United States General Accounting Office

GAO Testimony

Before the Subcommittee on Trade, Committee on Ways

and Means, House of Representatives

For Release on Delivery

Expected at 2:00 p.m. EDT

Thursday, May 15, 1997

U.S. CUSTOMS SERVICE

Oversight Issues

Statement of Norman J. Rabkin

Director, Administration of Justice Issues

General Government Division

GAO/T-GGD-97-107

Summary 

U.S. Customs Service: Oversight Issues

One of the oldest federal agencies, the U.S. Customs Service collects

revenues in excess of $23 billion annually while processing an estimated

14 million import entries and 450 million people through 301 ports of entry

into the U.S. In recent years, GAO has reported to the Subcommittee on

three issues that are the subject of today’s oversight hearings: drug

interdiction, labor-management relations, and overtime pay.

GAO’s September 1996 report on Customs’ drug interdiction efforts

identified and described the key elements, resources, costs, and

performance measures of Customs’ national drug interdiction program as

well as those of its investigative offices and selected ports in the Miami

and San Diego areas. It noted that Customs’ challenges included how to

(1) effectively interdict drugs and enforce trade laws while facilitating

border crossings and (2) develop performance measures that gauge the

effectiveness of its drug interdiction activities.

GAO’s March 1997 testimony discussed labor-management activities within

Customs. In June 1994, Customs and the National Treasury Employees

Union (NTEU) entered into a partnership agreement that established 19

goals, set up a National Partnership Council, and stated that NTEU will

participate in agency meetings that affect the workforce. GAO’s limited

work revealed that most of the Customs managers and NTEU chapter

presidents GAO interviewed characterized their relationship as better while

first-line supervisors’ views were more evenly distributed from “much

better” to “much worse.” Customs did not have any plans for an evaluation

of the impact of the partnership approach on its mission and GAO

concluded that since the partnership was almost 3 years old, it was not too

soon for Customs to develop a formal plan for evaluating it.

In 1991, GAO reported that overtime pay to Customs inspectors had

increased from about $57 million in fiscal year 1985 to about $103 million

in fiscal year 1990. GAO concluded that an important cause was Customs’

focus on ensuring that inspectors did not exceed the $25,000 cap instituted

by Congress in 1983 and its disregard of the individual overtime

assignments that build to the cap. GAO also concluded that original

overtime provisions hindered efficient management and that the special

payments were premised on conditions that no longer existed. GAO

recommended that (1) overtime pay be more directly linked to actual

hours worked and (2) overtime be used more efficiently. The 1993

Customs Officers Pay Reform Amendments (COPRA) were intended to more

closely match earnings to hours worked. However, the Treasury Inspector

General (IG) reported in September 1996 that although COPRA reduced

Page 1 GAO/T-GGD-97-107
Summary 

U.S. Customs Service: Oversight Issues

direct spending associated with overtime pay, it caused a significant

increase in the costs associated with night differential pay in fiscal years

1995 and 1996. In addition, the IG pointed out that annually inspectors file

and win grievances if they are not allowed to work because they are close

to the $25,000 cap.

Page 2 GAO/T-GGD-97-107
Statement 

U.S. Customs Service: Oversight Issues

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today at this Customs oversight hearing to discuss

work we have done for this Subcommittee addressing Customs’ drug

interdiction efforts, labor-management partnership concept, and issues

related to inspectional overtime. Our testimony is based primarily on

products we have issued on each of these subjects since 1991.

Created in 1789, the U.S. Customs Service is one of the federal

government’s oldest agencies. Although its original mission was to collect

revenue, Customs’ mission has expanded to include ensuring that all

goods and persons entering and exiting the United States do so in

accordance with all U.S. laws and regulations. Moreover, a major goal of

Customs is to prevent the smuggling of drugs into the country by creating

an effective drug interdiction, intelligence, and investigation capability

that disrupts and dismantles smuggling organizations.

As of January 1997, Customs performed its mission with a workforce of

about 19,500 personnel at its headquarters, 20 Customs Management

Centers, 20 Special Agent-in-Charge (SAC) offices, and 301 ports of entry

around the country. Customs collects revenues in excess of $23 billion

annually while processing the estimated 14 million import entries and

450 million people who enter the country each year.

Drug Interdiction In September 1996, we issued a report to this Subcommittee on the drug

interdiction efforts of the Customs Service.1

 As one of the more than 50

federal agencies involved in the War on Drugs, Customs is responsible for

stopping the flow of illegal drugs across the nation’s borders. In addition

to routine inspections to search passengers, cargo, and conveyances for

illegal drugs moving through U.S. ports, Customs’ drug interdiction

program includes investigations and other activities unique to specific

ports.

Our report identified and described the key elements, resources, costs,

and performance measures of Customs’ national drug interdiction

program, as well as those of its investigative offices and selected ports in

the Miami and San Diego areas.

1

Customs Service: Drug Interdiction Efforts (GAO/GGD-96-189BR, Sept. 26, 1996). The data in this

section were current as of September 1996, unless otherwise indicated.

Page 3 GAO/T-GGD-97-107
Statement 

U.S. Customs Service: Oversight Issues

Customs has two key organizational elements in its drug interdiction

program. First, the Office of Field Operations has over 6,600 inspectors

and 527 canine enforcement officers who perform inspections at the 301

air, land, and sea ports around the country. Inspectors use an array of

technology in their search for drugs, such as an X-ray system for trucks

and trailers, X-ray machines for containerized cargo, and fiber-optic

scopes to examine gas tanks and other enclosed spaces. Inspectors also

target persons, cargo, and conveyances for examination using manifest

reviews and databases such as the Treasury Enforcement

Communications System, which contains information on suspected

smugglers.

Second, the Office of Investigations has about 2,500 special agents, about

half of whom are authorized to react to and investigate drug seizures at

ports and develop cases that implicate drug smuggling operations.

Investigations also is responsible for about 1,100 personnel in aviation,

marine, and intelligence units, which support the drug interdiction

mission. The aviation unit supports foreign interdiction operations,

interdicts and apprehends air smugglers, and supports other Customs and

federal, state, and local law enforcement efforts. Marine units interdict,

investigate, and apprehend violators that smuggle drugs into the United

States via commercial and pleasure vessels. To assist in performing these

missions, the aviation and marine units have 78 vessels, 77 airplanes, and

39 helicopters. The intelligence unit supports Customs’ management and

all field elements; this involves developing assessments of drug smuggling

threats for various parts of the country. For example, threat assessments

of the Southwest border led, in part, to the Customs Commissioner’s

support for creating a major national initiative, Operation Hard Line,2

 for

the Southwest border.

Customs reported to the Office of National Drug Control Policy that its

combined budget for drug interdiction and investigations averaged about

$575 million for fiscal years 1990 to 1996. In fiscal year 1995, its drug

interdiction budget was about 38 percent and its drug investigations

budget was about 3 percent of the federal drug control budget.

Customs has traditionally measured the output from its drug interdiction

effort by the resulting number of seizures, arrests, indictments, and

convictions. For example, in fiscal year 1995, Customs reported about

2

First implemented on the Southwest border, Operation Hard Line emphasizes intensified inspections,

improved facilities, and the use of technology to detect drug smuggling. It has been expanded beyond

the Southwest border to the southern tier of the United States, including the Caribbean and Puerto

Rico, with enhanced air and marine enforcement.

Page 4 GAO/T-GGD-97-107
Statement 

U.S. Customs Service: Oversight Issues

2,200 cocaine seizures, about 900 heroin seizures, and about 10,000

marijuana seizures—these seizures accounted for over 50 percent of all

drugs seized by federal agencies. It also reported participating in the

seizure of an additional 13 percent of the total drugs seized.

These traditional measures, however, track activity, not outcome or

effectiveness. Customs has sought to develop nontraditional measures for

use in assessing the effectiveness of its drug strategy initiative. For

example, Customs is testing a program designed to estimate the number of

drug smugglers entering the ports, thus providing it with a baseline from

which to measure how effective its inspectors have been at targeting drug

smugglers at the ports. At the time of our report, the program was

implemented at major air and land border ports.

Our September 1996 report also described drug interdiction activities at

major ports in the Miami and San Diego areas. It provided information on

the ports, estimates of the resources Customs had invested in drug

interdiction and investigation activities there, and traditional measures of

its success. In addition, we described a special cargo entry program at the

Otay Mesa, California cargo port. The program, called Line Release, was

designed to expedite the release and tracking of low-risk, high-volume

shipments. Under the Line Release program, Customs is to prescreen

manufacturers, importers, brokers, and shippers in an attempt to ensure

they are low risk for drug smuggling; Line Release participants are

required to pass five intensive examinations and meet a minimum

requirement of 50 shipments per year. Although the program has been

criticized for allowing trucks to enter the United States from Mexico

without inspection, our work showed that vehicles participating in the

Line Release program were subject to the same special enforcement

operations as non-Line Release vehicles, and were inspected more

frequently through these operations than were non-Line Release vehicles.

Finally, our report discussed the challenges Customs was facing in its drug

interdiction mission. First, we pointed out that Customs’ major challenge

was to effectively carry out its drug interdiction and trade enforcement

missions while facilitating the flow of persons and cargo across the

borders. Customs has to perform these missions despite continuous and

extensive threats from drug smugglers along the border.

Second, because its financial information systems are not designed to

account for costs by mission component, Customs has to estimate the

amount it is spending for drug interdiction overall. This reduces Customs’

Page 5 GAO/T-GGD-97-107
Statement 

U.S. Customs Service: Oversight Issues

ability to determine whether allocation of additional resources at specific

ports or in a specific region has produced commensurate benefits.

Customs officials told us that they were developing mission- and

performance-based budgets, in accordance with Department of the

Treasury directives, that would enable them to determine with greater

reliability the costs of drug interdiction activities throughout Customs.

Third, Customs—like other law enforcement agencies engaged in the fight

against drug smuggling—has attempted to develop performance measures.

Traditional output measures do not allow officials to gauge the

effectiveness of drug interdiction activities. Even the new, nontraditional

measures being developed may not allow Customs to assess, over time,

whether increased efforts are producing better outcomes.

Labor-Management

Partnership Concept

In March 1997, I testified before this Subcommittee on labor-management

activities within Customs.3

 The Subcommittee had asked us to review,

among other topics, the history of union activity at Customs and the effect

that the partnership agreement between Customs and the National

Treasury Employees Union (NTEU), the exclusive representative of

Customs’ bargaining unit employees,4

 had on Customs’ ability to establish

and achieve its mission-related goals. At the time of that hearing, we had

performed preliminary work at Customs headquarters, 5 Customs

Management Centers, 11 ports of entry around the country, the NTEU

national office, and 7 local NTEU chapters.5

Executive Order 12871, October 1, 1993, required the head of each federal

agency to create labor-management councils to help involve employees

and their unions as full partners. These partnership councils are to identify

problems and craft solutions to better serve the agency’s customers and

accomplish its mission. In June 1994, the Customs Service and NTEU

entered into a partnership agreement that established 19 goals, set up a

National Partnership Council, and stated that NTEU will participate in

agency operational meetings that affect the workforce. In February 1997,

Customs and NTEU implemented a new national contract.

3

U.S. Customs Service: Varied Reaction to the Labor-Management Partnership Concept

(GAO/T-GGD-97-54, Mar. 11, 1997).

4

As of January 1997, approximately 11,200 of the 19,500 Customs personnel were eligible to join NTEU,

and about 7,200 had done so.

5

Because the testimony satisfied the Subcommittee’s interests at that time, we have not conducted

further work on this issue.

Page 6 GAO/T-GGD-97-107
Statement 

U.S. Customs Service: Oversight Issues

Our limited work revealed a variety of opinions regarding Customs-NTEU

relations since the implementation of the executive order. Most of the

Customs managers we interviewed characterized their relationship with

NTEU chapters as better. Most of the NTEU chapter presidents we spoke

with also said the relationship was better. The views of the Customs

first-line supervisors we interviewed were more evenly distributed from

“much better” to “much worse.”

Customs managers and supervisors and NTEU representatives provided

similar comments about the advantages of the partnership concept, citing

faster problem resolution, improved communications, and mutual

involvement in decisions. However, comments on disadvantages revealed

no clearly shared views. For example, managers and supervisors generally

stated that all issues must be bargained with the union before any action

can be taken, while NTEU officials generally indicated that managers want

to choose when they include NTEU in making decisions and when they do

not.

Customs’ partnership agreement with NTEU and Executive Order 12871 call

for evaluating the progress of and improvements in the agency’s

performance resulting from the partnership concept. To a limited extent,

Customs had begun that effort. However, at the time of our testimony,

these efforts had not set the groundwork for the kind of comprehensive

evaluation envisioned by the Executive Order and partnership agreement.

In our work at Customs’ headquarters and several field locations, we did

not see any plans for an evaluation of the impact of the partnership

approach on Customs’ mission.

We pointed out in our testimony that cultural changes such as those

promised by the partnership concept do not occur quickly. The

Commissioner of Customs told us that he expected it to take at least 5

years for the new relationship to become Customs’ normal operating

environment. Nevertheless, given that Customs and NTEU had been in this

new relationship for almost 3 years, we concluded that it was not too soon

for Customs to develop a formal plan for the evaluation of progress and

improvements in organizational performance resulting from this

labor-management partnership.

Overtime Issues In the Act of February 13, 1911, Congress enacted overtime pay provisions

for Customs inspectors. Sunday work was to be compensated at the rate

of 2 days’ regular pay; on holidays, the rate was to be the total of 2 days’

Page 7 GAO/T-GGD-97-107
Statement 

U.S. Customs Service: Oversight Issues

pay plus the hourly rate for the period of time worked on the holiday. No

minimum period of work was required to qualify for the

premium—overtime—pay. Thus, inspectors could have worked as little as

1 minute and received 2 days’ pay for Sunday work. For overtime work at

other times during a week, the minimum compensation was 4 to 12 hours’

pay, depending on whether the inspector worked late, came in early, or

was called back to work. In 1983, Congress set a cap of $25,000 on the

amount of individual overtime earnings. With the enactment of the

Consolidated Omnibus Budget Reconciliation Act of 1985, Customs began

charging user fees for processing passengers and cargo; the revenue from

these fees paid for Customs’ overtime and premium pay.

In 1991,6

 we reported to this Subcommittee that overtime pay to Customs

inspectors had increased from about $57 million in fiscal year 1985 to

about $103 million in fiscal year 1990. We concluded that an important

contributing cause of this growth was Customs’ focus on ensuring that

inspectors did not exceed the $25,000 cap and its disregard of the

individual overtime assignments that build to the cap. We found internal

control weaknesses that resulted in errors in preparing overtime

documentation, certifying payments, and entering data in the overtime

system. We also concluded that the 1911 Act provisions hindered the

efficient management of overtime and that the special payments were

premised on conditions that no longer existed. Although we believed that

inspectors should be paid extra for working overtime, we recommended

that (1) the 1911 Act be amended so that inspector overtime pay would be

more directly linked to actual hours worked and (2) Customs management

focus on achieving a more efficient use of overtime.

Based in part on our findings, the Customs Officers Pay Reform

Amendments (COPRA), Section 13811 of the Omnibus Budget

Reconciliation Act of 1993, established the overtime and premium pay

system for Customs officers performing inspectional services. The intent

behind changing the 1911 Act was to more closely match earnings to hours

worked, thereby reducing overtime costs. It was expected that the changes

made by COPRA would result in overtime savings of $12 million in both

fiscal years 1994 and 1995, and a total of $52 million for the 5-year period

ending with fiscal year 1998.7

 However, in September 1996 the Treasury

Inspector General (IG) reported that although COPRA reduced direct

spending associated with Customs officers’ overtime pay, it caused a

6

Customs Service: 1911 Act Governing Overtime Is Outdated (GAO/GGD-91-96, June 14, 1991).

7

See House Report 103-111, May 25, 1993.

Page 8 GAO/T-GGD-97-107
Statement 

U.S. Customs Service: Oversight Issues

significant increase in the costs associated with night differential pay.8 The

IG reported a net increase in overtime pay of $8.9 million in fiscal year

1995.9

Further, the IG pointed out that future night differential pay to Custom

officers will be even higher. On December 9, 1995, an arbitrator ruled

favorably on a grievance filed by NTEU that protested Customs’ refusal to

pay night differential to Customs officers who were on sick or annual

leave for 8 hours or longer. The ruling required Customs to pay employees

who would ordinarily receive COPRA night differential when at work but

who did not receive it when on leave since January 1, 1994. Customs

estimated that it paid over $1 million in premium pay for work not

performed as a result of that ruling. Customs’ appropriation act for fiscal

year 1997 prohibits this practice for that fiscal year, but this prohibition

expires at the end of fiscal year 1997.

The IG report also pointed out that the pay cap has caused additional

increases in administrative costs for Customs. Annually, inspectors (and

canine enforcement officers) file grievances because they are not allowed

to work overtime assignments if they are close to the $25,000 cap.

According to a Customs official, most port management stop those

Customs officers who are approaching the cap (usually those who had

earned about $24,500) from working any more overtime. This work was

performed by other Customs officers who were not at the cap. The IG

reported that in fiscal year 1994 over $100,000 in settlements were paid as

a result of these overtime cap grievances.

Mr. Chairman, this completes my statement. I would be pleased to answer

any questions.

(264438)

8

Night differential pay depends on the regularly scheduled hours of the Customs officer. If the majority

of the officer’s hours are between 3 p.m. and midnight, compensation equals the basic hourly rate plus

premium pay of 15 percent of the hourly rate. If the majority of the hours are between 11 p.m. and 8

a.m., compensation equals the basic hourly rate plus premium pay of 20 percent of the hourly rate.

9

Customs Officer Pay Reform Amendments (COPRA), Office of Inspector General, Department of the

Treasury, OIG-96-094 (Sept. 13, 1996). Customs reported that this amount increased to $9.5 million in

fiscal year 1996.

Page 9 GAO/T-GGD-97-107
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the

following address, accompanied by a check or money order

made out to the Superintendent of Documents, when

necessary. VISA and MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address

are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 6015

Gaithersburg, MD 20884-6015

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000 

or by using fax number (301) 258-4066, or TDD (301) 413-0006.

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any

list from the past 30 days, please call (202) 512-6000 using a

touchtone phone. A recorded menu will provide information on

how to obtain these lists.

For information on how to access GAO reports on the INTERNET,

send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov

PRINTED ON RECYCLED PAPER
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. G100