED EFFORT
WITH FOREIGN COUNTRIES VIA OUR CUSTOMS ATTACHE OFFICES. FROM
OCTOBER 1, 1994, THROUGH SEPTEMBER 30, 1997, THE LASAR GROUP HAS
BEEN RESPONSIBLE FOR SEIZING $17.3 MILLION IN CASH AND ASSETS,

IN ADDITION TO THESE TWO SPECIALIZED MONEY LAUNDERING GROUPS,
OUR RAC OFFICES ALSO INVESTIGATE TARGETS IN THEIR GEOGRAPHIC
AREAS. FOR EXAMPLE, THE RAC/LAS VEGAS INVESTIGATION OF KEN MIZUNO
LED TO THE IDENTIFICATION OF THE LARGEST NON-NARCOTIC MONEY
LAUNDERING CASE IN THE HISTORY OF THE U.S. CUSTOMS SERVICE.
MIZUNO, A JAPANESE NATIONAL, CURRENTLY ON TRIAL IN JAPAN FOR
DEFRAUDING SEVERAL THOUSAND JAPANESE IN CONNECTION WITH THE,
FRAUDULENT SALE OF GOLF COURSE MEMBERSHIPS, LAUNDERED MORE
THAN $270 MILLION OF FRAUDULENT PROCEEDS IN THE UNITED STATES.
SEIZURES AND SUBSEQUENT GOVERNMENT AUCTION OF MIZUNO'S ASSETS
PURCHASED WITH LAUNDERED FUNDS IN THIS CASE, TOTAL MORE THAN $100
MILLION. MIZUNO HAS BEEN INDICTED BY THE U.S. ATTORNEY IN NEVADA.
AND IS TECHNICALLY REMAINS A FUGITIVE IN THE U.S. HOWEVER, HE |S.
CURRENTLY SERVING A LENGTHY SENTENCE IN JAPAN.

3. CUSTOMS FRAUD:

IN 1994, LOS ANGELES BECAME THE NATION'S TOP INTERNATIONAL TRADING
CENTER IN THE UNITED STATES BY DOLLAR VALUE. CARGO VALUED AT OVER
$146 BILLION WAS CLEARED THROUGH THE LOS ANGELES CUSTOMS PORT
THAT YEAR. APPROXIMATELY 125,000 CONTAINERS ARE EXPORTED EACH
MONTH. THE LOS ANGELES AND LONG BEACH PORT AUTHORITIES PREDICT
THAT IN THE YEAR 2000 6.4 MILLION CONTAINERS WILL BE
IMPORTED/EXPORTED THROUGH THESE TWO PORTS.

AS THE NATION'S TOP TWO CONTAINER PORTS, THE PORTS OF LONG BEACH
‘AND LOS ANGELES RECEIVE MORE THAN 50 PERCENT OF THE TOTAL
CONTAINER VOLUME THAT PASSES THROUGH WEST COAST PORTS. THIS
VOLUME EQUALS 25 PERCENT OF ALL FOREIGN CARGO ARRIVING IN THE.
UNITED STATES. THE COMBINED TRADE VOLUME OF THE PORTS OF LONG
BEACH AND LOS ANGELES PLACES THEM IN THIRD PLACE GLOBALLY,
FOLLOWING HONG KONG AND SINGAPORE. WITH CONSTRUCTION OF THE
ALAMEDA CORRIDOR AND THE EXPANSION OF THE LONG BEACH AND LOS
ANGELES PORTS, TRADE IS EXPECTED TO INCREASE FROM THE CURRENT


6

leaving the country, as well as two chronic problem areas, drug
smuggling and money laundering.

Third, the plan describes the strategies that Customs intends to
use to achieve its goals in each area; and fourth, it lists some per-
formance targets it hopes to achieve for some of its goals. Fifth, the
plan discusses some external factors that could significantly affect
Customs’ achievement of its goals. Sixth, it contains a listing of
program evaluations used to prepare the plan and a schedule of
evaluations to be conducted in each of the functional areas.

However, despite having the elements required by the Results
Act, Customs’ plan does not, in our opinion, provide enough details
on how the agency plans to address management problems which,
if not corrected, could hamper its ability to meet its stated goals.
These problems involve financial management and internal control
systems, including controls over computer systems and seized as-
sets. In addition, the plan does not mention how Customs plans to
deal with the potential year 2000 computer problems.

We have included these problems on our list of Federal programs
at risk because of vulnerabilities to waste, fraud, abuse, and mis-
management. My prepared statement gives more detail on each of
these issues.

Next, I would like to offer a few comments on Customs’ resource
allocation process, specifically, how Customs assesses its need for
inspectors at its ports of entry and how it allocates available re-
sources to the ports.

Customs officials told us that they were not aware of any formal
needs assessments conducted prior to 1995 for cargo and passenger
inspectors. In 1995, Customs requested additional inspectors to
help implement Operation Hardline along the Southwest border. In
assessing its needs, Customs considered a variety of factors, such
as how many inspectors it would need to fully staff the primary
cargo, passenger lanes, and inspection facilities at ports along the
Southwest border. Last year, Customs conducted another needs as-
sessment for inspectors and considered factors such as the number
of drug seizures at each port.

We are currently reviewing the documentation for those needs
assessments, as well as for the process by which the Customs offi-
cials determined the actual number of new inspectors to be as-
signed to each port.

Mr. Chairman, you specifically asked us to comment on the rela-
tionship of Customs inspectional staff to the workload at the major
ports of entry. We have obtained data from Customs on the total
number of inspectors assigned to its major cargo and passenger
ports, as well as on the latest workloads at those ports. However,
we only received these data from Customs on Tuesday, and they
are not in adequate detail to enable us to make these kinds of com-
parisons. To assess how workload-to-staff ratios at any port com-
pared to other similar ports, we would need reliable data on the
number of passengers or cargo processed at each port, as well as
the number of inspectional personnel assigned to these ports for
each of these functions.

Mr. Chairman, this concludes my summary. Mr. Dutton and I
will be glad to answer any questions that you have.

{The prepared statement of Mr. Rabkin follows:]


40

permet Fay

THE LOS ANGELES HARBOR IS UNDERGOING A TERMINAL EXPANSION THAT,
WHEN COMPLETED, WILL RESULT IN THE LARGEST CONTAINER TERMINAL IN
THE NATION. THIS PROJECT PARALLELS ANOTHER WHICH INCLUDES
EXPANDED LANDFILL, PORTAGE AND RAILHEAD FACILITIES PLANNED TO,
ACCORDING TO THE LOS ANGELES PORT AUTHORITY, DOUBLE CARGO
VOLUME IN THE NEXT 25 YEARS. ADDITIONALLY, WORK HAS BEGUN ON THE
“ALAMEDA CORRIDOR” WHICH WILL PROVIDE A HIGH-SPEED RAIL
CONNECTION THROUGH THE HEART OF LOS ANGELES JOINING THE CITY'S
MAIN GOODS AND PASSENGER TERMINAL (UNION STATION) WITH THE TWIN
PORTS OF LONG BEACH AND LOS ANGELES.

THE LOS ANGELES INTERNATIONAL AIRPORT (LAX) WAS RANKED THIRD IN
‘THE WORLD FOR CARGO PROCESSING IN 1995 WITH NEARLY 1.6 MILLION
METRIC TONS OF CARGO PROCESSED THAT YEAR. LAX WAS ALSO RANKED.
AS THE FIFTH BUSIEST AIRPORT IN THE WORLD IN 1995 WITH MORE THAN 53.9
MILLION PASSENGERS ARRIVING FROM AROUND THE WORLD. THE LAS
VEGAS INTERNATIONAL AIRPORT IS THE EIGHTH BUSIEST AIRPORT IN THE
NATION AND SERVICES FLIGHTS FROM MEXICO, ENGLAND, GERMANY AND
CANADA.

THERE ARE APPROXIMATELY 62 MUNICIPAL AIRPORTS IN THE SAC/LA
JURISDICTION AND MANY SMALL, UNCONTROLLED AIRPORTS, PRIVATE,
AIRSTRIPS, DESERTED ROADWAYS AND ORY LAKE BEDS.

‘AS A CONSEQUENCE OF THE LARGE GEOGRAPHIC AREA AND VARIETY OF
INVESTIGATIVE PRIORITIES FOR WHICH WE ARE RESPONSIBLE, WE ARE ALSO
FACED WITH THE CHALLENGES ASSOCIATED WITH COORDINATING OUR
ENFORCEMENT EFFORTS WITH THE LARGE NUMBER OF OTHER FEDERAL,
STATE, AND LOCAL LAW ENFORCEMENT AGENCIES, NUMBERING MORE THAN
125 INDIVIDUAL ORGANIZATIONS.

‘THE NUMBER OF EMPLOYEES CURRENTLY ON-BOARD IN THE LOS ANGELES
SAC OFFICE, INCLUDING THE FIVE RAC OFFICES, IS 164, CONSISTING OF 135,
SPECIAL AGENTS, 14 INTELLIGENCE RESEARCH ANALYSTS, 14
ADMINISTRATIVE AND SUPPORT PERSONNEL, AND ONE TECHNICAL
ENFORCEMENT OFFICER. WE ANTICIPATE FILLING A NUMBER OF VACANCIES
IN THE NEAR FUTURE,

THE INVESTIGATIVE PRIORITIES WITHIN THE SAC/LA AREA OF JURISDICTION
ARE NARCOTICS SMUGGLING, MONEY LAUNDERING, CUSTOMS FRAUD, AND
EXPORT CONTROL VIOLATIONS (PARTICULARLY IN THE AREAS OF HIGH
TECHNOLOGY AND WEAPONS.) THE THREAT LEVEL WITHIN EACH OF THESE
AREAS CAN BEST BE DESCRIBED AS EXTREMELY HIGH. THIS ASSESSMENT IS
CONSISTENT WITH THREAT ASSESSMENTS PREPARED BY THE FEDERAL
BUREAU OF INVESTIGATION (FBI), THE LOS ANGELES METROPOLITAN HIGH
INTENSITY DRUG TRAFFICKING AREA (HIDTA); AND THE ORUG ENFORCEMENT


19

Mr. Horn. Well, I thank you for that helpful overview. Let me
start with the General Accounting Office’s general review of agency
plans under the Results Act.

Has your portion of the office, in terms of the administration of
justice, had an opportunity to go through a lot of these plans that
are in draft stage and are slowly being submitted to the Congress,
including this oversight committee? What is your experience with
that?

Mr. RABKIN. I have reviewed the Justice Department’s plan in
detail. I have seen their first-draft plan that was released in Feb-
ruary. They had a few updates in July and August, and the final
plan was then submitted to the Congress on September 30.

Their plan has evolved. When it started out, it only had a few
of the elements that the Results Act required in it, and we wrote
them a report and commented on that. The plan has now improved
to the point where it contains all the elements, like the Customs
Service plan does.

GAO has also reviewed the Treasury Department plan and—as
you know, Customs is part of the Treasury Department—and their
plan also has evolved and now contains most of the elements, al-
though each of the elements could be refined to better meet the in-
tent of the Results Act.

One of the problems that we found in just about all of the agen-
cies’ plans that I am aware of is compliance with one of the act’s
requirements. This requirement is that the strategic planning be
linked to the agency’s annual performance plan for the coming fis-
cal year. Hence, there will be a linkage of the resources that are
available to the agency and the results that it expects to achieve.

The problem is that the agencies’ budgets and plan for fiscal
1999 are still to be reviewed within the administration. They won't
be made public until January 1998. At that point, we expect to see
more detailed information on how their strategic plan relates to
what they plan to do and the results that they expect to produce
in fiscal year 1999.

Mr. Horn. As you have reviewed the various law enforcement
plans, how would you stack up the Customs’ measurements with
those of other agencies? Is there something that Customs should
have that it does not have in terms of actually knowing the effec-
tiveness of their operations in terms of their utilization of man-
power? What is your feeling on that?

Mr. RABKIN. The Customs plan generally is one of the better
plans that I have seen. Customs had a plan early. They have been
involved in strategic planning even before the requirements of the
Results Act, so they are a little ahead of the game. Their plan is
very comprehensive and covers everything that they do.

When you get down to the nitty-gritty of the plans, though, about
what results are they going to produce, in some places they have
actual measures that you can look at. For example, when they talk
about compliance with applicable laws and regulations, they set a
goal that the trade community will achieve a 99 percent compliance
rate. The problem with that, however, as with most law enforce-
ment agencies, is that while you know what you see when you in-
spect a passenger or a cargo conveyance leaving or entering the
country, you know whether that is in compliance or not, but you


14

that (1) duties, taxes, and fees on imports are properly assessed
and collected; (2) sensitive data maintained in its automated
systems, such as information used to monitor its law enforcement
operations, are adequately protected from unlawful access and
modification; and (3) core financial systems capture all activity
that occurred during the year and provide reliable information for

management to use in controlling operations.

The Treasury Department's Inspector General (1G) issued an
unqualified opinion on Customs’ fiscal year 1996 financial
statements. However, the IG also reported that Customs had
significant internal control weaknesses and that the financial
management systems may not be able to provide reliable information
in a timely manner. Further, the IG's report disclosed that
extensive manual procedures and analyses were required to process
certain routine transactions and to prepare financial statements at
fiscal year-end. This lack of readily accessible, quality data
raises questions about Customs’ capacity to track and measure its
performance. Customs' strategic plan would be more helpful to
decisionmakers if it more clearly addressed how Customs intends to

correct these data reliability problems.

Our report on high-risk issues within the information technology

area cited information security and the year 2000 problem as two


cnerenoneorconaness Sepseeeme

oust of Representatives Prensa

2157 Ravounn House Ormce Bunane Pathe)
Wasrncton, OC 20815-6149 ee

Statement of Chairman Stephen Horn

Oversight of the Management Practices of the U.S. Customs Service

October 16, 1997

Today, we will examine several issues surrounding the US. Customs Service. 1a the past
50 years a revolution has occurred with respect to world trade. Any visit to the Pons of Long
Beach and Los Angeles will show the importance of trade to this region. The massive growth of
world trade has led to maay high-paying export industries in California. Jobs in trade typically
pay more than the average job However, this huge volume of trade has not been without its
difficulties

For example, the trade in "goods" has also been accompanied by a trade in “bads" -illegal
narcotics and herbs, pirated fakes of intellectual property, including video and music cassettes,
and illegal weapons designed for use by international and domestic cnminals and terrorists, The
primary Federal agency with responsibility in these areas is the US Customs Service. The
Customs Service ensures that traded goods can be purchased by Americans, and attempts to
minimize the illegal imports and exports that threaten our citizens in many ways. The Customs
service assesses the correct duties on trade, bringing in billions of dollars per year, enforces trade
‘quotas for certain sensitive goods, and generally enforces U.S. trade laws,

‘The Customs Service was reorganized in 1995 into various Customs Management Centers
(CMC5}, We are pleased to be today in one of the largest CMCs -- Southern California
Southern Califorma has several unique characteristics >it has the largest border crossing in the
entire world at San Ysidro, where an average of about 1 million human beings cross each week
Itis adjacent to one of the most important drug source countries in Mexico. which is responsible
for the ion’s share of the dangerous drugs entering the United States. It is home to the largest
container port complex in the world in the form of the L.A.-Long Beach Ports, And itis the most
‘poputous region within the Customs Service

~Despite these unique threats, Southern California has not received resources on a par with
the challenges, and definitely not in comparison to other Customs regions. Itis as if the resources
given to the Customs Service were frozen at the ratios of the 1950s, when Los Angeles was a

Congress of the United States ee

COMMITTEE ON GOVERNMENT REFORM AND QVERSIGHT SS


69

Yesterday, we enjoyed seeing Puckett, I think that was the name
of the healthy brown labrador canine, run up and down a contain-
er’s contents that was there and retrieve a small bag of cocaine
from a box hidden among numerous other boxes. I would assume
that Puckett would be used to randomly inspect the cargo without
having to open it.

How many drugs are found through this random inspection proc-
ess versus the intelligence gathering, sting type of operation? And
are such results used in determining resource allocation?

Mr. TROTTER. Well, we could provide that to you. This is informa-
tion that is not, you know, for public disclosure, but we do have
that information for you, sir.

Mr. Horn. OK.

Mr. TRorreR. I would say that much of our work is done through
very labor intensive work up front, through what we call analysis
of what is coming in. Randomness, we do have random generated
examinations, but what we ask for in our work environment is that
our inspectors be 10 times more productive than a random exam-
ination, What we find is that they are almost always more than 10
times. In our land border environment we found that they are more
than 10 times effective.

So what we try to do, is run a statistically valid sample of look-
ing at random generated examinations and then the examinations
that we actually target. One thing that you have touched on and
we need to address a little more is intelligence gathering. With the
amount of containers coming into this seaport, or along our land
border, it would be impossible to look at them all. We are looking
at a percentage of those containers and we have that information
for you.

The problem, of course, is the vastness of it. And Mr. Heinrich
spoke to moving the cargo. We're the largest trading country in the
world and we have what we call “just in time” inventory. All of
those things are important. We try to be sophisticated in what we
look at and we try to have reasons for that, and we would be able
to share that with you, sir.

Mr. Horn. Now, we are obviously not only interested in the geo-
graphical distribution in that matrix, but in addition to the func-
tional distribution, would you agree that based on workload indica-
tors, California does not have the same levels of resources in com-
parison to other major metropolitan areas? How do you feel about
that, Mr. Trotter?

Mr. TROTTER. It is interesting that you bring that up. In the be-
ginning of your statement, sir, we somewhat—perhaps didn’t give
you a clear enough definition of what the management center here
was, which we call southern Pacific versus southern California. It
is somewhat confusing. The two were combined.

If you look at southern California, which is the San Diego area,
Mr. Heinrich does not supervise those people down there, nor does
Mr. Hensley. What we have, if you lock at what is in southern
California from L.A. south, it is very similar to the numbers of
what is in New York. There is no doubt about that.

Now, if you are just comparing what is in New York compared
to what is in Los Angeles, then, yes, sir, I mean, there is an appar-
ent indication when you look at those raw numbers that there is


24

Mr. Horn. Is Mr. Willemson on your GAO staff handling this
one? :

Mr. RaBKIN. The division that he is in is handling it. I don’t
know if he is involved personally in this.

Mr. Horn. Obviously we have a timing problem here. The report
for Senator Feinstein, in which we have an interest, and including
New York, if we are to get into the appropriations cycle, we really
need it by March or April, although it will be in the Treasury-Post-
al bill of Mr. Kolbe’s, and that is sometimes either first at bat or
last at bat, because it does move fairly fast. I would think we need
to resolve this misallocation part. It is pretty obvious when you
look at the data. Hopefully, it can be resolved sometime in the
spring and avoid a supplemental, but do it in the base bill.

So we would certainly welcome anything you can do to expedite
that report to make a difference with the appropriations.

Mr. KIN. Well, one of the things we can do is talk to Senator
Feinstein’s staff and perhaps brief you on the results. We should
have a draft report available in the February or March timeframe,
which we will be sending out to the Customs Service for comment,
and we might be able to share that with you.

Mr. Horn. Very good.

In terms of allocation resources in the Southwest, what propor-
tion of total Customs resources is allocated in the study that you
are dealing with? What are we talking about? Is it 40 percent of
their allocation?

Mr. RABKIN. I don’t have that figure.

Mr. Horn. OK. We might file it for the record.

[The information referred to follows:]

Customs Service data indicates that, as of August 1997, 31 percent of inspectors
and 64 percent of canine enforcement officers were assigned to ports along the
Southwest border.

Mr. Horn. Have you looked at the 1995 reorganization of Cus-
toms? Does it make sense, and is it meeting the goals they had set
for this regionalization?

Mr. RABKIN. We looked at it when it was announced, and we did
some followup work shortly after they began it. At that time we
said that the reorganization plans did make sense and that the
Customs Service was on the right track to implementing them, but
what really mattered was the follow-through, making sure that the
results were being achieved.

We have not done a formal review of that process recently, but
my sense is that it has been working. One of the goals, I think, was
to get staff out of the headquarters and back onto the line. I think
they were moving in that direction. Another goal was to decentral-
ize a lot of the decisionmaking down to the port level, and I think
that has been happening, as well.

Mr. Horn. Very good.

Information security is obviously something that we are con-
cerned about across the whole Federal Government. Does the Cus-
toms Service also face information security problems? How would
you characterize those problems?

Mr. RABKIN. I think the Customs Service is as vulnerable as
most other Federal agencies in this regard. They have a lot of sys-
tems with a lot of data that are vulnerable to unauthorized access.


10

States laws and regulations." This covers Customs’

responsibilities to collect revenues and prevent smuggling.

Second, the plan's goals and objectives cover Customs’ major
functions--processing cargo and passengers entering the U.S, and
cargo leaving the U.S. In addition, Customs has developed goals
and objectives for two chronic problem areas--narcotics smuggling
and money laundering--as well as for three mission support

functions--information and technology, finance, and human resources

management. ‘These goals and objectives are generally results-
oriented and appear to be measurable. For example, Customs’
overall goal for its processing of arriving international
passengers is that the passengers it admits into the country will
be in compliance with applicable laws and regulations. ‘This goal
is results oriented because it focuses on the outcomes Customs is
mandated to achieve--compliance with applicable laws and
regulations. In this case, Customs plans to gauge its success by
measuring the extent to which it identifies and denies entry to

noncompliant passengers.

Third, the plan discusses the strategies by which Customs hopes to
achieve its goals. Customs’ overall strategy is two-pronged: it
plans to maximize compliance by (1) informing the trade and
traveling community of applicable laws and regulations and (2)
taking enforcement activities against noncompliant exporters,

importers, and travelers. Its specific strategies are logically


29

Statement
of
Robert S. Trotter
Assistant Commissioner for Field Operations
United States Customs Service
before the
Subcommittee on Government Management, Information and Technology
of the

‘Committee on Government Reform and Oversight
U.S. House of Representatives
on
Thursday, October 16, 1997
Los Angeles, California

Good moming Mr. Chairman. It isa pleasure to appear before you today to address the Customs
Service Strategic Plan under the Results Act; the allocation of resources by the Customs Service
based on workload and performance; and other general management issues, I hope that the
information provided at this hearing will assist the subcommittee in its oversight responsibilities

INTRODUCTION AND MISSION

Mr. Chairman, as you are certainly aware, the mission of the United States Customs Service is to
censure that all goods and persons entering and exiting the United States do so in compliance with
ail United States laws and regulations. The United States Customs Service still reflects the
activities envisioned when the first U.S. Congress enacted laws providing for levying and
collecting revenue in 1789. In fact, in Fiscal Year 1997, Customs collected approximately $22.5
billion in revenue.

With more than 19,000 employees at more than 300 ports of entry and with an increase in the
number of laws to protect citizens from dangerous drugs, hazardous materials, unsafe products
and environmental degradation, coupled with the dramatic growth in global trade and travel,
Customs responsibilities have greatly expanded. Further, its organizational structure is of
relatively recent origin with major changes occurring in 1913, again in 1964, and again on
‘October 1, 1995, with the implementation of the Customs reorganization plan: People, Processes
and Partnership. This last change positioned Customs to more effectively and efficiently meet the
challenges of the 21st century.

Customs focus is on balancing its multi-agency and international enforcement responsibilities with
the need to efficiently process legitimate trade coming into and out of the United States. In
addition, Customs has ongoing ies to administer: 1) revenue collection, 2) accurate
collection and reporting of import and export statistics, 3) protection of domestic industry and



98

Mr. Horn. We will have the staff follow up with you and Cus-
toms, because it seems to me it is not that great a problem. If they
get in the room and say, “Hey, this makes common sense, it meets
our needs and your needs,” and not change—well, when it is sheer
confusion at the shipper end as to what is it that they are supposed
to put up there, that obviously has a problem. So Mr. Brasher will
look into it for the subcommittee and see if that is not a solvable
problem.

What is your experience talking to your fellow freight forwarders
and brokers in the New York area? Does there seem to be a geo-
graphical imbalance of Customs personnel to be helpful in New
York as opposed to the number of Customs personnel to be helpful
in Los Angeles and Long Beach?

Ms. GRIMSMAN. I think—I am also on the National Brokers and
Trade Forwarders Association, and I work on the air freight com-
mittee with the national association and am quite familiar with
JFK. I think Los Angeles and New York Customs personnel are
very cooperative with the trade. We're the largest two airports in
the country, and they are probably equal in the level of service and
cooperating with the needs of the trade. They have similar meet-
ings that we have here. We share information. Their inspectors,
when there is some particular method of improvement, they share
it with the AMS people here. So I think it is pretty even, the treat-
ment or the working together, I guess would be a better word with
the Customs Service.

Mr. Horn. So you are pleased with the personnel you interact
with. Then, the question is, are there enough personnel staff posi-
tions to handle the traffic that moves through both the airports and
the seaports?

Ms. GRIMSMAN. Currently it is well staffed, but I think with the
growth projected that that is something that is going to have to be
considered for future growth.

Mr. Horn. The ports are supposed to double by 2010, and the Al-
ameda corridor will be finished by 2002.

Ms. GRIMSMAN. Right. Exactly. But, again, it is the effort the
local people make. So hopefully it never will happen, but if that
goes away, yes, there would probably be a major concern from the
trade. But yes, for future growth, we do need to look at more posi-
tions.

Mr. Horn. Now, one of the things that a number of Federal
agencies looked at with this sort of dichotomy, is they have both
enforcement and service responsibility. You look at the Immigra-
tion and Naturalization Service, you look at the Internal Revenue
Service, and some of the complaints that come—I haven’t heard it
with reference to Customs but I am asking the question because I
sure hear them with reference to IRS and INS—are that if you only
separated the service function from the enforcement function, then
that would please your constituency in the case of the shippers and
the freight forwarders and so forth with Customs. This as opposed
to, let’s say, the immigrant or the taxpayer with the other two
agencies, to have enforcement as a separate thing.

Is there any reason to say that Customs should have enforce-
ment responsibilities in one place and service responsibilities in the


91

agement Centers, Account Managers, and other organizational ad-
aptations, the personnel directly involved in entry processing has
been and is being reduced.

In addition, many of the most expert Customs personnel have
left the U.S. Customs Service to join private industry. Customs has
not replaced this expertise, and under its current organizational
structure it is not likely to develop the same product expertise that
it possessed in the past. This loss of expertise, which has largely

one unaddressed by Customs, represents a substantial threat to

‘ustoms conducting business at the same level of expertise it has
exhibited in the past.

In closing, I would like to affirm the fact that the Customs Serv-
ice officials and personnel at the port of Los Angeles, Long Beach,
and Los Angeles International Airport have been model partners in
forging a strong and amicable relationship between U.S. Customs
and the importing community. Local Customs officials have always
been open, accessible, and responsive to the concerns of the associa-
tion and its membership. This working partnership has been frus-
trated by Customs headquarters’ unwillingness to focus on the
completion of the automation process, and on doing the hard and
unglamorous work of fully reengineering its core processes. Hope-
fully Customs headquarters will complete the automation process
and restore the uniformity which used to exist under its earlier or-
ganizational structure.

In addition, the association hopes Customs headquarters will
avoid the temptation to commit resources to pet projects which may
attract glamour and attention to individual Customs employees,
but which detract from the processing of cargo.

Thank you for the opportunity to appear before this committee.

[The prepared statement of Ms. Grimsman follows:]


i

linked to the goals. For example, among its strategies for
maximizing trade compliance are to (1) detect areas of
noncompliance and, through informed compliance and targeted
enforcement actions, raise compliance levels; and (2) "investigate
and prosecute willfully noncompliant importers, exporters, and
brokers, wherever detected, and provide a highly visible deterrent

factor."

Fourth, the strategic plan discusses in very general terms how it
relates to annual performance plans. In addition, for each goal,
Customs provides specific targets it hopes to achieve during fiscal
years 1997 through 2000. For example, among Customs’ strategies
for facilitating exports while achieving compliance with applicable
laws and regulations is to redesign its outbound process "so that
it is clear, consistent, and understandable to all customers and
stakeholders of the process.” Customs’ targets for fiscal years

1997 and 1998 are to “continue to implement the uniform policies”

and "implement performance measures." For fiscal years 1999
through 2002, Customs’ targets are to "implement the redesigned
process" and "determine the resources needed to optimally implement
the redesigned" process. However, these targets are more process
oriented than results oriented; targets more closely related to the
strategy, such as the extent of positive results from a customer

survey and eventually higher compliance rates, might give Customs a

better idea of whether its strategy is working.


97

Mr. Horn. Yes, when I went through there yesterday I looked at
shipping manifests that are automated. I didn’t get to the airport
to look at the airline manifest. What is the difference? I saw coun-
try of origin, weight, description, and this type of thing.

Mr. KimoTo. The same information is required in the AirMan en-
vironment. The problem comes with a consolidated air shipment,
and in addition to a master bill of lading there are house bills of
lading and sometimes subhouse bills of lading, and all of that infor-
mation has to be put into the Customs system and it has to match
with the same information the importer . And it is not working
right now.

ir. Horn. Is that how it is shipped by the airline? Does it all
come in the same plane? Or are there parts divided among other
planes?

Mr. Kimoto. Well, that is a separate issue, again. It is possible
to have 20 cartons on one bill of lading that get split up into two
separate aircraft and two separate flights, and that creates another
problem for the manifest system.

Mr. Horn. And it doesn’t account for that in the system?

Mr. Kimoro. No.

Mr. Horn. Seems to me the way you solve the problem is get the
customers, namely you, into the room and say, “OK, what are we
doing to redesign the software?”

Ms. GRIMSMAN. Well, if I could add, we have been working with
the Customs Service on a headquarters level for 8 years on this
project. The Los Angeles Airport Customs has been very coopera-
tive, and we have these monthly user meetings. And one of the
major problems, the No. 1 issue is Customs cannot, for whatever
reason, take the lead in this particular situation. We told them in
the very beginning, you must dictate to the freight forwarders, the
airlines, and the brokers what you want as the data element: the
house bill number or some nebulous number that people just kind
of make up, and somebody in Japan will type it with an alpha code,
somebody else will type it a different way, and it will never match.

In the sea environment Customs told the steamship lines, “You
will make a unique bill of lading.” They did this, and this solved
probably 90 percent of the problem. But Customs, it is my under-
standing they don’t have jurisdiction over trade forwarders, so we
have been telling them someone has to take the lead in this and
specify how you want the manifest data to come in from the inward
carrier.

And to this day, I guess before Mr. Weise left, he had been work-
ing with the ATA and committed, made a commitment that their
programming would not recognize all the alpha codes and this and
that, and they would just look at the numeric and it should rec-
oncile in the system. Well, to this day, this has not happened. And
this is back to the Customs here in this port. To cooperate and
move the cargo through, they have to band-aid everything.

And it falls back on headquarters that they are not helping the
programming on this, because there is ACE now and all of these
other programs that say, “Now, you guys are going to have to
wait.” And we are saying, “we can’t wait. We have this project half-
way started and you have all of these people running around trying
to make it work and it is just not working.”


102

back planning for our next hearing, which will be in New Hamp-
shire on Monday, so we are moving around. Well, the next one is
tomorrow in Beverly Hills.

J. Russell George is the staff director and chief counsel; Mr.
Brasher, to my left, your right, is the senior policy director who is
handling this issue; Mr. John Hynes, professional staff member
who remained in Washington; Andrea Miller, clerk who arranged
for the hearing on the Federal side; Connie Sziebl, our district
manager; and our court reporter is Joe Strickland.

We want to particularly thank the city clerk’s office for the city
of Long Beach: Stanley Enge, the clerk typist; Julie Butera, the ex-
ecutive secretary to Shelba Powell, the city clerk, and we thank
Mrs. Powell; and Kittie Abrego, executive secretary to Curtis Tani,
who is the assistant to the city manager; and Mike Hallinan, who
is the electronic technician that made you able to hear us and he
may now pull the plug because this hearing is adjourned.

[Whereupon, at 12:30 p.m., the subcommittee was adjourned.)

O


65

What we try to do is move what we call vacant positions to priority
threat areas. Now we have made a very sincere effort through con-
gressional mandates and through instructions from Congress to
move more and more resources to the Southern border, and that
has been the drawdown across our country.

You spoke about the Northern border. I was just up there last
week. We have ports up there that process more dollar amounts
than New York or L.A. and do it with much fewer people. So we
have continued to drain our human resources, due to the balancing
of the budget and to reductions to our base of about $100 million
over the last several years; and in doing that, we have then de-
ployed those resources into our highest threat areas. That, for right
now, is the southern tier, as we call it, which includes the Carib-
bean, the southern Florida area, as well as the Southern border.

Mr. Horn. I want to make sure I understand this. On the North-
ern border you are getting a higher return per officer than L.A. or
New York is that the figure?

Mr. TROTTER. Well, what I am saying, sir, when you look specifi-
cally just at dollar amounts—and that is where you have to be cau-
tious and where the GAO cautioned us, too, that actually, for ex-
ample, in the port of Detroit, we do collect more duty or at least
have more trade because most of that is duty-free, under the
NAFTA provisions, than we have in the ports of Los Angeles or
Long Beach. That is why we can’t just look at the duty and dollar
collections and say, that is where we should put our People, be-
cause we look at the Northern border risk—as Mr. Hensley and
Mr. Heinrich spoke to so well, we do not have a drug threat along
that Northern border, which is our primary obligation.

There is some of that—I just visited Vancouver and Seattle last
week. There is some drugs coming into the northern part of United
States and traveling the I-5 corridor. So we are trying to look at
that and reassess where to shift resources, because the bad guys,
as you put them, they are able to shift more quickly than we are.
That traditionally has been one of our concerns and one that we
try to work with Congress and the administration to resolve.

Mr. Horn. If you had to rank the five major factors that you
have to consider in preparation of the budget in resource allocation,
what would they be?

Mr. TROTTER. Well, certainly we look at our high priority items,
such as drug interdiction, which is our No. 1 priority; certainly cur-
rency investigations and interdiction; child pornography; illegal
high-tech exports; IPR, and outbound. We have an outbound risk
as well, a new area that we are moving into.

Mr. Horn. I am not familiar with it. Would you define it?

Mr. TROTTER. Outbound is in-the-past strategic commodities that
have been ship ed out of this country.

Mr. Horn. h OK, arms, weapons whatnot?

Mr. TROTTER. Yes, sir.

Mr. Horn. Got it. How much are you getting in that area? You
are talking also about high grade computers going through Ger-
many in a third and fourth transfer, ending up in Iran?

Mr. TROTTER. Yes, sir, as you well know, since the Iron Curtain
has come down somewhat and we have loosened up trade around
the country—Mr. Hensley just showed me a figure, alone, $40 mil-


71

it, sir, when you look at the northern border you will see we do not
have many people processing cargo on the northern border. We do
not have many people processing cargo in L.A., Long Beach, New
York, or in New Jersey. We have moved away from that area. We
try to use selectivity. We try to use automation. Therefore about 98
percent of that stuff goes through without an examination.

So, no, sir, we do not put a lot of people in that area. And quite
honestly when you try to compare apples to apples you will not see
a match-up there. I think when we show you the numbers for the
air passengers itself, there is a pretty good balance of numbers of
passengers processed and numbers of inspectors and canine offi-
cers.

It is the way the law is written and the way these positions are
paid for. Over the years as we have had to take reductions in our
base, they have generally come from the seaport environment in all
of our locations, or from the northern land border, which has actu-
ally helped to create that imbalance. But that was done purpose-
fully and not without forethought in our minds.

Mr. Horn. You are telling me there is some legal problem in
some law? What is that?

Mr. Trotter. Yes, sir. That is—John Heinrich, you had the
name for that. What is it?

Mr. HEINRICH. The Consolidated Omnibus Budget Reconciliation
Act, COBRA.

Mr. TROTTER. What that has done to us, sir, it has created an
imbalance in our work force. Mr. Heinrich or any person who has
a major airport, and you named it, O’Hare, Dallas, Houston, or any
of the places in this country that have major seaport operations
and airport operations, they cannot move their inspectors or Ca-
nine Enforcement Officers from the air environment into the sea
environment. That is prohibited by the law, so it does somewhat
tie our hands,

Mr. Horn. Why was that prohibited by the law?

Mr. TROTTER. Te was predicated on who pays the user fees. The
air carrier passengers pay the user fees and they established a
floor and a ceiling of how many inspectors had to be at the air pas-
senger processing facilities. To assure the carriers, as part of the
deal we changed the way we financed the Government. As you
know, we are a user-fee-driven organization, and the air carriers
through their trade representative groups wanted to assure that we
keep those levels maintained.

Mr. Horn. Is this part of the American airline industry’s usual
resistance to any fees at any airport in America? Is that part of
that?

Mr. TROTTER. Well, sir, actually they pay a sizable amount of
user fees. I wouldn’t say that they are not paying their fair share,
sir. I would not, in that environment. It just so happens the way
the budget is set up, if the user fees pay for specific services, the
Congress and the administration tends to stay away from that be-
cause that is how they want to move our Government. In the other
areas where you cannot do that, which is part of what you are see-
ing here, we have to take those cuts. We have to share with the
rest of the Government responsibility in balancing the budget, and
that is where those cuts come from.


16

problem and the plan does not identify risks associated with the
year 2000 problem as factors that could hinder accomplishment of

the plan.

CUSTOMS’ RESOURCE ALLOCATION PROCESS

We have not completely reviewed the processes by which the Customs
Service determines its operational resource needs and allocates
available resources to ports of entry. We are currently reviewing
those processes for cargo inspections; this work has been requested
by Senator Feinstein. We expect to report our results in the
Spring of 1998. However, I can comment on some of the work we have

completed so far.

Officials in Customs‘ Office of Field Operations told us that they
were not aware of any formal needs assessments used to determine
the number of cargo and passenger inspectional personnel to be
assigned to each of its 301 ports, prior to 1995. Beginning in
1995, for the fiscal year 1997 appropriations cycle, Customs
requested additional inspectors to help implement Operation Hard
Line.* To determine how many more inspectors it needed and where

it needed them, Customs asked its field managers--at the then

‘Operation Hard Line is Customs’ effort to address border violence
and drug smuggling through intensified inspections, improved
facilities, and advances in technology.


99

other? We are talking about IRS. You could each talk about a sepa-
rate agency.

Ms. GRIMSMAN. I don’t know about separating them. I think with
more resources, better types of equipment and maybe x-ray and
just a more efficient way of operating their exam process. But that
is a money issue. Just, I know there are these things that you put
containers through and it x-rays them, but again it is resources.

As far as the service, again, as I mentioned there are so many
new projects coming around, it is kind of hard to keep track of
where we are today.

Ms. CASTELLANOS. If I may comment?

Mr. Horn. Sure, Ms. Castellanos.

Ms. CASTELLANOS. It is an age-old question about that because
it has been discussed previously, and I have been in this business
for a vel long time and I recall these previous problems.

Indeed, we had to put together an alliance here of business, Cus-
toms, forwarders, brokers, and so forth, to get more staffing here
a few years ago through Mr. Roybal’s committee at that time. How-
ever, I think as Judy says, I don’t think it is necessary to remove
or rather separate these services, but I did note that all of your dis-
cussions here earlier with Customs and the GAO, everything was
on an emphasis of drug interdiction. And, indeed, they mentioned
five major things, and it was drug interdiction, child pornography,
smuggling of high technology and outbound things, and so forth.

From our view, we have a totally different view because we rep-
resent the importing community, and we are talking about moving
legitimate cargo through the port as quickly as possible, observing
the laws, and so forth. But that is our function and that is the
function of the importer. That is his big necessity, especially in this
day and age where they do not hold large inventories. Everything
is on an on-time basis and they want to move their cargo as quickly
as possible, and breakdowns in either examinations because of
whatever the reason might be, lack of personnel or whatever, or
not that it happens very often but sometimes you do get down time
on the Customs computer, but that is minor, things like that that
impede the movement of the cargo. That is what we are principally
concerned with and what the importing community would be con-
cerned with.

Not that I want to say we’re against the other things, and that
should be totally downgraded. That is not what we are saying. But
we do want the understanding that the cargo, as another competi-
tor of ours says, “the cargo has to move.”

Mr. Horn. Sure. Well, you make an excellent point, and you are
really talking about what the basic overwhelming task of the Cus-
toms Service is, to move that legitimate cargo through the ports
and into the shipping and distribution systems of a particular
country. So that is a point well taken.

Do you have any thoughts, Mr. Kimoto?

Mr. KimorTo. I would just like to point out that the application
of law for the Customs Service is quite a bit more complex than
it is for the IRS and INS. There are a number of different agencies
that are involved with the importation of goods. They have to en-
force food and drug laws. Dozens of different agencies are involved
with importing, and it is a very complex job that they have.


21

The resource allocation issue is again focusing on the cargo ports,
but she is interested in learning how the Customs Service decides
what it needs at each of these ports—to what extent does it con-
sider workload, does it consider the threat, or does it consider other
factors such as the physical constraints of the port or union agree-
ments that might be met at the port, et cetera—and factor all of
those together to determine how many inspectors it needs to be
able to achieve its goal of ensuring that all the trade laws are en-
forced.

Once Customs determine the needs, then that goes through the
budget process to Treasury, and to OMB. Then it goes up to the
Hill and Congress acts on it, providing the resources; and then it
comes back down, and the Customs Service has to allocate those
resources back out to the ports. We are also interested in finding
out how the Customs Service has done that, what factors they have
used then to make the allocations and actually assigned inspectors
and get them on line out at the ports.

Mr. Horn. I am delighted you are doing that, because that is ex-
actly what we want also. And the question is, Have you had a
chance to go to the various regional centers of the Customs Serv-
ice? To what degree are you and where are you in that study as
to—first, are they asking from the process up in the budget for
Customs for these additional resources? Where, if any time, are
they cut off at that, let’s say on the west coast, where I think it
is very clear from my sources in New York and sources on the west
coast, there is a major differential here, and they cannot really do
as much as they would like to do.

Now, the question is, Have they had the guts to ask for the re-
sources? Is that chopped off at the Customs level, the Commis-
sioners’ level? Is it chopped off at the Office of Management and
Budget level which acts for the President or is it chopped off at
Congress?

And I assume you are going to follow some of that trail on at
least resource-asking. Then the question is, If they get the re-
sources, as you suggested, what are their allocation formulas and
by what criteria? Is it just tradition?

I remember in a Democratic Congress, the first one I was in in
1993-94, we looked at how the Department of Justice allocated re-
sources to the U.S. attorneys’ office, and guess what? Montana
ranged way beyond everybody else. Why? As I remember, because
Senator Oman—he was quite a significant figure there—made sure
that those resources went to Montana and Wyoming and so forth.
That is wonderful if you are from Montana and Wyoming, but if
you're from the largest port complex in the country and the third
ranking air complex at Los Angeles International, you wonder, hey,
Who is running this system? Are they serious or aren’t they?

Now, how far along have you gotten in looking at the region as
centers and looking at how Customs makes these allocations when
Congress does give them the money?

Mr. RABKIN. We have gathered a lot of data and spoken to people
at the Customs ports, at the Customs Management Centers, and in
their budget and finance offices at the executive level. We have
talked to officials at the Treasury Department about what they do
with the Customs budget when they receive it, what they specifi-


[Romaae ar

‘THE NATION'S THIRD LARGEST EXPORTING AREA, AND ORANGE COUNTY IS
‘THE 13TH. DURING FY 1995, EXPORTS TO JAPAN THROUGH THE PORTS OF
LONG BEACH AND LOS ANGELES JUMPED NEARLY 18 PERCENT TO $10.5
BILLION, AND EXPORTS TO KOREA ROSE 18 PERCENT TO $4.9 BILLION. TOP
EXPORTS ARE ELECTRONIC COMPONENTS, ELECTRICAL EQUIPMENT,
‘COMPUTERS AND OTHER HIGH-TECHNOLOGY GOODS, ACCOUNTING FOR 70
PERCENT OF ALL CALIFORNIA EXPORTS. OF THE TOP'50 U.S. EXPORTERS (BY
VALUE OF GOODS), 25 HAVE OFFICES OR SUBSIDIARIES IN THE LOS ANGELES
AREA OR UTILIZE EITHER LONG BEACH OR LOS ANGELES AS ONE OF THEIR
EXPORT PORTS.

HISTORICALLY, 25 PERCENT OF ALL COMPANIES LISTED IN THE DEPARTMENT
‘OF COMMERCE'S TABLE OF DENIALS ARE LOCATED IN EITHER CALIFORNIA OR
NEVADA. THE TABLE OF DENIAL LISTS COMPANIES THAT HAVE HAD THEIR
EXPORTING PRIVILEGES SUSPENDED BY THE DEPARTMENT OF COMMERCE
BECAUSE OF PRIOR VIOLATIONS OF POLICY OR LAW. OF MORE THAN 2,000
VALID DEPARTMENT OF STATE AND DEPARTMENT OF COMMERCE EXPORT
LICENSE HOLDERS IN CALIFORNIA, 62 PERCENT ARE LOCATED IN THE LOS
ANGELES AREA. THE SAC/LA HAS ALSO IDENTIFIED 1,720 MANUFACTURERS
AND SUPPLIERS OF CRITICAL TECHNOLOGY OR COMMERCE-CONTROLLED
COMMODITIES AND 282 NUCLEAR MANUFACTURERS AND SUPPLIERS IN THE
GREATER LOS ANGELES AREA, THESE LOS ANGELES:

AREA FIRMS COMPRISE THIRTEEN PERCENT OF ALL SUCH FIRMS
NATIONWIDE.

‘THE THREAT OF ILLEGAL EXPORTS IN THE SAC/LA AREA OF JURISDICTION IS
VARIED AND COMPLEX. THE LARGEST VOLUME OF AIR CARGO IN THE U.S.
PASSES THROUGH LOS ANGELES. THE PORTS OF LOS ANGELES AND LONG
BEACH EXPORT APPROXIMATELY 125,000 CONTAINERS PER MONTH. THIS
MAKES LOS ANGELES A PRIME LOCATION FOR THE EXPORTING OF ARMS,
MUNITIONS AND CRITICAL TECHNOLOGY, WHICH IS EVIDENCED IN THE
NUMBER OF SMALL ARMS SEIZURES THAT ARE CONTINUALLY BEING MADE AT
ive

‘THE LOS ANGELES AREA HAS OVER 1,000 COMPANIES AND MANUFACTURING
FIRMS ENGAGED IN THE PRODUCTION AND SALE OF CONTROLLED
‘TECHNOLOGY SUCH AS MILITARY OEFENSE PRODUCTS, AEROSPACE
EQUIPMENT, AND BOTH COMPUTER HARDWARE AND SOFTWARE
TECHNOLOGY. THE RECENT ECONOMIC COMPRESSION OF SOUTHERN
CALIFORNIA'S DEFENSE INDUSTRY HAS ALSO RESULTED IN THE SPIN-OFF OF
NUMEROUS SMALL, ENTREPRENEURIAL, HIGH-TECH FIRMS WHO PRODUCE
PRODUCTS FOR AN INTERNATIONAL, NOT DOMESTIC, CLIENT BASE. EXPORT
VIOLATORS WITH “SHOPPING LISTS" OF CONTROLLED COMMODITIES WHICH
THEY SEEK TO ILLEGALLY EXPORT CAN

LOCATE MANY OF THESE ITEMS AND THE COMPANIES THAT PRODUCE THEM
WITHIN THE GREATER LOS ANGELES AREA.


95

This loss of expertise, which has largely gone unaddressed by Customs,
represents a substantial threat to Customs conducting business at the same level
of expertise it has exhibited in the past.

In closing | would like to affirm the fact that Customs Service officials and
personnel at the Port of Los Angeles, Long Beach, and Los Angeles International
Airport have been model partners in forging a strong and amicable relationship
between U.S. Customs and the importing community. Local Customs officials
have always been open, accessible and responsive to the concerns of the
Association and its membership. This working partnership has been frustrated
by Customs Headquarters’ unwillingness to focus on the completion of the
automation process, and on doing the hard and unglamorous work of fully
reengineering its core processes. Hopefully Customs Headquarters will
complete the automation process, and restore the uniformity which used to exist
under its earlier organizational structure. In addition, the Association hopes
Customs Headquarters will avoid the temptation to commit resources to “pet
projects” which may attract glamour and attention to individual Customs

employees, but which detract from the processing of cargo.

MM:sr
StmtsGrimsman


33

public. On that note, we continue to welcome feedback and comments from anyone and everyone
who is interested.

Customs 1998 Annual Plan is derived from the Strategic Plan and identifies the Fiscal Year 1998
‘goals, objectives and strategies to make appropriate progress toward achieving our 5-year
Strategic Plan and Customs vision for the future

To provide a focus for what Customs employees are to achieve, the executive staff of Customs
developed the following vision statement: To protect the public against violations which threaten
the national economy and health and safety through targeted enforcement and informed
compliance and to be the national resource for information on goods and people crossing our
borders.

From the Strategic Intent came five Agency challenges that will be the foundation for Customs
initiatives over the next 5-10 years, They are to:

‘© implement enforcement strategies resulting in effective interventions against willful
violators,

© strive to achieve 100 percent compliance with Customs and other agency laws;

© form partnerships with other agencies and industry to provide world class customer
service,

© become an information-based agency that maximizes the use of technology to achieve
mission effectiveness and resource efficiency, and

© create a working environment that best utilizes and recognizes the talents of our
employees.

To achieve these goals, the Customs Service has embarked on a major change in its management
philosophy. In late 1994, Customs formally adopted the concept of Business Process
Improvement (BPI) and is in the process of implementing it throughout the Service, BPLis a
systematic methodology developed to help an organization make significant advances in the way
its process operates. One of the initial steps in BPI was to identify the core and mission support
processes of Customs.

Strategic Problem Solving (SPS) compliments BPI to improve Customs narcotics, money
laundering and trade enforcement efforts. SPS is defined as a creative, multi-functional approach
that endeavors to prevent or reduce enforcement violations in addition to enhancing the ability to
detect and apprehend “willful violators.” Soon after the adoption of BPI, Customs recognized
that many enforcement issues for which itis responsible do not fit neatly into the BPI framework
Even where they do fit, there is a need for a total enforcement focus to deal with specific chronic
or significant narcotic, money laundering and trade violations. It is Customs goal to permanently
solve enforcement problems instead of applying temporary fixes to them. The SPS concept, built
upon community-based policing concepts and a systematic process management approach, fills
this need.


17

district (and subsequently at the Customs Management Center‘)
level--to assess their resource needs on the basis of a variety of
factors, such as the need to (1) fully staff primary cargo and
passenger lanes and inspection facilities, (2) respond to staffing
agreements with INS,’ (3) provide canine enforcement to cargo and
passenger processing operations, and (4) balance enforcement
efforts with the need to quickly move complying cargo and
passengers through the ports. As a result of this needs assessment
and the ensuing appropriations process, Congress provided Customs
with authority to hire an additional 657 inspectors and other staff

in fiscal year 1997

During preparation of its fiscal year 1998 budget request, Customs
headquarters conducted another needs assessment for inspectors.
The Customs’ official who conducted the assessment told us that it
was influenced by the number of drug seizures at ports, the
increased smuggling threat through railway ports of entry, and the

threat of internal conspiracies at certain ports.

We are currently reviewing the documentation for these needs
assessments, as well as the process by which Customs officials
determined the actual number of new inspectors to be assigned to
each Customs Management Center and port.

‘on October 1, 1995, Customs closed its 7 regional and 42 district
offices and replaced them with 20 Customs Management Centers

"Both Customs and INS inspect incoming passengers at ports of
entry


61

Government Performance and Results Act, and to evaluate the relative effectiveness of our
various targeting methods.

ENFORCEMENT THREAT

U.S. Customs is the nation’s first line of defense against drug smugglers. There is no higher
priority than narcotics enforcement. To address this threat, we initiated plans in January to
revitalize our enforcement presence that included the redeployment of 14 inspector positions to
the seaport’s anti-smuggling units. These efforts led to three major narcotic seizures in the last
8 months.

We are using an array of new technology at the seaport to assist in our narcotics interdiction
efforts. A stationary pallet x-ray, mobile x-ray vans, density meters, fiber optic scopes, night
vision scopes, thermal imagery and automated targeting systems are some examples of these new
technologies that have been deployed in recent years

At LAX, the current narcotics threat indicates a growing vulnerability as a result of increased
passenger and cargo arrivals from both narcotic source and transit countries. Heroin and cocaine
smuggling are still considered our most serious problems. To address this threat, 14 inspector
positions were recently redeployed from existing airport resources to LAX's Contraband
Enforcement Team. This larger complement will enable us to provide a more unpredictable
enforcement presence, and enhance our ability to deter internal conspiracies involving cargo and
conveyances

Canine enforcement continues to be a valuable Customs tool in narcotics interdiction. Currently,
‘we are authorized a total of 26 canine positions. They are being used successfully in a variety of
enforcement activities, such as conveyance searches, cargo sweeps and passenger and
international mail screening

‘Commercial fraud is another significant threat to our country’s economy, particularly here in Los
Angeles. In FY 1997, we seized over $10 million worth ofilicit imports. Violations include the
illegal use of patents, trademarks, and copyrights (known as intellectual property rights), false or
ro country of origin marking, evasion of textile and apparel quotas, and hazardous products

prohibited by the Consumer Products Safety Commission and the Food and Drug Administration,

Our Fines, Penalties & Forfeitures Division opened over 6,100 seizure, liquidated damages and
penalty cases in FY 1997 covering a wide range of violations from narcotic smuggling to
consumer product safety. Gross revenue raised from the sale of seized, forfeited and abandoned
property exceeded $13.2 million in FY 1997

To complement these operational and enforcement efforts, we have also undertaken an extensive
community and trade outreach program. This program is designed to increase awareness on the


small city, and the bulk of the trade activity in California took place in Sen Francisco. Well,
California overtook New York in population decades ago, and we certainly have our share of
problems with drugs, crime and illegal trade activity. As resource allocation has not seemed to
‘change, it is time for the Congress to examine this situation. This is the first step in a process that
will include a detailed examination of how the Customs Service allocates its resources.

Based on information provided by the Customs Service, it appears that the average agent
in Los Angeles is responsible for mote drug seizures, more inspections of aircraft and passenger
traffic and more shipping containers, This does not imply that Customs officers in New York are
featherbedding But itis clear that California does not receive resources relative to the threats
‘which face the Customs Service here, Customs officers in California are forced to do more with
less, to inspect less, to let some suspicious small infractions go uninvestigated because of limited

resources

‘The marginal benefit of an officer in California may well be greater than one elsewhere.
Usimately, we in Congress want to focus taxpayer resources where they will have the greatest
impact. That was the premise of the Government Performance and Results Act of 1994, In that
law, we tried to get agencies to focus om their results. Without an examination of the resources
needed to do the job, and their appropriate geographical distribution, a move towards results-
based government will fail. We do not want that to heppen and that is why we are here today.

We are joined this moming by witnesses from the General Accounting Office and the
Customs Service, as well as from the private sector, to explore these and other Customs-related
issues.


93

One of the principle reasons for enactment of the Act was to improve
Customs processing by increasing its reliance on automation. This drive to
automation has benefited both U.S. Customs and the importing community in
facilitating the import process. However, it is the perception of the Association
that Customs’ drive to automation at the port level has been frustrated by
Customs Headquarters’ failure to complete the automation process. Customs
has in large part implemented the process of automation at present. However,
the final building blocks in the automation process have not been put in place
(Le., the automated air manifest system, and automated in-bond processing).
Completion of the automation process is essential to the orderly processing of
Customs entries, and to Customs and Customs brokers realizing the full benefits
of automation.

The Association perceives the failure to complete the automation process
as a result of Customs Headquarters’ failure to focus on its core business —
cargo review, release, duty collection, anti-smuggling, and drug interdiction.
Unfortunately, Customs Headquarters has allocated too great a portion of its
resources in pursuit of too many new initiatives, and has not directed sufficient
resources to its core businesses. This lack of focus has prevented Customs from
utilizing its resources in the most efficient manner. While these initiatives are
laudatory, Customs Headquarters must take one step at a time and complete the
basic automation process before diverting resources to new programs. Its focus
‘on “sexy” initiatives should not detract from its key concerns — cargo processing,

anti-smuggling, and drug interdiction.


38

fRenaae ta

‘STATEMENT OF JOHN HENSLEY
U.S. CUSTOMS SERVICE
‘SPECIAL AGENT IN CHARGE, LOS ANGELES
BEFORE THE
‘SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION AND TECHNOLOGY
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
U.S. HOUSE OF REPRESENTATIVES
OCTOBER 16, 1997

MR. CHAIRMAN, AS THE MAJOR BOROER ENFORCEMENT AGENCY, THE U.S.
CUSTOMS SERVICE ENFORCES HUNDREDS OF LAWS AND REGULATIONS
RELATED TO INTERNATIONAL COMMERCE AND TRAFFIC. CUSTOMS
ASSESSES AND COLLECTS DUTIES ON IMPORTED MERCHANDISE; ENSURES.
THAT FOREIGN CARGO COMPLIES WITH ALL ENTRY REQUIREMENTS;
PROTECTS DOMESTIC INDUSTRY FROM UNFAIR FOREIGN COMPETITION
PROTECTS THE AMERICAN PUBLIC AND ENVIRONMENT FROM HAZARDOUS:
AND UNSAFE PRODUCTS: INTERDICTS NARCOTICS AND OTHER CONTRABAND;
AND PROTECTS U.S. TECHNOLOGY FROM FOREIGN ENCROACHMENT.

THE OFFICE OF INVESTIGATIONS IS THE INVESTIGATIVE LAW ENFORCEMENT
ARM OF CUSTOMS. CUSTOMS SPECIAL AGENTS PERFORM THE FULL RANGE.
‘OF DUTIES AS ANY OTHER FEDERAL CRIMINAL INVESTIGATOR IN
INVESTIGATING VIOLATIONS INVOLVING CURRENCY, FRAUD, NEUTRALITY,
SMUGGLING, AND THE ILLEGAL EXPORT OF CRITICAL TECHNOLOGY. THESE
INVESTIGATIONS ARE SIGNIFICANT IN SUPPORTING NATIONAL ENFORCEMENT
EFFORTS IN COMBATING NARCOTICS SMUGGLING, INTERNATIONAL MONEY
LAUNDERING, AND ECONOMIC CRIME, AND IN SAFEGUARDING OUR NATIONAL
SECURITY. THREE MAJOR GOALS ARE EMPHASIZED IN ALL OF OUR
INVESTIGATIONS: (1) THE DETECTION, PROSECUTION, AND DISMANTLING OF
MAJOR CRIMINAL ENTERPRISES ASSOCIATED WITH NARCOTICS SMUGGLING
AND THE FINANCIAL SYSTEMS EMPLOYED TO LAUNDER ILLICIT PROCEEDS;
(2) THE PROSECUTION OF MAJOR VIOLATORS (KINGPINS) OF CUSTOMS.
IMPORT LAWS, INCLUDING NON-NARCOTIC MONEY LAUNDERING, AND.
SUBSTANTIAL MONETARY RECOVERIES; AND (3) THE DETECTION AND
PREVENTION OF ILLEGAL EXPORTS OF CRITICAL TECHNOLOGY, DEFENSE
ARTICLES, WEAPONS OF MASS DESTRUCTION, AND THE REDUCTION OF
ILLEGAL ARMS AND MUNITIONS TRAFFIC.

SPECIAL A 1 OF FICE, LOS ANGEL!

‘THE LOS ANGELES OFFICE OF THE SPECIAL AGENT IN CHARGE (SAC/LA),
WHICH IS LOCATED IN THE CUSTOMSHOUSE ON TERMINAL ISLAND, IS ONE OF
20 SPECIAL AGENT IN CHARGE FIELD OFFICES NATIONWIDE. AS THE SPECIAL
AGENT IN CHARGE OF THE LOS ANGELES DISTRICT, | AM RESPONSIBLE FOR


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In the enforcement part, they are enforcing a lot of different
things rather than just counting income or determining nationality.
So it is a much more complex enforcement job that they have, and
T think it would be difficult to separate the two with the Customs

rvice.

Mr. Horn. Well, we don’t have any intention of doing it, but
since it has come up with two other agencies I thought I would
throw that out, since you are correctly saying, “Hey, from our
standpoint as a freight forwarder, all of these other things that you
are doing are wonderful, and the public is demanding that, but we
would like to get the freight moving.” And when you feel when you
are diverting into all of these other things, and it is a legitimate
complaint, that they are not always able to get all the freight
cleared and moved into the shipping processes.

Let_me ask you about your organization, the Los Angeles Cus-
toms Brokers and Freight Forwarders Association, Inc. Do you ever
have cases where any of your members are engaged in or are in-
dicted on illegal activity, and what does your association do? Do
you throw them out of your association? Or do yu just tolerate
people in the association that do illegal things and use the Freight

‘orwarders Association or whatever as a front?

Ms. GRIMSMAN. As far as we know, I don’t believe that has ever
come up, and we do have specific bylaws that would address cer-
tain issues along those lines.

Mr. Horn. What? That would refuse to let them continue in
membership?

Ms. GRIMSMAN. There are criteria where someone may be asked
to be out of the association, but we have very strict rules on who
can be a member. You have to be permitted in the port. Permits
must be issued by U.S. Customs. We have board approval prior to
accepting them. So it is quite a difficult process to get in.

Ms. CASTELLANOS. Also, I think that a review in the Customs
district of those people who are our members, they are not persons
or companies who are usually subjected to any kind of a penalty
or review with Customs. Most of our membership tends to heed the
law and, indeed, sometimes works with Customs in various aspects
in order to stop anybody from doing something fraudulent, smug-
gling any drugs, or anything of that nature.

Mr. Horn. Are there any points that you heard Customs make
that you would like to comment further on?

Ms. GRIMSMAN. Yes, Mr. Trotter’s comment on the accessing the
user fee. We would applaud if Congress can do anything about
that. I think that would give a lot of money to the Customs budget
for perhaps exam processing, more equipment for expedited exami-
nations, you name it. I think if they could get their hands on that
extra income it would greatly enhance the service.

Mr. Horn. Who would object in the shipping community?

Ms. GRIMSMAN. I doubt if anyone would.

Ms. CASTELLANOS. The Treasury might object because the funds
go into the general account.

Mr. Horn. How about the airlines? You don’t think the airlines
would object?

Ms. GRIMSMAN. No. The passenger versus the cargo? They want
the cargo off their docks. Their docks are not a warehouse. They


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ADMINISTRATION (DEA).

WHILE THESE INVESTIGATIVE PRIORITIES REFLECT THE AREAS OF GREATEST
THREAT, THE SAC/LA IS ALSO RESPONSIBLE FOR CONDUCTING
INVESTIGATIONS IN OTHER AREAS, SUCH AS CHILD PORNOGRAPHY AND.
RUSSIAN ORGANIZED CRIME. HOWEVER, | WANT TO FOCUS FIRST ON OUR
FOUR 4 MAJOR PRIORITIES.

1, NARCOTICS:

ACCORDING TO A JOINT REPORT PREPARED FOR THE OFFICE OF NATIONAL
DRUG CONTROL POLICY (ONDCP) BY THE HIGH INTENSITY DRUG TRAFFICKING
AREA (HIDTA) AND THE JOINT DRUG INTELLIGENCE GROUP (JDIG) ESTIMATES,
OF THE ANNUAL COCAINE TRAFFICKING THROUGH THE LOS ANGELES AREA IS
OVER 130 TONS PER YEAR. MEXICAN TRANSPORTATION GROUPS ARE USED
TO SMUGGLE LOADS OF COCAINE FROM MEXICO TO LOS ANGELES. COCAINE
DISTRIBUTION IN LOS ANGELES AT THE WHOLESALE LEVEL IS HANDLED BY
COLOMBIAN AND MEXICAN TRAFFICKERS; THE RETAIL DISTRIBUTION IS
CONTROLLED BY GANGS. BESIDES THE COCAINE ACTIVITY, LOS ANGELES
SERVES AS THE MAJOR TRANSHIPMENT POINT FOR SOUTHEAST ASIAN,
‘SOUTHWEST ASIAN, AND MEXICAN HEROIN, HEROIN TRAFFICKING IS .
CONTROLLED BY CHINESE, MIDDLE EASTERN, AND MEXICAN ORGANIZATIONS.
LOS ANGELES IS ALSO A MAJOR TRANSHIPMENT AREA FOR MARIJUANA
CONTROLLED PRIMARILY BY MEXICAN TRAFFICKING GROUPS.

ADDITIONALLY, ILLEGAL METHAMPHETAMINE PRODUCTION CONTINUES TO
GROW, PARTICULARLY IN ADJACENT RIVERSIDE AND SAN BERNARDINO
COUNTIES, AS WELL AS MEXICO.

‘THE HIGHLY DEVELOPED TRANSPORTATION ROUTES (LAND, SEA, AND AIR)
AND OUR PROXIMITY TO THE MEXICAN BORDER CREATES A UNIQUE THREAT
BY MAKING THE LOS ANGELES AREA A MAJOR DISTRIBUTION, STORAGE, AND
SUPPLY CENTER FOR ILLICIT DRUGS DESTINED FOR CITIES THROUGHOUT
‘THE UNITED STATES AND BEYOND. IN FACT, LOS ANGELES IS NOW
REFERRED TO AS THE “WESTERN WAREHOUSE" FOR DRUGS SMUGGLED
THROUGH THE SOUTHWEST BORDER. THIS IS EVIDENCED BY THE FACT THAT
PER THE EL PASO INTELLIGENCE CENTER (EPIC). MORE COCAINE SEIZED AT
OR AFTER CROSSING THE SOUTHWESTERN LAND BORDER WAS DESTINED
FOR THE LOS ANGELES AREA THAN ANY OTHER CITY LOCATED IN THE,
SOUTHWEST.

OVER 128 CRIMINAL NARCOTIC TRAFFICKING ORGANIZATIONS/INDIVIDUALS:
HAVE BEEN IDENTIFIED WITHIN THE SAC/LA AREA OF JURISDICTION. THESE
‘TRAFFICKERS RANGE IN OPERATION FROM A REGIONAL BASE TO THE
INTERNATIONAL LEVEL. OF THESE 128 ORGANIZATIONS, 94 ARE INVOLVED
WITH COCAINE, 37 IN THE MANUFACTURING AND DISTRIBUTION OF
METHAMPHETAMINE, 23 IN HEROIN, 30 IN MARIJUANA, AND 52 IN MONEY