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81–233 2002

CREATION OF HOMELAND SECURITY

DEPARTMENT

HEARING

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

JUNE 26, 2002

Serial No. 107–74

Printed for the use of the Committee on Ways and Means

(

ii

COMMITTEE ON WAYS AND MEANS

BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois 

E. CLAY SHAW, JR., Florida 

NANCY L. JOHNSON, Connecticut 

AMO HOUGHTON, New York 

WALLY HERGER, California 

JIM MCCRERY, Louisiana 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

JIM NUSSLE, Iowa 

SAM JOHNSON, Texas 

JENNIFER DUNN, Washington 

MAC COLLINS, Georgia 

ROB PORTMAN, Ohio 

PHIL ENGLISH, Pennsylvania 

WES WATKINS, Oklahoma 

J.D. HAYWORTH, Arizona 

JERRY WELLER, Illinois 

KENNY C. HULSHOF, Missouri 

SCOTT MCINNIS, Colorado 

RON LEWIS, Kentucky 

MARK FOLEY, Florida 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

ROBERT T. MATSUI, California 

WILLIAM J. COYNE, Pennsylvania 

SANDER M. LEVIN, Michigan 

BENJAMIN L. CARDIN, Maryland 

JIM MCDERMOTT, Washington 

GERALD D. KLECZKA, Wisconsin 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

WILLIAM J. JEFFERSON, Louisiana 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

KAREN L. THURMAN, Florida 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

ALLISON GILES, Chief of Staff

JANICE MAYS, Minority Chief Counsel

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined.

iii

C O N T E N T S 

Advisory of June 19, 2002, announcing the hearing ............................................. 2

WITNESSES 

U.S. Department of the Treasury, Hon. Jimmy Gurule ́, Undersecretary for 

Enforcement .......................................................................................................... 7

Joint Industry Group, and JBC International, James B. Clawson ..................... 30

National Treasury Employees Union, Colleen M. Kelley ..................................... 38

Port of Tacoma, Timothy Farrell ............................................................................ 25

Sara Lee Branded Apparel, Jerry Cook ................................................................. 35

SUBMISSIONS FOR THE RECORD 

American Apparel & Footwear Association, Arlington, VA, Stephen Lamar, 

letter ...................................................................................................................... 63

American Civil Liberties Union, Timothy H. Edgar, statement .......................... 64

American Petroleum Institute, Charles E. Sandler, letter ................................... 70

American Textile Manufacturers Institute, statement ......................................... 72

Border Trade Alliance, San Diego, CA, statement ................................................ 73

National Customs Brokers and Forwarders Association of America, statement ...................................................................................................................... 74

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CREATION OF HOMELAND SECURITY 

DEPARTMENT 

WEDNESDAY, JUNE 26, 2002

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

Washington, DC. 

The Committee met, pursuant to notice, at 5:22 p.m., in room 

1100 Longworth House Office Building, Hon. Bill Thomas (Chairman of the Committee) presiding. 

[The advisory announcing the hearing follows:]

2

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON OVERSIGHT

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721

June 19, 2002

No. FC–20

Thomas Announces Hearing on

Creation of Homeland Security Department

Congressman Bill Thomas (R–CA), Chairman of the Committee on Ways and 

Means, today announced that the Committee will hold a hearing on the President’s proposal to create a U.S. Department of Homeland Security including the transfer 

of all assets and authority of the U.S. Customs Service to the new Department. The 

hearing will take place on Wednesday, June 26, 2002, in the main Committee hearing room, 1100 Longworth House Office Building, beginning at 

2:00 p.m. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses. Any individual or organization not scheduled 

for an oral appearance may submit a written statement for consideration by the 

Committee or for inclusion in the printed record of the hearing. 

BACKGROUND:

Since 1789, the Customs has been a separate Federal agency under the U.S. Department of the Treasury. Virtually all Federal Government revenue was originally 

collected by Customs through duties. Today, Customs collects about $20 billion of 

revenue and ensures that all imports and exports comply with U.S. laws and regulations. Customs collects and protects the revenue, guards against smuggling, and is 

responsible for the following:

• Assessing and collecting Customs duties, excise taxes, fees, and penalties due 

on imported merchandise. • Interdicting and seizing contraband, including narcotics and illegal drugs. • Processing persons, baggage, cargo and mail, and administering certain navigation laws. • Detecting and apprehending persons engaged in fraudulent practices designed 

to circumvent Customs and related laws. • Protecting American business and labor and intellectual property rights by 

enforcing U.S. laws intended to prevent illegal trade practices, including provisions related to quotas and the marking of imported merchandise; the AntiDumping Act; and, by providing Customs Recordations for copyrights, patents, and trademarks. • Protecting the general welfare and security of the United States by enforcing 

import and export restrictions and prohibitions, including the export of critical technology used to develop weapons of mass destruction, and money laundering. 

• Collecting accurate import and export data for compilation of international 

trade statistics.

Today, in addition to its own laws, Customs enforces well over 400 other provisions of law for at least 40 agencies. A number of these statutes are quality of life 

issues that relate to the environment, such as motor vehicle safety and emission 

controls, water pollution standards, pesticide controls, Freon smuggling, and the 

protection of endangered wildlife. Other laws safeguard American agriculture, business and public health, and consumer safety. 

On June 18, 2002, President Bush proposed to transfer all of the authority and 

assets of Customs, as well as any other Federal agencies, to a new Homeland Security Department. Specifically, Customs would be placed under an Under Secretariat 

for Border and Transportation 

Security along with the Immigration and Naturalization Service, the Animal and 

Plant Health Inspection Service, the U.S. Coast Guard, and the Transportation Security Administration. 

3

In announcing the hearing, Chairman Thomas stated: ‘‘Customs has long performed the critical balancing act of assuring the security of our ports and borders 

while also ensuring that vital international commerce continues to flow. Our Nation’s long-term defense rests equally upon the protectors at our borders and the engine of our economy. During this hearing, I hope we can examine how these dual 

functions would continue to be performed if Customs were transferred entirely to 

a new Homeland Security Department.’’

FOCUS OF THE HEARING: 

The President proposes to create a new Homeland Security Department, the most 

significant transformation of the Federal Government in over a half-century by 

transforming and realigning current government activities into a single department 

whose primary mission is to protect our homeland. The creation of the Department 

is a key step in the President’s national strategy for homeland security. The hearing 

will focus on details of how this realignment will affect Customs and its core functions such as collection of duties and trade facilitation.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Due to the change in House mail policy, any person or organization 

wishing to submit a written statement for the printed record of the hearing should 

send it electronically to hearingclerks.waysandmeans@mail.house.gov, along with a 

fax copy to (202) 225–2610, by the close of business, Monday, July 8, 2002. Those 

filing written statements that wish to have their statements distributed to the press 

and interested public at the hearing should deliver their 300 copies to the full Committee in room 1102 Longworth House Office Building, in an open and searchable 

package 48 hours before the hearing. The U.S. Capitol Police will refuse sealedpackaged deliveries to all House Office Buildings.

FORMATTING REQUIREMENTS: 

Each statement presented for printing to the Committee by a witness, any written statement 

or exhibit submitted for the printed record or any written comments in response to a request 

for written comments must conform to the guidelines listed below. Any statement or exhibit not 

in compliance with these guidelines will not be printed, but will be maintained in the Committee 

files for review and use by the Committee.

1. Due to the change in House mail policy, all statements and any accompanying exhibits for 

printing must be submitted electronically to hearingclerks.waysandmeans@mail.house.gov, along 

with a fax copy to (202) 225–2610, in Word Perfect or MS Word format and MUST NOT exceed 

a total of 10 pages including attachments. Witnesses are advised that the Committee will rely 

on electronic submissions for printing the official hearing record.

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee.

3. Any statements must include a list of all clients, persons, or organizations on whose behalf 

the witness appears. A supplemental sheet must accompany each statement listing the name, 

company, address, telephone and fax numbers of each witness.

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov/.

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226–

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above.

Chairman THOMAS. The hour of two having arrived

f ——

[Laughter.] 

Chairman THOMAS. For those of you who have not had a chance 

to take a look at the document that is spread out on the table, 

courtesy of the National Archives, to try to set the tone of our discussion about the changes that may or may not be made in creating a new Department of Homeland Security, dealing with those 

areas that have traditionally been under the Committee on Ways 

and Means jurisdiction, what you have in front of you is the fifth 

act of Congress. That’s correct. There were four previous acts. This 

4

was the fifth act, which created the U.S. Customs Service, the first 

agency of the U.S. Federal Government to be created. 

It was signed more than 220 years ago. 

This fifth bill passed by Congress was to create the agency to implement the first act of Congress, which was the Tariff Act of 1789. 

So when we talk about making some fundamental decisions, the 

idea that the first and fifth act creating the Tariff Act to produce 

revenue, which was the sustaining revenue source for the U.S. Government for some time, along with excise taxes, and the agency to 

carry it out, means that, since Alexander Hamilton as the Secretary of the U.S. Department of the Treasury, the Customs’ mission has always been, primarily, to collect revenue and to ensure 

that imports flow smoothly across the border. 

Perhaps one of the reasons we are holding the hearing today is 

to examine the ‘‘primarily’’ aspect of it and to see what might be 

done in creating a greater degree of security for our homeland. 

Today, Customs collects more than $20 billion in revenue each 

year. However, obviously, Customs over the years has taken on 

many other functions, because of its unique presence on the border: 

fighting against illegal drugs; illegal transshipment of T-shirts; illegal Rolex knockoffs; and you could go on and on and on. 

And one of the reasons we need this hearing is to understand the 

changing priorities and the Administration’s current point of rethinking our border security. 

I just thought, in engaging in this discussion of change, it might 

be useful to reflect briefly on what has been constant. Obviously, 

the fundamental questions, as we move into the 21st century, are: 

What is Customs? What is the new role for Customs? To what extent is it a continuation of the old role? And to what extent, notwithstanding the fact of Customs physically being relocated somewhere else, should it maintain the long-term ties of revenue 

through Treasury and back to the Committee on Ways and Means? 

So some of the fundamental questions we should be looking at 

are: 

If we combine Customs with several more entities and have them 

answer to a Homeland Undersecretary in some way, will former 

Customs’ inspectors start doing Coast Guard or Immigration and 

Naturalization Service (INS) or other work that is being pulled together under Homeland Security, or would they be somewhat 

moved but essentially the same in terms of the responsibility and 

the jurisdiction? 

Are they going to be more specialized, more generalized? 

Will they combine two or three different functions currently performed by other agencies’ inspectors at the border? 

Just how will the generation of information be shared between 

these disparate groups now pulled together? 

And I guess the bottom line for this Committee is: Give us the 

vision that explains Customs first task, the collection of revenue, 

in this new department and 21st century. 

So I look forward to the testimony. My guess is that we will have 

more questions than there are answers. But we have a very tight 

schedule. The leadership on both sides of the aisle have asked us 

to, by July 12, report the Committee’s reflections on what ought to 

5

be done, for the purpose of putting a bill together to move it 

through the House. July 12 is our deadline. 

And I now recognize the Ranking Member, the gentleman from 

New York, Mr. Rangel, for any comments he may have. 

[The opening statement of Chairman Thomas follows:]

Opening Statement of the Hon. Bill Thomas, a Representative in Congress 

from the State of California, and Chairman, Committee on Ways and Means 

In front of us today is a historic document courtesy of the National Archives. It 

is the fifth Act of Congress creating the United States Customs Service, the first 

agency of the United States Federal Government ever to be created. It was signed 

more than 220 years ago by President George Washington in 1789. Customs was 

empowered to implement the first Act of Congress, the Tariff Act of 1789. Earlier 

this month another AGeorge W.@ proposed changes, which the Congress and American people welcome, to reorganize the government and create a Department of 

Homeland Security by transferring other agencies, including Customs, to that new 

department. 

Since Alexander Hamilton first oversaw the fledgling Customs Service, its mission 

has always been primarily to collect revenue and to ensure that imports flow 

smoothly across the border. Today, Customs collects more than $20 billion in revenue each year. Over time, however, Customs has taken on many other functions 

because of its unique border presence. Fighting against illegal drugs, illegal transshipped t-shirts, and illegal Rolex knockoffs are just a few of these other functions. 

This hearing is about how changing priorities have led us to the point of rethinking 

our border security in a dramatic way. In so doing we should remember why Customs was created in the first place. 

This hearing will focus on fundamental questions as we rethink the role of Customs in the 21st century, recognizing the historic and significant role of the Customs Service while exploring options and the effects of these options on a new department and the customers it serves. A group of people, now at Customs, fulfills 

many missions, often on an impromptu or ad hoc basis, that then become permanent. As we examine this further, we should ask ourselves fundamental questions: 

(1) If we combine Customs with several more entities and have them answer to the 

same Homeland undersecretary, will former Customs inspectors start doing Coast 

Guard or INS work or continue as they have been doing? (2) Will it be more effective to have each specialize or generalize? (3) Will the information generated by one 

entity more easily be shared with the others? (4) And what will happen to Customs’

first task—revenue collection? (5) What do these changes mean to a small or large 

American business that relies upon imported component parts in order to manufacture something? (6) What do they mean to the American retailers and consumers? 

I look forward to the testimony of our witnesses today as we consider legislation 

by our July 12 deadline. 

ferences publicly, but you know that the minority has pledged to 

The Chair would like to now recognize the Ranking Member, Mr. Rangel.

Mr. RANGEL. Mr. Chairman, I do not like to talk about our diff the leadership and to the President to try to set up this Homeland 

Security on a bipartisan basis as soon as we can, and that is why 

I was so pleased that you were one of the first to have hearings 

on this very important subject. 

But I do not know how in the world you expect—is this the only 

hearing we are going to have on this before we——

Chairman THOMAS. I will tell the gentleman, if it is necessary 

to have additional hearings, we will. And I have put a request in 

that Governor Ridge speak with us. As you might imagine, he is 

very much in demand. I believe he has 18 different committees he 

is appearing in front of. He could not be here today, but he said 

he would make himself available at a future date. 

And I do not think that it would be absolutely necessary, unless 

the gentleman from New York believes it to be the case, that we 

would need to meet in another public hearing. We could, as we 

6

have done in the past, perhaps meet bipartisan in the library or 

some other location to continue to ask questions from someone who, 

if he is not named the Secretary following the formation of the 

Cabinet, would certainly have most of the precise information 

about how this Cabinet would be structured. 

Mr. RANGEL. Well, I would assume that our responsibility is not 

just to have a bipartisan meeting in the library but to get answers 

to serious questions that Americans and the rest of the House 

would have. They rely on us to a great deal. Customs is such a very 

important part of Treasury. And it is kind of hard for me to see 

why we do not have the Secretary of Treasury here, we do not have 

the Customs Commissioner, or anyone representing Customs. And, 

of course, I can see why we will not have Tom Ridge, because, actually, we do not know what role he is going to play with Homeland 

Security. 

Chairman THOMAS. Will the gentleman yield briefly? 

Mr. RANGEL. Yes, sure. 

Chairman THOMAS. One of the things that we tried to do, given 

the demands on everyone’s time, is to get someone who will be able 

to provide us with answers. The answers to the gentleman’s questions would perhaps be better responded to at the end of the hearing, to see if in fact we have gotten some questions answered. And 

to the degree we have, then we can make additional decisions. To 

the degree that we have not, then I think we can go forward. 

But one of the things we need to do is to have the hearing. And 

then we will decide if in fact the questions have been answered or 

not. It is harder for me to do it a priori. 

Thank the gentleman for yielding. 

Mr. RANGEL. Let me ask you this, could you at least tell me the 

thinking of the Chair in putting together the panel as to how the 

questions that I would have for Secretary O’Neill or the Customs 

Commissioner or a representative from Customs or Tom Ridge— you know the questions that Republicans and Democrats would 

want to ask. Just tell me the thinking of why you put together this 

panel, that’s all. 

Chairman THOMAS. The answer is, you have to begin somewhere. One of the things that I want to make sure there is a public 

record on is exactly what Customs’ officials do. There is still a lot 

of failure to understand that diverse role. In looking at the way in 

which the structure was initially presented in discussions with a 

number of people who have interactions with Customs’ officials in 

many different capacities, we thought it might be a pretty good 

idea to at least lay on the record what Customs’ folks do today. 

I know the gentleman wanted the representative of the Treasury 

employees, because we have had a number of discussions about the 

work hours, the locations, some of the difficulties in terms of the 

kinds of work hours that Customs’ representatives carry out. That 

I think also has to be appreciated. I was pleased to have that individual on the panel at the gentleman from New York’s request. 

Mr. RANGEL. Well, Mr. Chairman, these people have waited for 

3.5 hours, and if you are having this hearing in order to find out 

what Customs does, and not ‘‘where do we go from here’’ with Secretary O’Neill and the Customs Commissioner and how they see 

the split-up, they could have sent us an official document as to 

7

what Customs does. We want to find out what impact the President’s recommendation is going to have on Customs when we make 

this move for them. 

But let me thank the panel and everyone else for your patience 

with us. 

But I just wish, Mr. Chairman, that you would see your way 

clear to have me to encourage more of my Members to be here to 

participate in something like this, because they had every reason 

to believe that, if we are talking about the Homeland Security, the 

President’s new Cabinet position, that this Committee, just because 

of who we are, to be quite frank, would have the Secretary in front 

of us to see how it impacts on Internal Revenue Service (IRS) enforcement, on Alcohol, Tobacco, and Firearms (ATF) on a variety of 

things. 

But this is the hand that you dealt us, and I pass. 

Chairman THOMAS. I will tell the gentleman, you asked me 

about the panel that will follow the presentation of Mr. Gurule ́, who is the Undersecretary for the Office of Enforcement. At the 

time the Committee was structured, at 2 p.m., Mr. Ridge was 

scheduled to appear before the Judiciary Committee. I perhaps 

would not dismiss the Undersecretary of Treasury until you have 

heard his testimony. 

And I understand that the gentleman would much rather be in 

my seat than his, so I appreciate the concerns. 

With that, the gentleman from Treasury, Mr. Gurule ́, if you will 

give Mr. Rangel—and I will be listening very intently—an understanding of the current vision and direction of Treasury as this 

homeland security issue moves through, especially with emphasis 

on Customs.

STATEMENT OF THE HON. JIMMY GURULE ́ , UNDERSECRETARY 

FOR ENFORCEMENT, U.S. DEPARTMENT OF THE TREASURY 

Mr. GURULE ́ . Thank you. Chairman Thomas, Members of the 

Committee, thank you for the opportunity to testify. Let me at the 

outset say that we want to work closely with you, Congressman 

Rangel, and the Members of the Committee to address your questions and concerns as we move through the legislative process on 

this very important issue. 

We appreciate the Committee’s historical role on trade and tariff 

matters, which, along with Customs itself, dates back to 1789. We 

also recognize the highly compressed schedule you are operating 

under, and we will make every effort to be responsive to you and 

do so in a timely manner. 

I am proud to be here on behalf of the Administration to discuss 

President Bush’s proposal to create the Department of Homeland 

Security. It includes moving the entire U.S. Customs Service into 

the new department, which is the subject of today’s hearing. 

Secretary O’Neill, Customs Commissioner Bonner, and I fully 

support the President’s proposal and strongly believe that the new 

Homeland Security will play a key role in safeguarding the American people. 

In his June 6 address to the Nation, President Bush called for 

the creation, and I quote, of ‘‘a single, permanent department with 

an overriding and urgent mission: securing the homeland of AmerVerDate Sep 04 2002 05:02 Sep 07, 2002 Jkt 081233 PO 00000 Frm 00011 Fmt 6633 Sfmt 6602 E:\HR\OC\B233.XXX B233
8

ica and protecting the American people.’’ The President also stated, 

and I quote, ‘‘The reason to create this department is not to increase the size of government, but to increase its focus and effectiveness.’’ Two days ago, President Bush toured Port Elizabeth, New Jersey, and commended employees of Customs, the Coast Guard, and 

the New York/New Jersey Port Authority for their vital work in 

keeping dangerous cargo from entering our country. The President 

told the employees that his proposed Homeland Security would 

make their jobs easier. President Bush said, and I quote, ‘‘It’ll 

make our Federal Government more responsive. It will allow us to 

communicate better, to more effectively secure the homeland.’’ Since September 11, at the direction of the President, the top priority bar none at Customs has been responding to the continuing 

terrorist threat at our land border, seaports, and airports. The Customs is working diligently to protect homeland security by keeping 

terrorists and terrorist weapons from entering the United States, 

while at the same time enhancing our economic security by moving 

goods and people efficiently across the borders. 

The Customs has implemented several key programs since September 11, and I just want to touch on a few of them briefly. These 

are initiatives that respond to the new threat our country faces. 

First there is Operation Green Quest, a Customs-led multi-agency initiative that targets terrorist financing. This task force has already initiated hundreds of investigations, aggressively moved 

against terrorist funding sources, and led to the seizure of suspected terrorist assets. 

Then there is the Container Security Initiative, CSI. Customs is 

entering into partnerships with foreign seaports to conduct 

prescreening and more effective risk targeting of sea containers before—and I stress ‘‘before’’—they are shipped to our ports. 

And there is Project Shield America, where Customs’ agents 

monitor exports of strategic weapons and materials from the 

United States to prevent international terrorist groups from obtaining sensitive U.S. technology, weapons, and equipment that could 

be used in a terrorist attack on our Nation. 

On April 16 of this year, Secretary O’Neill, Governor Ridge, and 

Commissioner Bonner launched the Customs-Trade Partnership 

Against Terrorism, or C–TPAT, in Detroit. The C–TPAT is a 

unique partnership with U.S. importers, carriers, brokers, and others to improve security along the entire supply chain, while expediting the flow of legitimate commerce into the United States. 

The success of programs like CSI and C–TPAT demonstrates how 

Customs seeks to balance its important dual missions of security 

enforcement and trade facilitation, dual missions that are inextricably linked. 

With C–TPAT, for example, Customs has been successful in recruiting companies to join the program and make additional investments in supply chain security solely because Customs is able to 

offer those companies the benefit of expedited clearance at the borders. 

Another example of how Customs’ trade and enforcement functions are intertwined can be seen in the way Customs’ inspectors, 

import specialists, and special agents currently work closely with 

9

each other to enforce trade and anti-smuggling laws. I cannot 

stress enough the importance of these dual missions and the interconnectedness with respect to the duties and functions of these important components of Customs. 

When Customs’ inspectors make a substantial bulk cash seizure 

at the border using resources such as canine enforcement teams 

and non-intrusive inspection equipment, they hand the case over to 

Customs’ special agents. These agents then conduct a follow-up investigation, such as an investigation into the source of the funds 

or the destination of the funds. This cooperative effort between inspectors and special agents is a seamless one precisely because of 

Customs’ dual missions. The same is true with other border-related 

enforcement matters, such as intellectual property piracy. What begins as an infringement identification is often directly turned into 

an investigative effort. 

There are three additional points that may be self-evident but 

cannot be overlooked in describing the link between Customs’ dual 

missions. First, many trade enforcement functions are carried out 

by the same Customs’ personnel who ensure border security. Second, Customs uses the information it receives from trade compliance examinations and manifests also to assess security risks for 

shipments; this information is the cornerstone of many of Customs’

anti-terrorism efforts. And third, Customs relies on the expertise of 

its trade enforcement personnel to recognize anomalies in their review and processing of commercial transactions information associated with the admissibility and entry of imported goods that assist 

law enforcement in developing targeting criteria as well as targeting suspect shipments and initiating investigations. 

Mr. Chairman, Treasury is proud of the vital role the men and 

women of Customs have played and will continue to play under the 

President’s plan in defending our homeland. 

Thank you again, Mr. Chairman and the Members of the Committee, for this opportunity to testify. And at this time, I would be 

happy to answer any questions you might have. 

[The prepared statement of Mr. Gurule ́ follows:]

Statement of the Hon. Jimmy Gurule ́, Undersecretary for Enforcement, U.S. 

Department of the Treasury 

Chairman Thomas, Members of the Committee, thank you for this opportunity to 

testify. Let me at the outset say that we want to work closely with you, Congressman Rangel, and the Members of the Committee to address your questions and concerns as we move through the legislative process on this important issue. We appreciate the Committee’s historical role on trade and tariff matters which, along with 

Customs itself, dates back to 1789. We also recognize the highly compressed schedule you are operating under, and we will make every effort to be responsive to you 

and do so in a timely manner. 

I am proud to be here on behalf of the Administration to discuss President Bush’s 

proposal to create a Homeland Security Department. As you know, President Bush’s 

proposal includes moving the entire U.S. Customs Service into the new Department, 

which is the subject of today’s hearing. Secretary O’Neill, Customs Commissioner 

Bonner and I fully support the President’s proposal and strongly believe that the 

new Department of Homeland Security will play a key role in safeguarding the 

American people. 

In his June 6th address to the Nation, President Bush called for the creation of 

‘‘a single, permanent department with an overriding and urgent mission: securing 

the homeland of America, and protecting the American people.’’ The President also 

stated, ‘‘The reason to create this department is not to [increase] the size of government, but to increase its focus and effectiveness.’’

10

After the President’s announcement on June 6th, Treasury Secretary O’Neill applauded President Bush for his bold plan to concentrate our homeland security resources in a single Cabinet department. The Secretary said, ‘‘The President has 

demonstrated real leadership, recognizing the new challenges we face and redesigning our system to rise to those challenges. I fully support for this plan to integrate our resources into one collaborative, efficient and nimble structure to focus 

solely on protecting the American people.’’ Two days ago, President Bush toured Port Elizabeth, New Jersey, and commended employees of the Customs Service, Coast Guard, and the New York/New 

Jersey Port Authority for their vital work in keeping dangerous cargo from entering 

our country. The President told the employees that his proposed Homeland Security 

Department would make their jobs easier. President Bush said, ‘‘It’ll make our Federal Government more responsive. It will allow us to communicate better. It will 

allow all of you to make sure that the hard hours you’re putting in are able to more 

secure the homeland.’’ For over 200 years, the U.S. Customs Service has defended our country’s borders 

and facilitated legitimate international trade and travel. Since September 11th, at 

the direction of the President, the top priority of Customs has been responding to 

the continuing terrorist threat at our land borders, seaports, and airports. The Customs Service is working diligently to protect homeland security by keeping terrorists 

and terrorist weapons from entering the United States, while enhancing our economic security by moving goods and people efficiently across the borders. 

The Customs Service has implemented several key programs since September 

11th that respond to the new threat our country faces. ‘‘Operation Green Quest,’’ a Customs-led multi-agency initiative that targets terrorist financing, has already 

initiated hundreds of investigations, aggressively moved against terrorist funding 

sources, and led to the seizure of suspected terrorist assets. With the Container Security Initiative (CSI), Customs is entering into partnerships with foreign seaports 

to conduct pre-screening and more effective risk targeting of sea containers, before 

they are shipped to our ports. Under ‘‘Project Shield America,’’ Customs agents monitor exports of strategic weapons and materials from the U.S. to prevent international 

terrorist groups from obtaining sensitive U.S. technology, weapons, and equipment 

that could be used in a terrorist attack on our nation. 

On April 16th of this year, Secretary O’Neill, Governor Ridge and Commissioner 

Bonner launched the Customs-Trade Partnership Against Terrorism (C–TPAT) in 

Detroit. C–TPAT is a unique partnership with U.S. importers, carriers, brokers, and 

others to improve security along the entire supply chain, while expediting the flow 

of legitimate commerce into the United States. 

The success of programs like CSI and C–TPAT demonstrates how Customs seeks 

to balance its important dual missions of security enforcement and trade facilitation, 

dual missions that are inextricably linked. With C–TPAT, for example, Customs has 

been successful in recruiting companies to join the program and make additional investments in supply chain security solely because Customs is able to offer those 

companies the benefit of expedited clearance at the borders. The same is largely 

true for CSI, which offers expedited processing at U.S. ports for pre-screened cargo 

from its partner ports. These programs underscore how Customs is capable of effectively increasing security at the borders while facilitating the critical flow of trade 

into and out of the United States. These programs also reflect how Customs has effectively established partnerships with private industry to work together to protect 

our borders. 

Another example of how Customs’ trade and enforcement functions are intertwined can be seen in the way Customs inspectors, import specialists, and special 

agents currently work closely with each other to enforce trade and anti-smuggling 

laws. When Customs inspectors make a substantial bulk cash seizure at the border 

using resources such as canine enforcement teams and non-intrusive inspection 

equipment, they hand the case over to Customs special agents. These agents then 

conduct a follow-up investigation, such as an investigation into the source of the 

funds or the destination of the funds. This cooperative effort between inspectors and 

special agents is a seamless one precisely because of Customs’ dual missions. The 

same is true with other border-related enforcement matters, such as intellectual 

property piracy. What begins as an infringement identification is often directly 

turned into an investigative effort. 

There are three additional points that may be self-evident, but cannot be overlooked in describing the link between Customs’ dual missions. First, many trade enforcement functions are carried out by the same Customs personnel who ensure border security. Second, Customs uses the information it receives from trade compliance 

examinations and manifests also to assess security risks for shipments. This information is the cornerstone of many of Customs’ anti-terrorism efforts. Third, Customs reVerDate Sep 04 2002 05:02 Sep 07, 2002 Jkt 081233 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 E:\HR\OC\B233.XXX B233
11

lies on the expertise of its trade enforcement personnel to recognize anomalies in their 

review and processing of commercial transactions information associated with the 

admissibility and entry of imported goods that assist law enforcement in developing 

targeting criteria as well as targeting suspect shipments and initiating investigations. 

Recognizing these links, the President has proposed that the Customs Service as 

a whole be transferred intact into the new Department of Homeland Security. In 

the legislation for the new Department, the President noted that the Department 

will ‘‘ensur[e] the speedy, orderly, and efficient flow of lawful traffic and commerce.’’

Therefore, under the President’s plan, Customs will continue to administer and 

enforce our Customs laws, protect our borders from terrorists, and facilitate the flow 

of legitimate commerce. The President’s plan strikes the appropriate balance between enforcement and trade facilitation that is so critical to our nation’s economy 

and security. 

Mr. Chairman, the Department of the Treasury is proud of the vital role the men 

and women of the Customs Service have played, and will continue to play under 

the President’s plan, in defending our homeland. Thank you again, Mr. Chairman 

and the Members of the Committee, for this opportunity to testify. I would be happy 

to answer any questions you may have.

tary. 

Mr. CRANE. [Presiding.] Thank you very much, Mr. Undersecref Governor Ridge has stated that the Homeland Security will have 

a single mission, the most important job of the Federal Government, namely to protect the American people and our way of life 

from terrorism, and it will have a single, clear line of authority to 

get the job done. It will bring together everyone under the same 

roof, working toward the same goal, and pushing in the same direction. 

In what way do you see Customs and, in particular, the collection 

of duties by Customs, fitting into the overall mission of the new 

agency? 

Mr. GURULE ́ . That is a very important question. And, again, I 

think it goes to the decision the President has made to move the 

entirety of Customs to this new department, this proposed Homeland Security. 

First, it is clear that the enforcement efforts of Customs are inextricably linked with its trade and revenue functions. It is very difficult to split out those responsibilities. If you have Customs’ inspectors at the border on the one hand inspecting cargo and conveyances for contraband, these same inspectors are likewise looking to determine trade compliance, looking to follow up on issues 

involving evaluation and certification of goods. And this information is shared both with Customs’ agents and offices such as the 

Office of Regulations and Rulings. It is shared with import specialists. 

So, again, this dual mission of Customs cannot be overstressed, 

overemphasized. And, again, it is very difficult to simply just carve 

out the trade and revenue collection function, because it is so closely linked to what Customs does on the enforcement side. 

Mr. CRANE. Will there be a reorganization within Customs after 

the move? 

Mr. GURULE ́ . Well, the President’s proposal, as you know, provides for the transfer of the entirety of Customs. It does provide, 

however, for a transition period after the legislation is enacted, 

with respect to when different functions of Customs or any of these 

other border security agencies would be transferred over. So there 

12

is some time there for looking at some of these complex issues and 

evaluating them and deciding when these functions will be transferred over. 

And at the same time, the new Secretary of Homeland Security 

would have the authority to reconfigure or consolidate in a unique 

way or a different way, I should say, some of these agencies. But 

those decisions with respect to any reconfiguration or consolidation 

have not been resolved at this point in time. But at the same time, 

because these are complex issues, complex questions, we certainly 

welcome the opportunity to work with Members of this Committee, 

and we are certainly open to considering any concerns that you 

have. 

Mr. CRANE. Can you describe how Treasury reviews revenue 

regulations and rulings prepared by Customs now and how that 

will change when Customs goes to Homeland Security? 

Mr. GURULE ́ . Well, it is envisioned that when Customs is transferred over to this new department, that its mission will be transferred intact as well. So there is not any sense, at least at this 

point, that there is going to be some major change with respect to 

its mission involving, for example, the promulgating of regulations 

for Customs that the Office of Regulations and Rulings is engaged 

in, or the issuing of binding rulings on matters such as classification valuations and such. 

So the same mission transfers over as well. 

Mr. CRANE. What can and will Treasury do if it disagrees with 

Customs’ post-reorganization on such matters as classification, revenue collection, or transshipment? 

Mr. GURULE ́ . Well, I think that the President’s bill is clear on 

this point. Those responsibilities transfer over. Those responsibilities become the responsibility of the Secretary of Homeland Security. So these operational functions that the Secretary of Treasury 

currently maintains would transfer over to the new Secretary of 

Homeland Security. 

Mr. CRANE. Thank you, Mr. Undersecretary. 

Mr. Rangel? 

Mr. RANGEL. Thank you. 

Mr. Undersecretary, the exchange I had with the Chairman in no 

way meant to infer that you and the panel that follows you are not 

qualified to do what you do. 

But I love the work of this Committee, and I have worked very 

closely, for 35 years, with the oversight of Customs. And it just 

seemed to me that we should have the Secretary of Treasury before 

us, or the Commissioner of Customs, since we are very sensitive as 

to what is going to happen, not what is going to be envisioned or 

what you hope is going to happen. But we cannot protect these line 

outfits as Members of Congress unless we really know the concerns 

of the people who work every day with Customs. 

And with all due respect, you have not worked with Customs, 

have you? 

Mr. GURULE ́ . Well, I have. In fact——

Mr. RANGEL. How long have you? 

Mr. GURULE ́ . My oversight responsibility includes oversight responsibility for Customs. The Commissioner of Customs reports to 

the Undersecretary for Enforcement. I, in turn, report to the DepVerDate Sep 04 2002 05:02 Sep 07, 2002 Jkt 081233 PO 00000 Frm 00016 Fmt 6633 Sfmt 6602 E:\HR\OC\B233.XXX B233
13

uty Secretary, and the Deputy Secretary reports to Secretary 

O’Neill. So I work very closely with Customs, and have worked 

very closely with Customs since I was confirmed in August. Granted, that is a——

Mr. RANGEL. August of last year? 

Mr. GURULE ́ . That is true. In that sense, it is a short time. 

I would add one other point. My relationship with Commissioner 

Bonner goes back 15 years, when he and I worked together in the 

U.S. Attorney’s office in Los Angeles. I have great respect for him. 

We have a very good working relationship, and we have worked 

very closely, shoulder to shoulder, on important issues involving 

terrorism, especially post-September 11. 

Mr. RANGEL. I am not challenging your commitment. I am challenging the fact that I think the Commissioner of Customs could 

do a better job in terms of telling us the concerns that he may or 

may not have as we work our way through this legislation than you 

who he reports to. 

But having said that, I have a chart that came from the Secretary of Treasury’s office on the organization of Homeland Security, and Customs is not even on it. One of my staff wrote in ‘‘Customs’’ next to ‘‘Border Security.’’

Something like this, a table of organization, are you familiar 

with that? 

[The chart follows:]

Mr. GURULE ́ . I cannot see the chart. 

Mr. RANGEL. No, but it says, ‘‘Organization of Homeland Security.’’ On top is ‘‘Secretary.’’ There is a ‘‘Deputy Secretary.’’ Then 

to the left of it is ‘‘Secret Service.’’ To the right is ‘‘State, Local, and 

Private Sector Coordination.’’ Then it goes down and the umbrella 

has four departments under it, and one of the departments is ‘‘Border and Transportation Security.’’ Another is ‘‘Emergency Preparedness and Response.’’ Another is ‘‘Chemical, Biological.’’ And 

the other is ‘‘Information Analysis.’’


Insert offset folio 81233a.001
14

And under all of these hangars, all of these nice, rectangular 

boxes, the list that I am looking under is ‘‘Border and Transportation Security.’’

Under that hangs ‘‘Border Security,’’ ‘‘Transportation Security,’’

‘‘Coast Guard,’’ ‘‘Immigration and Visa Processing.’’

Mr. GURULE ́ . I do have it in front of me now. 

Mr. RANGEL. And Customs is not even in a box. 

Mr. GURULE ́ . Well, it is envisioned certainly that the border security function, that Customs would fall in the box here for border 

security. And as I have stated, Customs plays a very important, 

crucial role. 

Mr. RANGEL. No matter how important the role is, it was not 

important enough even to give them a box. And we do not have the 

Secretary of Treasury to reaffirm the fact that, if they have every 

reason to believe that the Committee on Ways and Means that provides oversight over Treasury and over Customs, that if we are not 

going to be certain that in this transfer, that they do not have 

someone to look after their interests, besides just hoping that we 

do the best by the them—I do not think it is fair for us not to have 

the Customs Commissioner or the Secretary of Treasury or Tom 

Ridge here before us. 

Do you know when this change is supposed to take—how many 

employees are there in Customs? 

Mr. GURULE ́ . In Customs, there are—let me tell you exactly. 

Mr. RANGEL. Roughly. 

Mr. GURULE ́ . I will tell you exactly. There are 19,628, so approximately 20,000 employees. 

Mr. RANGEL. When do they move over to the Homeland Security? 

Mr. GURULE ́ . The bill that the President has submitted to Congress provides that within—there is a transition period. After the 

legislation is enacted and signed into law, there is a transition period of up to 12 months. And within that 12-month period of time, 

the President has discretion to decide which particular functions 

and offices and agencies transfer over during that period of time. 

I think that is a very important point to highlight, because it 

does provide time for addressing some of the more complex issues 

that are implicated by the creation of this new department. And it 

does afford an opportunity to work closely——

Mr. RANGEL. I am on a clock, and my time is about to run out. 

Will we have a Customs Commissioner under the new program? 

Will that be his title? 

Mr. GURULE ́ . Again, the entirety of Customs would go over——

Mr. RANGEL. Will the union status and civil service status of 

the Customs’ office as it exists now be the same? 

Mr. GURULE ́ . Yes. At this point, it is envisioned that——

Mr. RANGEL. No, no. 

Mr. GURULE ́ . They will transfer with the union status, with 

their——

Mr. RANGEL. It’s a mean gavel. ‘‘Yes’’ is good for me. 

Mr. CRANE. Thank you. 

Mr. RANGEL. I have time. Don’t I have a little time? Just one 

last question. 

15

Can you say with some degree of accuracy that Customs, as we 

know it, with all the functions as we now know it, will be transferred intact with the Commissioner under the present setting 

without any changes that we should be concerned about? 

Mr. GURULE ́ . The initial transfer, it is intended that it be transferred over in its entirety and with the same mission, with the 

same responsibilities that it currently possesses. 

Mr. RANGEL. Could you write and tell me why Customs just 

didn’t make the organizational chart? 

[The information follows:]

Under the proposed bill, the new Department would continue to fulfill all of the 

existing functions of the Customs Service. While not specifically designated by name 

in the organization chart, as you point out, the President proposes to transfer the 

entire Customs Service—its border security, trade/revenue, and investigative missions—into the new Department of Homeland Security. 

To recognize the importance of Customs’ functions, section 401 of the proposed 

legislation specifically includes within the jurisdiction of the Under Secretary for 

Border and Transportation Security a number of ‘‘primary responsibilities,’’ including: ‘‘(1) preventing the entry of terrorists and the instruments of terrorism into the 

United States; (2) securing the borders, territorial waters, ports, terminals, waterways, and air, land, and sea transportation systems of the United States. . . . (4) 

administering the customs laws of the United States; and (5) in carrying out the 

foregoing responsibilities, ensuring the speedy, orderly, and efficient flow of lawful 

traffic and commerce.’’

Certainly, the new Secretary will consider how to best organize the new Department in order to maximize efficiencies and synergies and minimize redundancies 

and overlapping missions. It is anticipated that there will be integration of many 

of the border security functions—particularly when it comes to headquarters bureaucracies and duplicative inspection activities at our ports of entry. The President 

wants to create the most efficient structure possible to ensure that our ports of 

entry and other critical assets are protected and combining key components will 

tainly what is most important is in the President

help do so.

Mr. GURULE ́ . Sure. It may not have a separate box, but cerf ’s bill that has 

been submitted to Congress, it is very clear that the entirety of 

Customs is transferring to this new department, to address and to 

enhance security at the border. 

And then lastly, I would just like to comment with respect to 

Commissioner Bonner’s absence, and he does send his regrets. He 

is in Europe working on a very important initiative, the CSI. And 

he is presently, as we speak, negotiating agreements with the governments of the Netherlands and Belgium to implement this important initiative with respect to containers and, in essence, moving our border back to the point of origin with respect to containers, so that the inspections can be conducted in those foreign 

ports. 

So it is a very important trip that he is on at this time. 

Mr. CRANE. Thank you. Ms. Dunn. 

Ms. DUNN. Thank you very much, Mr. Chairman. 

And, welcome, Secretary. It is good to have you here, because I 

think a lot of us are seriously interested in exactly how this whole 

situation will work. And as you told our Ranking Member, in fact 

in the legislation covering homeland security, there is a statement 

that the entire operation of Customs and its responsibility to the 

Secretary of Treasury will be transferred over to Homeland Security. That is helpful. 

16

I have been hearing from numerous carriers, people from my 

hometown, which is a port city, Seattle, Washington—shippers, 

truckers, express air service—about Customs’ efforts to require 

more information on their manifests for security reasons that are 

obvious to all of us. Many of the carriers are, though, very concerned about the information they have to provide, the degree of 

it, the depth of it, as well as when they have to provide this information. 

The additional requirement applies to both outbound and inbound flow of products, and we are, of course, looking for a balance 

between security and trade, because we do not want to slow down 

the passage of product and want very careful security to come out 

of this new relationship that we are forming. 

Let me ask you a couple of questions that perhaps you can provide either general answers to or maybe even something more particular. 

Is the Administration intent to collect information on the manifests of all types of carriers before the cargo is loaded or submission 

of the manifest prior to departure? If so, how will you accommodate 

carriers like trucking lines and air couriers who are often delivering within hours of receipt of cargo? 

Airborne Express is an example of the kind of company that I 

represent that does overnight mail. I am sure that FedEx and others are in this same category. 

Can you tell me how this is going to work? Are they going to 

have to measurably change their way of doing business? 

Mr. GURULE ́ . I would say that since September 11, we have certainly learned and appreciate the value and importance of information. I think that perhaps information is the most valuable weapon 

against terrorism and terrorist attacks. And it is information that 

must be shared if we are to prevent future terrorist attacks. It 

must be information that is shared on a real-time basis. 

But at the same time, we have to be sensitive to this important 

balance of security and the facilitation of trade. I have had numerous conversations with Commissioner Bonner on the subject, as 

well as Secretary O’Neill. And they both feel strongly, as I do, that 

we must maintain that balance. 

With respect to the sharing of information on a timely basis, and, 

as you stated, in some cases it is literally within hours, we want 

to get that information in advance. I think that the Automated 

Commercial Environment (ACE) system certainly is very important 

to achieving that end in terms of facilitating the easy collection of 

information, because when ACE is up and running, we will have 

an electronic filing system, where businesses can file electronically, 

not in paper form, but electronically, information with respect to 

manifests and goods that are being shipped. 

So, again, that emphasizes the importance of the ACE system 

and its value both to trade facilitation as well as security. 

Ms. DUNN. Would the Administration support a staggered implementation of data collection based on the type of carrier? And 

would, for example, the Administration support different implementation periods for outbound and inbound traffic? 

Mr. GURULE ́ . I think on that point, certainly we would be, and 

we always are, interested in your views and concerns on these 

17

types of issues. And so if there is a particular issue or concern here, 

we would like to hear it. We want to work with you. 

We, obviously, want to do this right. We want to do it in a way 

that, again, addresses these important dual missions of Customs. 

Ms. DUNN. That sort of consultation would be very useful. I 

would like to take you up on that offer. 

There seems to be unanimity among carriers and importers that 

information that Customs needs should be shared directly with the 

government rather than requiring that importers send sensitive 

commercial information to a carrier which then sends the information on to Customs. Do you support allowing importers and shippers to deal directly with the government? 

Mr. GURULE ́ . That is a question, if I might, I would prefer to 

get my response back to you in writing, so that I am accurately 

communicating the Commissioner’s views on that particular issue. 

[The information follows:]

This issue involves the level of reporting detail which is required on cargo manifest reports—the reports which carriers file to notify Customs of the cargo they are 

bringing to the United States. For security targeting it is desirable to have the most 

detailed information that can be practicably provided in the manifest report. The 

issue you raise is that it is not the carriers that have the most detailed information 

about the cargo, but their clients, importers and exporters who do not necessarily 

want to share those details with the carriers because the details involve confidential 

business information. 

One method to address this issue, and the method that is embodied in the G–7 

standardized electronic customs messages that the U.S. Customs Service is incorporating in its ACE design, is to build links between the carriers’ manifest report 

and the importers’ and the exporters’ reports that would allow the government to 

combine the information received from both. This approach can provide detailed information to the government while shielding confidential information, and not requiring carriers to report information that the government can obtain from another 

source. In the interim, it is critical that the carriers improve the level of detail 

above that which had been provided in the past. Descriptions such as ‘‘freight, all 

kinds

Ms. DUNN. Thank you, Mr. Undersecretary. 

And last, on the function of Customs, it sounds to me like you 

’’ are no longer acceptable.

f are envisioning a new Homeland Security that pays very careful attention to balancing the agency’s core functions relating to trade 

and their new law enforcement functions, and that pleases me. I 

hope we can continue to stay in touch with you and make sure that 

it ends up that way. 

I have great regards for Customs, because it was a very alert 

Customs’ agent who was able to catch for us Ahmed Ressam, who 

you recall is the foreign terrorist who moved from Canada to the 

United States through one of our ports in Washington State, with 

a trunk loaded with potential bomb materials that he was going to 

transport down to blow up the LA airport. 

And so, it is very important to us that we continue to operate 

very well in the areas of security with Customs on our borders and 

on our two ports in Washington State. But also, our State depends 

on trade for one out of three of its jobs these days. And so it also 

very important to us that that balance take place, because we want 

the transport of people and product to continue in the way that it 

has so successfully in the past. 

Mr. GURULE ́ . Well, I am here to reassure you and every Member of this Committee that the Administration is committed to that 

18

balance of responsibilities. And that commitment will carry over 

with equal vigor to this new Homeland Security. 

Ms. DUNN. Thank you for being here. 

Mr. CRANE. Mr. McCrery. 

Mr. McCRERY. Thank you, Mr. Chairman. 

Mr. Gurule ́, you talked about the ACE computer system. Can you 

give us an update on the status of that, and tell us if it is going 

to follow Customs into the new Homeland Security? And will Customs have control over that computer system once the transfer is 

made? 

Mr. GURULE ́ . First, the Administration strongly supports ACE. 

Again, there are many things that we have learned following the 

terrorist attacks of September 11. And as I stated before, the importance of information and information-sharing is certainly one of 

those. 

And I think ACE is even more important today than it was prior 

to September 11, because of the enhanced ability that we will have 

to engage in better targeting of high-risk shipments and high-risk 

containers. 

So we see ACE as being important to identifying high-risk cargo 

on the one hand, and expediting low-risk trade on the other hand. 

Yes, it will carryover. That responsibility will remain within Customs, as Customs is transferred to the new department. And it is 

our intent to work aggressively to get ACE up and running as 

quickly as reasonably possible. 

Mr. McCRERY. So there is no danger that the funding is going 

to be delayed during this transfer? 

Mr. GURULE ́ . Absolutely not. The Administration remains fully 

supportive of ACE. 

Mr. McCRERY. Let’s talk about one of the specific functions of 

Customs, and that is revenue-raising functions. It seems to me that 

this is a function unique to Customs, unique among those departments that are to be transferred to the new Homeland Security. 

Aren’t there some offices within Customs that do nothing but raise 

revenues? 

Mr. GURULE ́ . Well, there are certainly some offices that are 

more heavily engaged in trade functions and trade revenue-related 

functions than enforcement. But having said that, at the same 

time, there is a strong nexus between those office functions and the 

enforcement function, the sharing of information for dual purposes. 

And one example of that, if I might, is the Office of Strategic 

Trade, or OST. It has two principle purposes. One is to analyze 

trade data for trans-anomalies in compliance, and second, it oversees the regulatory audit function. So it engages in onsite audits 

of companies to make sure that they are in compliance. 

Well, that certainly has a revenue-related function, to ensure 

that these audits are not highlighting anomalies or revenue that 

should be collected that is not being collected. But at the same 

time, once these anomalies and trends are identified, this information is shared with Customs’ inspectors. And a Customs’ inspector 

may be asked, ‘‘Well, with respect to this particular company, there 

is a shipment coming across the border on this date, and we want 

you to target it for close inspection.’’ Or the information may be 

19

shared with a Customs’ agent to conduct an investigation into possible trade fraud. 

So, again, there is a very strong synergy between these enforcement functions and trade revenue-collection functions. 

Mr. McCRERY. Well, while there may be a synergy, still, those 

functions seem to me to be unique, again, among the departments 

that are going to be transferred. So I just wish that you all consider the special needs and circumstances of those offices within 

Customs that are primarily if not wholly trade-related or revenue 

collecting-related, and make sure that those functions get all the 

resources they need in that new department. 

Mr. GURULE ́ . I certainly do not want to suggest that anything 

in my comments that we would do other than that. In fact, we recognize, certainly, the importance of the Office of Strategic Trade, 

the importance of the ORR, the Office of Regulations and Rulings. 

And it is certainly envisioned that those functions will continue. 

They will continue with Customs. They will transfer over with Customs. And we need to preserve them. We need to preserve the work 

that they are currently engaged in. 

Mr. McCRERY. Thank you. 

Mr. CRANE. Mrs. Johnson. 

Mrs. JOHNSON OF CONNECTICUT. Thank you, Mr. Chairman. 

In your work on this matter, and I assume that you have been 

in on some of the discussions about the development of the new department, what exactly do you think might be the consequences of 

having Customs, the Coast Guard, and Immigration in the same 

department? 

Mr. GURULE ́ . Well, certainly, it is envisioned that the consolidation, bringing together these different agencies that have related 

functions, will enhance cooperation with respect to border security, 

and will enhance information-sharing and coordination. 

Mrs. JOHNSON OF CONNECTICUT. I can generally see that. 

Could you give us examples? I can see that there might be some 

good cross work there, but can you give some examples of INS at 

the border, of you guys at the border? How will these missions complement one another so that actually you could each do your job 

more effectively? Or will it make any difference, you will just be 

side-by-side? 

Mr. GURULE ́ . No, I think it definitely will make a difference. 

And I think one way is that there is accountability here. There is 

a streamlining of the chain of command. So instead of these different agencies reporting to different departments with different 

secretaries, different leadership, now we have these agencies that 

are in the same department. And in the case of the division for border and transportation security, they will report to a single Undersecretary. And the single Undersecretary will be overseeing the coordination of these important functions and responsibilities. 

So it is a streamlining of the information chain, if you will, and 

the complementing and the targeting and concentrating of resources. 

Mrs. JOHNSON OF CONNECTICUT. Do you foresee cross-training at any level? 

20

Mr. GURULE ́ . Well, it is certainly a possibility. And it could be 

that it would make sense to have that done. But that is a decision 

that the new Secretary for Homeland Security will make and I 

think will certainly make with the objective of enhancing security 

and enhancing good government, because, again, that is another 

important objective of the President’s bill, to reduce the 

redundancies, reduce the overlapping of responsibilities, to make 

these agencies work more effectively and efficiently. So certainly, 

I could envision that happening. 

Mrs. JOHNSON OF CONNECTICUT. Thank you. 

Mr. CRANE. Ms. Thurman. 

Ms. THURMAN. Thank you, Mr. Chairman. 

Mr. Undersecretary, we welcome you and thank you for being 

here today. 

And I think as you know, all of us are wanting to see the Homeland Security Bill passed and implemented. But I do also think 

that we need to be concerned. 

And I would kind of want to pick up a little bit on what Mr. Rangel and this box thing. I do not know if you had an opportunity to 

look at Colleen Kelley’s testimony that she is going to be giving 

today. She really does make some very good points as to having 

Customs kind of as their own entity instead of being folded in as 

one large entity, because we are not doing it with Coast Guard, we 

are not doing it in some other areas, but just talking about what 

they have to do and what they have been doing in protecting our 

borders, interdiction of drugs, all of the other kinds of things. And 

so I am a little bit concerned that they are going to lose identity. 

And you can respond to that, and I hope that you will get a 

chance to look at this and give us some response back to what they 

have said. And hopefully, as we go forward, we do in fact take into 

consideration those that know the job out there every day and why 

they feel so strongly in their commitments to their jobs. On the security issue, I think we do need to be listening to those people that 

are on the frontlines. 

The second thing that I would bring up, and I do not know if you 

remember this, but last year we had a Customs’ bill before this 

Committee, and we had a huge fight over the benefit issue, particularly as it dealt with how they were paid and the differential pays 

that they received for nighttime work and those kinds of things. 

And according to some work that has been done by our staff, one 

of the things that they looked at is saying that section 730 of the 

proposal appears to remove all Homeland Security employees from 

the existing statutory framework governing employment of Federal 

employees. Specifically, section 730 removes all employees transferred to the new Homeland Security from existing Title 5, which 

governs the employment of Federal workers by creating new chapter within the title. So section 730 then leaves it to the discretion 

of the Secretary of Homeland Security and the Director of the Office of Personnel and Management (OPM) to decide what rules and 

regulations to apply to Homeland Security employees. 

What comfort can you give us here today, as those Members of 

this Committee who have been through this fight over the last couple of years, and certainly was taken out of the bill in changing it, 

what comfort can we get that these employees will be treated as 

21

they have been and certainly considered and given the rights that 

Federal employees are given? 

Mr. GURULE ́ . First, let me publicly state what I have stated 

personally and directly to Customs’ employees, and that is that this 

country owes a great deal of thanks and gratitude to the hard 

work, the dedication, and the professionalism of Customs’ employees who have worked tirelessly, certainly since September 11, who 

are working 12 hours and in some cases longer——

Ms. THURMAN. Absolutely. 

Mr. GURULE ́ . And 6 days a week and so on. It is remarkable, 

and we owe them a great debt of gratitude. 

I think it is interesting to note that the important contribution 

that Customs’ inspectors are making to make this country safer for 

all Americans was recently recognized by Commissioner Bonner 

when he went ahead and changed or upgraded their GS status 

from a GS–9 to a GS–11. 

Ms. THURMAN. But could that change if they were transferred 

over? 

And let me ask, before my time runs out, second, and being recognized and doing that is great, but in the development of this 

plan, how much have we counted on those people on the frontlines 

to give us input into this, into the President’s proposal? 

Mr. GURULE ́ . Let me respond to your first question. You asked 

about the change of status and such. It is envisioned that these 

Customs’ employees, when they would transfer over to the new 

Homeland Security, would carry with them their current, present 

GS status, their pay status, their benefits, even including their 

union status. What this bill seeks to do is provide the new Secretary of Homeland Security with some flexibility to retain employees, to promote employees, to make sure that we have the right 

people with the right expertise to ensure that this new department 

gets up and running effectively and as quickly as possible. That is 

the objective. And I think that, if anything, Customs’ employees 

seek to benefit and benefit in a very significant way from this legislation. 

And second, I’m sorry, was? 

Ms. THURMAN. And how much input have we used from those 

employees on the front line, in putting this together? 

Mr. GURULE ́ . Well, I think certainly, in kind of a democratic 

process, it is the senior staff that obviously have been engaged, and 

extensively, in discussions about this proposal. And then it is dependent upon the senior staff to engage their supervisors and such. 

And so in that way, I think that has been an opportunity for input. 

Mr. CRANE. Mr. Portman. 

Mr. PORTMAN. Thank you, Mr. Chairman. 

And thank you, Mr. Gurule ́, for being here today and getting us 

started on what will be a major undertaking, but one that we are 

all committed to, because it is so critical to try to better protect, 

in the case of Customs, our borders and ports and ports of entry, 

many of which are inside the United States, including Cincinnati, 

Ohio, that I represent, from terrorism. 

I guess a couple quick questions. One would be, if you were arriving in the greater Cincinnati airport and going through Customs 

22

and Homeland Security was in charge of Customs rather than 

Treasury, what difference would it make? 

Mr. GURULE ́ . Well, that, in terms of what difference it would 

make, is a decision that ultimately is going to be decided by the 

new Secretary of this new department. And as I stated, there is 

this 12-month transition period that the legislation provides, with 

respect to the functions being transferred over. But at the same 

time, there is a transition period—and, actually, beyond that 12-

month period, for the new Secretary to decide how these agencies 

are going to be configured or reconfigured or how they are going 

to complement one another. 

And so I think it is a very thoughtful and a very deliberate plan, 

because I think it does three things that are very important. I 

think, first, it advances the President’s goal with respect to consolidating quickly these very important border agencies. Second, I 

think it does so in a way that is least disruptive to the border security functions, because it transfers over Customs intact. And then, 

third, it provides for this transition period to work through some 

of the more difficult and complex issues, issues that, again, we welcome input and consultation with the Members of this Committee 

in resolving and working out. 

Mr. PORTMAN. A couple of quick questions. 

One, do you all have a sense that you have lost any employees 

to the new Transportation Security Administration? 

Mr. GURULE ́ . Oh, we have. It is not even a question of—I mean, 

clearly, clearly we have. There have been Secret Service Uniformed 

Division officers that have been—— Mr. PORTMAN. How about Customs? 

Mr. GURULE ́ . That have left. 

Less so. Less so with Customs. I think for me, and I have oversight responsibility not only for Customs but Secret Service, I have 

seen the exit more so with Secret Service. There have been some 

instances with Customs, but I do not think the numbers have been 

all that high. 

Mr. PORTMAN. I ask that because we have seen that here with 

Capitol Hill police, and you have seen that with the UD guys at 

Secret Service, and other law enforcement. And I think it just 

makes the point that there are different rules that now pertain to 

the roughly 100 agencies and departments and offices that would 

be consolidated. 

And getting to the earlier question about flexibility, it would 

seem to me that there would be the need not just to give the Secretary some flexibility on hiring and firing, to be sure that he is 

able to retain good people and attract the kind of people we need 

for this function, but also that there be some leveling of some of 

the pay and benefits so that you don’t have one agency robbing another, robbing Peter to pay Paul, within the same department. It 

would be particularly acute within the same department, I would 

think, given that your goals will now be to work together. 

I have read your legislation, and you do not have much specificity with regard to your personnel issues, but you do ask for some 

flexibility, which I hope that you will have, in part to be able to 

level out some of these issues, so that you don’t have that kind of 

competition. 

23

Mr. GURULE ́ . I think that is important. It is certainly important 

for continuity of operations, for enhancing efficiencies, and for 

these agencies to work even more closely. 

Mr. PORTMAN. Do you have pay bands at Customs? 

Mr. GURULE ́ . Well, that is an issue that—there has not been a 

decision reached on that. I think the legislation provides some 

flexibility. We are seeking flexibility there. But with respect to pay 

banding, that is a decision that is better left and will be left for 

the new Secretary. 

Mr. PORTMAN. Do you provide intelligence information from 

Customs currently? 

Mr. GURULE ́ . Do we provide intelligence? Certainly there is intelligence information that is being shared on a regular basis between Customs and the intelligence communities. We see that 

through Operation Green Quest. Operation Green Quest is collecting information, enforcement information, intelligence information, and sharing it regularly with the FBI and working closely 

with the intelligence community. 

So I think we have made some significant and substantial 

progress to breaking down stovepipes and engaging in a free flow 

or certainly a much freer flow of information and information exchange. 

Mr. PORTMAN. I think that is an important point to make, that 

part of the advantage of this agency is not just FBI and CIA information that can now be more readily collected, synthesized, and 

hopefully matched with vulnerabilities or risk, but that many of 

these entities, including Customs, have valuable information, some 

of which may be integrated already, some of which may not. And 

the same would go for the INS, even the inspections and the Coast 

Guard. And this could be a valuable advantage to us and a more 

efficient way to get that information where it needs to go. 

Mr. GURULE ́ . And I would add that this is one other important 

reason for moving forward and moving forward aggressively with 

ACE, because ACE has the potential of being the IT platform for 

multiple law enforcement agencies that are involved in tracking 

goods and personnel across the U.S. borders. So they would be able 

to access this information, including the INS. And in a very expeditious way, it would be accessible. 

Mr. PORTMAN. Thank you, Madam Chair. 

Mrs. JOHNSON OF CONNECTICUT. [Presiding.] Thank you. 

Mr. Doggett. 

Mr. DOGGETT. Thank you very much. 

Mr. Secretary, the President has of course urged the Congress to 

move swiftly in enacting this legislation. If that occurs, how soon 

after enactment is it realistic to expect that these Customs’ employees will be over working as a part of the new Homeland Security? 

Mr. GURULE ́ . Well, there is no question that, first of all, the legislation is very specific on this point. These functions, these agencies and responsibilities, will transfer over within a 12-month period of time, so within that period of time. Twelve months is the 

outside limit. But it is certainly envisioned that these agencies 

could transfer over sooner than that. But, again, the actual timing 

will be decided by the Secretary working closely with the President. 

24

Mr. DOGGETT. But the outside limit is not more than a year 

after it is signed. 

Mr. GURULE ́ . That’s correct. 

Mr. DOGGETT. It was quite natural, of course, to see Customs 

transferred. I was surprised that the agency within your department that has principle responsibility for keeping tabs on explosives and guns that could fall into the hands of terrorists, that that 

agency was not transferred. Does the department oppose the transferring of the ATF agency to this new department? 

Mr. GURULE ́ . Well, the President made the decision based on 

what needs to be done quickly to secure the homeland. I recognize 

that there are other ideas out there about other law enforcement 

agencies and whether they should be included as part of this new 

department. But this proposal is designed to cover the changes that 

need to be made now to enhance security. 

Mr. DOGGETT. And the President does not think that dealing 

with explosives is something that needs to be done now? 

Mr. GURULE ́ . No. Certainly, dealing with explosives not only is 

something that needs to be done now, it is being done now. And 

it is being done quite effectively by ATF. In fact—— Mr. DOGGETT. Does ATF have a key role in the war on terrorism? 

Mr. GURULE ́ . They are playing a very important role, especially 

with respect to inspection of facilities that house and store explosives. So the answer is yes. 

Mr. DOGGETT. The department does not oppose their being 

transferred there, the Treasury Department? 

Mr. GURULE ́ . The Administration has not made a decision with 

respect to ATF. 

Mr. DOGGETT. I guess it has made a decision not to transfer it 

in that it is not included in the bill. 

Mr. GURULE ́ . It is not included. That is correct. 

Mr. DOGGETT. But Treasury has taken no position itself of opposing the transfer? 

Mr. GURULE ́ . The position that Treasury has taken is to support fully the Administration’s position at it stands. 

Mr. DOGGETT. And what reason is there to separate out the key 

role that ATF plays in opposing terrorism from this Homeland Security? 

Mr. GURULE ́ . The only thing that I can say is that this was certainly considered by Homeland Security, considered by Governor 

Ridge, and the President. The decision was made to not include 

ATF. A decision was made that the current organizational structure that is proposed is sufficient to provide the enhanced security 

that the President is seeking. 

Mr. DOGGETT. Thank you. 

Mrs. JOHNSON OF CONNECTICUT. Thank you very much, Mr. 

Gurule ́. 

Mr. Rangel, do you have any additional questions? 

Mr. RANGEL. No, but I really did not understand the last answer, as to why ATF was not included in Homeland Security. I 

mean, if we all agree that they are doing a terrific job in terms of 

protecting our great Nation, and if this is Homeland Security, get 

them all under the same umbrella, what was the thinking in not 

25

just automatically including them as a part of that? Just what is 

the thinking? We support you, and we support the President, just 

why did you not do it? 

Mr. GURULE ́ . Again, as I stated, there are certainly different 

views with—— Mr. RANGEL. Just give us one. 

Mr. GURULE ́ . Respect to which agencies should be included, 

should be excluded. The President made a decision with respect to 

these particular agencies and believes that including these particular agencies in this new department will enhance security and 

will enable us to do so, enable the Administration to do so in a very 

timely, very timely way. 

Mr. RANGEL. So it doesn’t matter how many different ways I 

ask the question, you will not tell me why they reached that conclusion, right? 

Mr. GURULE ́ . I believe I responded to the question the best that 

I am able to. 

Mr. RANGEL. Thank you. 

Mrs. JOHNSON OF CONNECTICUT. Thank you very much for 

your testimony. We apologize for keeping you so late. And we will 

move on to the next panel. 

Mr. GURULE ́ . Thank you. It was a pleasure. Thank you. 

Mrs. JOHNSON OF CONNECTICUT. I would like to welcome 

Timothy Farrell, Deputy Executive Director of the Port of Tacoma 

in Washington; James Clawson, the Chief Executive Officer of JBC 

International and Secretariat of the Joint Industry Group; Jerry 

Cook, Vice President of International Trade, Sara Lee Branded Apparel, Winston-Salem, North Carolina; and Colleen Kelley, National President of the National Treasury Employees Union. 

Welcome to all of you. 

And thanks very much to our national Archives for bringing this 

fine document for our observation today. Thank you. 

Mr. Farrell, if you will proceed? 

STATEMENT OF TIMOTHY FARRELL, DEPUTY EXECUTIVE 

DIRECTOR, PORT OF TACOMA, TACOMA, WASHINGTON 

Mr. FARRELL. Thank you. I would like to thank the Committee 

for the opportunity to speak with you this evening. 

As you mentioned, my name is Tim Farrell. I am the Deputy Executive Director of the Port of Tacoma, Washington. 

Among the responsibilities that I oversee at the port is the integration of security into the free flow of trade through our port. And 

since September 11, we have dedicated more resources and greater 

vigilance to that task. And certainly we have had great partnership 

and help from the Federal Government and its various agencies, 

including Customs, as well as our private sector customers and 

partners. 

I want to focus on three messages tonight. First, as you know, 

Customs is a very important player in both international trade and 

border security and, as such, has a major role to play in the economic vitality of the United States. As you heard earlier from Representative Dunn, Washington State is the most trade-dependent 

State in the Union, with one in three jobs related to international 

trade. 

26

Second, as Customs integrates new security programs and standards into its operations at border crossings and ports, Customs 

needs to take care to assure that uniform application of these procedures at all border crossings and ports takes place. A non-level 

playingfield, from a regulatory standpoint, impacts both security 

and commerce, as I will explain a little bit later. 

And third, continued cooperation and coordination with Canadian Customs to assure comparable security protocols is essential 

in averting the risk of diversion of U.S.-bound cargoes from U.S. 

ports to Canadian ports. 

Let me give a little bit of background on the Port of Tacoma, 

which operates on 5,000 acres of tide lands on Puget Sound about 

30 miles from Seattle. 

Tacoma along with Seattle comprises the third largest container 

gateway in the United States. The two combine to handle nearly 

3 million containers each year. Most of those containers move 

through our ports into other parts of the country. In fact, 70 percent of imported containers move on to places such as the U.S. 

Midwest and Northeast. The Port of Tacoma handled $20 billion in 

international trade in 2001, and $3 billion in domestic trade as the 

gateway to Alaska. 

The Port of Tacoma is also one of the U.S. Maritime Administration’s 13 strategic ports, based on its proximity to major military 

installations and its ability to load military cargoes out from those 

installations. 

As I mentioned, Tacoma is close to the Canadian border, and 

that has an impact on our activities and on the regulatory framework in which we operate. 

Finally, the port generates directly and indirectly over 100,000 

jobs within the State of Washington. And as such, we take regulation and security matters very seriously because trade is a major 

part of our economy in Washington State. 

A little bit about what we have done in the ports, particularly 

in Puget Sound, about security since September 11: Ports of Seattle, Everett, and Tacoma jointly filed an application for Federal 

funding under the grant program that came out earlier this year. 

As far as we know, we were the only port range that submitted a 

joint application. We work closely together because you are only as 

secure as your neighbor. That grant program focuses much on target hardening, as it is called, fencing, barriers, cameras, officers, 

lighting, that sort of thing. 

In addition, the Ports of Seattle and Tacoma are working together on a version of Operation Safe Commerce; Secure Maritime 

Asian Routes for Trade, SMART is our acronym for it, but essentially, it is similar to what you have heard about going on in the 

Port Authority of New York and New Jersey. 

This program is designed as a way to determine best practices 

in securing the container logistics chain from the point of origin to 

the point of destination. It is based on the principle that if we find 

a weapon of mass destruction in a container in a U.S. port, it is 

too late. And so the critical information that we need to know is 

whether or not a container is loaded in a secure environment. And 

then from that point to its destination, is it secure, has it stayed 

en route, has it stayed on scheduled, has it been tampered with? 

27

And the Ports of Seattle and Tacoma, along with the other two 

major gateways for containers in the country, Los Angeles and New 

York-New Jersey, are working to determine some best practices for 

how we might consider and determine that containers are loaded 

and moving in a secure fashion. 

We are looking forward to Federal assistance and partnership in 

making that process go forward. 

With regard to Customs, it is critically important that in this 

time, where we consider changes to Customs and where its reporting relationships lie, that we do not compromise the non-securityrelated functions of Customs while at the same time we pay very 

close attention to security. 

Customs, as you heard earlier from the Undersecretary, does 

have trade and revenue functions, as well as security functions. 

I would call on the Congress to assure that, as we go forward in 

this security environment, that not only do we pay very close attention to security but that those things that Customs does to help the 

flow of commerce, including the development of the ACE system, 

be continually funded and supported. 

I mentioned briefly in my introductory statement about our proximity to Canada and balanced implementation of regulation. There 

is a concern in our part of the country, in the Pacific Northwest, 

as well as some other places, including New York-New Jersey and 

Boston, that implementation of security regulations could have the 

negative impact of diverting cargo to foreign ports, foreign in this 

case being Canada. 

This is an instance where we want to be very careful not to do 

the terrorists’ jobs for them and use our security system to slow 

down commerce to the extent that commerce chooses to go in other 

directions. 

Should that happen, two things occur. One is the obvious, immediate economic impact. I mentioned 100,000 jobs rely on the Port 

of Tacoma. The second is security. If cargo moves through another 

country, then we face the potential of a lower level of scrutiny in 

that Nation. So Customs has a very delicate balancing act that it 

accomplishes quite well, and that is the movement of trade, the facilitation of trade, as well as safeguarding our country from that 

trade. 

One of the impacts that we could see, if we do not do this quite 

right, is steamship lines and other entities that report to Customs 

reporting to multiple agencies for their information. And we do not 

want to see that. That is a way of creating greater work for our 

customers in terms of reporting their information. If we keep Customs in its singular grouping with both sides of the house, we can 

serve those companies that generate trade and keep our economy 

flowing. 

I want to commend Customs on its new programs: the CSI and 

the C–TPAT program. I think those are both strong initiatives, creative initiatives, in the direction of securing trade while continuing 

to make it happen. I think it is incumbent upon us and Congress 

to make sure that those programs are properly funded. 

So just to summarize, I would like to issue a couple of challenges. 

One is to Customs, and that is to maintain balanced application of 

the regulations that it puts forth to the business community; and 

28

second, to Congress, to oversee Customs to ensure that, again, the 

focus on security doesn’t overshadow the commercial functions of 

Customs, and also to support Customs in each of those areas, to 

make sure that it is properly funded to do so. 

So I thank you for the opportunity again. And I am happy to 

take any questions you may have. 

[The prepared statement of Mr. Farrell follows:]

Statement of Timothy Farrell, Deputy Executive Director, Port of Tacoma, 

Tacoma, Washington 

Good afternoon, Chairman Thomas and Members of the committee. My name is 

Tim Farrell and I am here today representing the Port of Tacoma. As the Port’s 

Deputy Executive Director, balancing security with the efficient flow of cargo across 

our docks is one of my paramount responsibilities and concerns. Though ports have 

always devoted resources to safety and the protection of cargo, the industry now 

shares an especially keen sense of responsibility with Congress and other governmental entities in these challenging days since September 11th, 2001. 

Before I begin my formal remarks, let me first put my comments into context by 

describing some of the Port’s key attributes. The Port of Tacoma moved more than 

1.3 million containers across its docks in 2001 and, when combined with the Port 

of Seattle, represents the nation’s 3rd largest intermodal gateway. Each year, the 

Port of Tacoma handles more than 15 million tons of cargo, amounting to more than 

$20 billion in international trade. Seventy percent of these international containers—holding products ranging from shoes to machinery—are transferred from 

ships to trains and are headed for markets in the Midwest and East Coast. Additionally, the Port of Tacoma handles an additional $3 billion worth of trade as the 

Gateway to Alaska, with more than 75 percent of all consumer goods bound for 

Alaska transported through Tacoma on the CSX and TOTE ships. 

Another important distinction Tacoma has is serving as one of the U.S. Department of Transportation Maritime Administration’s 13 national ‘‘strategic ports’’—a 

designation based on the load-out capabilities the Port of Tacoma provides to Fort 

Lewis. With nearly 102,000 jobs in Washington State related to activities at the 

Port of Tacoma, the Port serves as a major economic engine for the Pacific Northwest. 

The Port of Tacoma appreciates the opportunity today to share its perspectives 

on the proposal to incorporate the U.S. Customs Service into a new Department of 

Homeland Security. The U.S. trade policies are built on democratic principles of free 

and fair trade, and competition. The U.S. Customs Service capably faces the 

daunting responsibility of safeguarding this free flow of trade and has embraced the 

elevated challenge of allowing trade to continue to be free and fair in a heightened 

security environment. Ports also recognize the trade landscape has been forever altered, and that we must find new ways to continue doing business while integrating 

enhanced security. The Port of Tacoma is engaged in several initiatives on this 

front, including development of a ‘‘Operation Safe Commerce’’ model program called 

SMART (Secure Maritime Asian Routes for Trade) that would ultimately track containers from the point of origin and through the United States. 

Though the need for including U.S. Customs in the proposed Homeland Security 

Department is logical, Congress should not let this enhanced focus on security compromise the traditional responsibilities of U.S. Customs. It is imperative that Customs’ activities such as: tracking merchandise entering the country, air and sea surveillance and interdiction, and fighting drug smuggling continue to receive ample 

priority and funding. In my brief time with you this afternoon, I would like to convey three primary messages:

• U.S. Customs is an integral link in our nation’s economic chain of 

commerce. Ensuring the secure, legal and expedited movement of 

goods into and out of our country is essential to our economic vitality. 

• As U.S. Customs integrates new security standards into its traditional 

cargo inspection and tracking methods through ports across the 

country, care must be taken to keep procedures uniform and proportional from one port to another. 

• Continued cooperation and coordination with Canadian Customs, in 

establishing comparable security protocols, is essential in averting 

the risk of cargo diversion out of U.S. ports.

29

Now, let me expand upon these points. As a port in the Pacific Northwest, we are 

especially aware of the vital role U.S. Customs has always played in protecting our 

country’s land and sea borders. We consider Customs to be a primary partner in 

safeguarding the flow of trade through our port and we work closely with our local 

agency officials. It must be recognized, though, that not only does Customs have the 

power to ensure that cargo is legal and safe, it also has a direct impact on a port’s 

ability to be competitive. In these challenging times for the world’s economy, steamship lines are placing even greater emphasis on doing business with ports that can 

accommodate their need to move goods quickly onto and off of ships. If a port cannot 

provide efficient service, our customers (steamship lines and shippers), may decide 

to call elsewhere. In the case of ports along the Canadian border, this may mean 

jobs that would have resulted from ships calling at the ports of Seattle, Boston or 

New York/New Jersey, may instead end up going to workers in Vancouver, B.C., 

Montreal or Halifax. 

These competitive and security realities require all ports to focus on ensuring 

each step in the economic trade chain is operating efficiently. For example, what 

we have long heard from our customers—but even more pronounced since September 11th—is that the procedures U.S. Customs is employing in Tacoma are more 

time-consuming and costly than at other West Coast ports. There have been numerous instances where steamship lines report cargo to and from Eastern Asia is inspected at a much higher proportion in Tacoma than at other West Coast ports. 

Another recent concern expressed by our customers is whether Customs is requiring a standard percentage for ‘‘devan’’ to be consistently carried out at all ports. 

(The term devan refers to the physical unloading process of the container’s contents 

for inspection.) If U.S. Customs officials devan 100% of a container at one port and 

only 25% per container at another port, this would result in dramatic differences 

in efficiency and the cost of moving cargo through ports. For the shipper, this means 

lost revenue and time associated with having the cargo wait a day or more on the 

docks for the inspection, since a 25% devan typically takes 30–60 minutes and a full 

devan can commonly require six or more hours. The shipper also bears the direct 

expenses associated with labor’s additional handling of this cargo which can range 

per container from $287 for a 25% devan up to $673 for a complete devan. By way 

of comparison, it is like an airline passenger missing a flight because their luggage 

was searched and then receiving a bill afterwards for the service. 

We are working with Congresswoman Jennifer Dunn and other Members of our 

congressional delegation to gather data from U.S. Customs quantifying these assertions of disproportionate inspections and non-uniform methods. I share these examples with you in order to illustrate Custom’s influence on the efficient handling of 

cargo through all ports. The fine points of policy making in Customs, such as employing consistent inspection methods, must not be lost in the much bigger and important mission of Homeland Security. 

Coordinating consistent inspection and security protocols with Canada must also 

be a priority. Given our proximity to the Port of Vancouver, B.C., the ports of Tacoma and Seattle have long been sensitive to the threat of cargo diversion. Onerous 

policies like the Harbor Maintenance Tax, which add extra charges to containers 

bound for U.S. ports, create an incentive for steamship lines to offload their cargo 

in Canada. Congress must be vigilant in making sure that cargoes face the same 

level of scrutiny in Canada, as they would face if those goods were shipped directly 

into our country. Should the perception develop that it is easier to move goods into 

the U.S. through Canada, not only would our nation’s ports be disadvantaged, but 

our country would face a greater security risk. We recognize the efforts that U.S. 

Customs has taken thus far to work with Canadian Customs on programs such as 

Smart Boarder and the innovative CSI (Container Security Initiative) and the C–

TPAT (Customs Trade Partnership Against Terrorism) effort. 

As Congress explores the inclusion of the U.S. Customs Service into a Department 

of Homeland Security, we believe it is critical to not lose sight of the importance 

of this agency’s traditional mission. We look forward to working with the Congress, 

Customs and other critical U.S. agencies in integrating the enhanced requirements 

for security in concert with maintaining our nation’s efficient flow of trade. On behalf of the Port of Tacoma, thank you for this opportunity to share these issues before this Committee.

Chairman THOMAS. [Presiding.] Thank you, Mr. Farrell. 

And since you were the first Member of the panel, prior to going 

f to Mr. Clawson, as we move across the panel, we would like to get 

30

the horse before the cart, so it is my pleasure to call on the gentlewoman from Washington to introduce you. 

[Laughter.] 

Ms. DUNN. Thank you, Mr. Chairman. I appreciate you letting 

me step in here. We had a mixed message going on there, but you 

have already heard from Tim Farrell. 

Tim of course is the Deputy Executive Director for the Port of 

Tacoma. These are two terribly important ports to us, not in but 

near my district, the Port of Tacoma and the Port of Seattle. In 

Washington State, one out of three jobs are related to trade, so it 

is no coincidence that the Port of Tacoma plays a vital role in our 

economic viability and in the competitiveness globally of our region. 

The Port of Tacoma, as Mr. Farrell has told you, handles more than 15 million tons of cargo, amounting to about $20 billion a year 

in trade. Seventy percent of the containers that arrive in the port 

are bound for markets in the Midwest or East Coast, so you can 

see that we are a gateway to the rest of the United States. And 

what is done under the Customs’ jurisdiction is, therefore, terribly 

important to us. 

Tim has extensive experience in port management. He is responsible for a variety of port departments there in Tacoma, including 

finance, human resources, information technology, security, and 

risk management. Before he came to us at the Port of Tacoma, he 

worked for 7 years at the Massachusetts Port Authority. He is a 

native of Massachusetts. He graduated from Middlebury College. 

However, since he took his master’s degree at the University of 

Washington, we do consider him a native of the Pacific Northwest. 

Mr. Farrell has already brought out some very important points 

that have to do with competition between our ports and ports in 

other Nations. And I look forward to bringing some more points out 

from him as we go through questioning. 

Thank you, Chairman. 

Chairman THOMAS. Thank the gentlewoman. 

The next panelist, thank you for coming. James Clawson, Chief 

Executive Officer of JBC International, who is here for the Joint 

Industry Group. Your written statement, if you have one, will be 

make a part of the record. You have 5 minutes to address us in 

any way you see fit, Mr. Clawson. 

STATEMENT OF JAMES B. CLAWSON, CHIEF EXECUTIVE OFFICER, JBC INTERNATIONAL, AND SECRETARIAT, JOINT INDUSTRY GROUP 

Mr. CLAWSON. Thank you, Mr. Chairman and Mr. Rangel and 

Members of the Committee. As usual, it is a pleasure to be here 

again. 

Chairman THOMAS. Mr. Clawson, let me tell you, these microphones are very unidirectional, so you need to really talk directly 

into the end of it. 

Mr. CLAWSON. Thank you very much. I just wanted to thank 

you and Mr. Rangel and the Members of the Committee. 

In the interests of time, you have my written testimony. I 

thought that since I have been here enough on behalf of the Joint 

Industry Group and others for the last 20-plus years, I would like 

to just tell you some of our thoughts about where we are. 

31

We fully support the proposal. We recognize that there are issues 

about it that are difficult to understand, and we are still looking 

forward to clarification. But we do support it for all of the reasons 

that have been described by the Undersecretary. 

We also think that Customs ought to be kept together. There was 

discussion about splitting it. And, again, we support it for the reasons that were given, that Customs’ dual mission is inextricably 

combined and cannot be separated. 

Let me tell you the two things that I want to recommend to this 

Committee and to Congress that I think are very important. We 

have made the same recommendations to the Administration, and 

we will see where it goes. We totally agree with those who are concerned about the disappearance of Customs. We think there ought 

to be created within that chart that has been talked about a sixth 

Undersecretary for Customs Commercial Operations, just like the 

U.S. Department of Commerce has an Undersecretary and Commissioner for the Patent and Trademark Office. There is absolutely 

no reason why there cannot be an Undersecretary for the commercial work and the commercial side of the Homeland Security, giving 

it the same stature as the border security. 

In the early seventies, I worked in Treasury. We tried then to get 

a single border agency. It needs to be there, make no mistake, for 

all the reasons that are described. But I think it is critical that the 

commercial functions and all of the things that we talk about, from 

quotas to intellectual property protections, all the things mentioned 

in the Chairman’s opening remarks, that they not be subsumed 

under some Undersecretary whose first priority has been given 

that of the security of our Nation’s borders from terrorists and 

other security issues. I think that that is the critical nature of the 

recommendations that we make, to have that level of visibility, if 

you will, within the new department, reporting to the Deputy Secretary. 

And then equally as important, we believe this Committee, which 

has had oversight for many years over those issues, ought to continue to have jurisdiction and oversight over that portion of the 

work of Homeland Security, which would be the Commercial Operations/Customs, if you would call it that. 

And then there are some other suggestions that we are concerned 

about that haven’t been addressed in this discussion. I am referring 

to ACE. We have been very active in getting the funding for ACE. 

There are over $600 million that has already been appropriated. 

We are way into it; 8 years after the Customs Modernization Act 

(MODACT) and the trade is still waiting for a lot of the implementation to be done. And I think there is a real concern that ACE will 

be put on the back burner again, even though all the assurance is 

to the contrary. 

It is interesting that Customs has had 8 years to do ACE and 

has not done it. But it has deployed and put into place in less than 

10 months enormous amounts of technology with regard to the security of our country. And I think it speaks to our concern over the 

fact that, when there is a priority—and I am not arguing that we 

shouldn’t be concerned about the security our country. What we are 

concerned about is providing this commercial role sufficient priority 

32

with the other functions with regard to the economy of our country. 

And that is quite important. 

In closing, I think it is important that, for budget discussions 

within the government in the future, and for the whole idea of coordination, there ought to be equal standing between the commercial side and the enforcement-security side, from that dual role. 

And I am happy to take any questions that you might have. 

[The prepared statement of Mr. Clawson follows:]

Statement of James B. Clawson, Chief Executive Officer, JBC International, 

and Secretariat, Joint Industry Group 

INTRODUCTION 

Mr. Chairman and distinguished Members of the House Ways & Means Committee, my name is James B. Clawson and I am the Chief Executive Officer for JBC 

International. I also serve as the Secretariat for the Joint Industry Group (JIG), a 

coalition of more than one hundred and sixty Members representing Fortune 500 

companies, brokers, importers, exporters, trade associations, and law firms actively 

involved in international trade. The Joint Industry Group enjoys a close and cooperative relationship with the U.S. Customs Service and frequently engages Customs 

on trade-related issues that affect the growth and strength of American imports and 

exports. 

It is my honor to appear before this Committee to share with you the comments 

of the Joint Industry Group and its Membership regarding President Bush’s proposal to create a U.S. Department of Homeland Security. More specifically, I will 

address the transfer of all assets and authority of the U.S. Customs Service to the 

new Department. 

The JIG recognizes the daunting task that lies ahead in the creation of the Department of Homeland Security. The architects of the reorganization will need to 

take a careful approach to anticipate the future needs of the agencies involved and 

the people they serve. They should fully evaluate the effectiveness of including or 

excluding the enforcement functions of additional agencies. In addition, they should 

not rush to meet any deadline that is essentially chosen for the purposes of public 

relations. It is essential that U.S. Customs and the Administration not lose sight 

of their role to facilitate the flow of trade during the reorganization. Customs should 

continue with their efforts to develop and implement smarter tools for facilitation, 

including the Automated Commercial Environment (ACE), and they should continue 

to engage the support of the trade community in building better business procedures. 

For years, U.S. Customs has been the agency on the front line, serving a dual 

role to defend our nation’s borders and to facilitate the flow of trade. Governor Ridge 

and Commissioner Bonner have taken into consideration this dual mission as they 

look to move Customs out of Treasury and into the new Department of Homeland 

Security. However, many Members of the trade community continue to have concerns over how this new department will balance Customs’ commercial and enforcement operations after being placed within a single ‘‘Security Department.’’ There are 

those Members of the JIG who feel that certain branches of Customs would best remain with the Treasury Department while several other agree with the opinion of 

Commissioner Bonner that Customs’ dual role is inherently inseparable. 

We recognize that the trade will not make the ultimate decision to incorporate 

Customs into the new agency or to leave it in one piece. However, we are in a position to state our concern for the continuation of attention to commercial interests, 

trade facilitation efforts and continued funding of those activities. 

CONTINUING EFFORTS TO FACILITATE TRADE

In recognition of the many dangers facing the nation, the U.S. Customs Service 

has relied upon technology to keep pace with the volume of trade and the threats 

posed by transnational criminal organizations. The JIG has worked with Congress 

and the Administration to emphasize the importance of the U.S. Customs Service 

and its efforts to modernize its systems. Both Congress and the Administration have 

shown great support for the development of the Automated Commercial Environment (ACE). This system is not Customs’ system alone but part of the nation’s border enforcement system. It is the FBI’s system, the State Department’s system, the 

Food and Drug Administration’s system, and the system of every agency of government that has a responsibility to protect our nation at its borders. Commissioner 

Bonner has repeatedly assured the trade that ACE will be fully implemented within 

33

an appropriate time frame. By arming U.S. Customs officials with information, this 

modern and efficient system will not only facilitate trade, but will also strengthen 

the government’s ability to secure our nation’s borders. 

We applaud the support that the Committee on Ways and Means, specifically 

Chairman Crane and his Subcommittee, has demonstrated for understanding that 

ACE facilitates U.S. exports and imports, while enhancing Customs ability to protect America’s borders from illicit narcotics flows and terrorist activities. In light of 

the events of September 11, the trade is fully assured by Members of this Committee, Congress and the Administration that ACE will be successfully completed. 

However, the committee must also recognize the importance the trade places on 

other facilitation initiatives that are currently underway at Customs. 

It is the worst fear of many in the trade that trade facilitation will be almost entirely neglected in a humongous department devoted almost entirely to security and 

enforcement. Trade facilitation includes an initiative to implement fully the Customs Modernization Act (Mod Act) and simplify current trade procedures through 

technology or procedural reform. ACE is just a piece of the puzzle. Trade facilitation 

takes into consideration classification, valuation, data harmonization and all other 

technical issues related to trade. While not all trade facilitation initiatives fall under 

the direct jurisdiction of Customs, most operate successfully within Treasury. In a 

new Department of Homeland Security, Congress, Customs and Treasury should 

continue to work on projects such as the World Customs Organization’s (WCO) 

Trade Data Harmonization initiative and should continue current efforts to minimize the backlog of pending cases within Customs’ Office of Regulations and Rulings. Specifically, the JIG acknowledges Commissioner Bonner for his initiative to 

deliver rulings within ninety days. However, without sufficient budgetary support, 

this promise cannot be met. 

Trade facilitation also includes procedural reform to ease the regulatory and administrative burdens posed on Customs and the trade. For example, Commissioner 

Bonner has committed to investigate mechanisms for duty drawback reform. We are 

committed to work with the Commissioner in his efforts to simplify current drawback procedures. The JIG believes that pending legislation will simplify and clarify 

ambiguities and assist the U.S. Customs Service administer a complicated program 

by making drawback procedures consistent with continuing congressional changes 

to trade laws. In addition to drawback reform, the new Department provides an additional opportunity to review all laws that may be revoked, reworked, or reassigned 

to other agencies. Any organizational changes should be done to simplify the Customs administrative responsibilities. 

We appreciate the promises made by Governor Ridge, Commissioner Bonner, and 

other Members of the Administration regarding trade facilitation and procedural reform. These gentlemen promise that the necessary measures to expedite the legal 

flow of goods will be taken. Unfortunately, the trade continues to patiently wait for 

the fulfillment of commitments made after the passage of the Mod Act in 1993. 

While perhaps an unpopular or minority view, this committee should continue to investigate mechanisms for insuring that the trade facilitation function within Customs and Treasury is preserved and receives adequate funding in the future. 

CONTINUED SUPPORT FROM THE TRADE 

The Department of Treasury and U.S. Customs continually engage the trade in 

advisory roles and forums. For example, the Treasury Department has engaged a 

smaller group of companies and trade associations to participate in an Advisory 

Committee on the Commercial Operations of Customs, more commonly known as 

the COAC. It is vital that the branch that retains jurisdiction over Customs’ commercial operations maintain a contingent of representatives to provide advice on 

trade facilitation measures and administrative reform. The COAC currently provides regular, quarterly review of Customs. This body advises Treasury and Customs on the implementation of programs that directly affect their ability to do business. This includes partnership initiatives such as the Importer Self Assessment 

(ISA) and Customs Trade Partnership Against Terrorism (CTPAT). They also advise 

Customs during implementation of trade agreements and legislative mandates. 

While it is vital that the trade is continually engaged as advisors to Customs, the 

Treasury and the future Department of Homeland Security, it is also necessary for 

those who construct the rules of law to evaluate the effectiveness of such industry 

working groups. Some industry working groups are more effective than others, just 

as some of these so-called ‘‘partnership initiatives’’ are more effective than others. 

However, it is more important that Congress and the trade are guaranteed a continued role in oversight as Customs is moved to the new Department of Homeland Security. It is essential that Customs and the trade continue to work together to guarantee that public and private interests work in cooperation to facilitate global trade. 

34

FUNDING FOR COMMERCIAL OPERATIONS

The JIG is concerned that money earmarked for Customs’ commercial operations 

and trade facilitation activities will be diverted to fund enforcement activities. Fees 

imposed in the name of Customs’ commercial operations should only be dedicated 

to the programs that they claim to support. This can be illustrated in the current 

debate over the proposed extension of the Merchandise Processing Fee (MPF). Although the MPF is not the topic of this hearing, many parallels can be drawn from 

this debate. The MPF is a so-called ‘‘user-fee’’ paid by importers to cover the cost 

incurred by Customs to process commercial imports. The MPF money collected by 

Customs, however, does not directly fund Customs operations. Instead it is placed 

in the general revenue fund where it is used for any number of government programs that may or may not be related to Customs operations. 

The JIG supports current legislation that provides for revenue generated by the 

Merchandise Processing Fee (MPF) to be used only to fund programs related to the 

work of the commercial operations of the U.S. Customs Service. On several separate 

occasions in the 107th Congress, bills have been introduced which attempt to use 

this fee to fund unrelated programs, such as the Patient’s Bill of Rights. We strongly oppose any extension of the MPF, or any user fee, that does not earmark those 

funds exclusively to offset the costs of Customs commercial operations. This also excludes the use of MPF funds for Customs’ Homeland Security activities. 

In addition, the JIG supports provisions in the Trade Act of 2002 that require accountability for use of MPF funds. If the Customs Service is to continue collecting 

this user fee in the name of commercial operations, it MUST directly fund improvements to Customs processing, specifically for ACE and other initiatives that are 

greatly needed to improve the trade process. JIG is greatly optimistic that this approach will allow user fees to be applied to the commercial operations of the U.S. 

Customs Service for which they are intended and needed. 

Mechanisms should also be developed to guarantee that user fees and appropriated funds are not included in legislation where de facto justification or revenue 

neutrality is not used to siphon money away from commercial activities into the security and enforcement activities. This includes funds dedicated to trade facilitation 

measures. Customs and the new Department of Homeland Security should be held 

to a standard that aims to warn against the misuse of funds. 

Mr. Chairman and Members of the Committee, we believe this Committee must 

continue to have jurisdiction and oversight of the commercial operations of the Customs function in the new department. I believe one option for continuing the commercial activities in the new Department is to establish an Under Secretary for 

Commercial Operations whose office will ensure equal priority within the Department for those functions. 

It is also important for Members of this Committee to authorize adequate funding 

for Customs commercial operations as well as their trade facilitation activities. For 

example, Customs needs continued funding to staff 301 ports of entry and to build 

its arsenal of tools to aid in border inspections. Customs also needs funding to continue development of smart tools, such as ACE, and to develop processes to facilitate 

the flow of trade. This will allow Customs to defend our physical and economic well 

being. 

CONCLUSION 

Mr. Chairman and Members of the Committee, the Joint Industry Group supports 

the President’s efforts to protect our nation’s welfare. The trade community views 

their role as standing side-by-side with U.S. Customs officials, working as partners 

on the front lines to facilitate the safe and secure flow of commerce. We ask the 

Committee to consider the importance of the dual role of Customs and their efforts 

to facilitate trade. Again, this will allow the Customs Service to better fulfill its dual 

mission of protecting America’s borders from foreign threats, while facilitating the 

flow of trade through our air, sea, and land ports. 

I agree with Chairman Thomas when he stated, ‘‘Our Nation’s long-term defense 

rests equally upon the protectors at our borders and the engine of our economy.’’

We thank you for your time and consideration of these issues.

Chairman THOMAS. Thank you very much, Mr. Clawson. 

Jerry Cook, Vice President, International Trade, Sara Lee, lookf ing at trade from both inside the United States and outside. 

Mr. Cook, your testimony will be made a part of the record. Address us in any way you see fit. 

35

STATEMENT OF JERRY COOK, VICE–PRESIDENT OF 

INTERNATIONAL TRADE, SARA LEE BRANDED APPAREL 

Mr. COOK. Thank you, Mr. Chairman, Mr. Rangel, and Members of the Committee. I will just summarize my written testimony, 

for time’s sake. 

Most importantly, the focus for us with Customs has been fairly 

successful, particularly this past year. Customs managed 23 million 

entries and related cargo, both from an enforcement and from a 

commercial facilitation. Important to note, is Customs maintain the 

primary data repository for over 40 other government agencies, as 

well as enforcing 400 laws, ranging from public health, safety, social, economic, environmental, and transportation, and all in a very 

timely and sensitive manner. The ability to execute these respective activities is not only critical for our public safety but also in 

fostering our economic security. With the advancement of the 

MODACT, the essential ingredients of combining trade facilitation 

along with the enforcement were critically linked to improve security, compliance, and, for us, a very predictable business solution. 

The successful trade programs that this Committee crafted, and 

the subsequent legislation have created economic opportunities in 

the United States and around our borders. The economic development of trade has decreased security threats to the United States, 

and the sustained economic development of regions like the Caribbean basin and the Sub-Saharan have placed an ongoing development of those regions totally dependent on an efficient Customs. To 

delink the Customs’ enforcement from the business facilitation, in 

my mind, would likely have unintended consequences to the business community and to the respective agencies trying to manage 

the trade and business. 

While the full development and implementation of Homeland Security is being contemplated, we need to ensure that the hard work 

and the leadership of this Committee and others ensures the timely 

implementation of ACE. The ACE system envisioned a very robust 

environment that can both facilitate risk assessment and reduce 

the cost burden of paper documents and the repetitive reloading of 

data in our current trading systems. 

If the two roles were separated based purely on enforcement 

versus commercial, the definition of what constitutes enforcement 

versus commercial would likely lead to an endless level of appeals 

while trade is idled. By adopting ACE as the core platform for 

Homeland Security, the respective process necessary to exchange 

commercial and enforcement data will be incorporated on day one. 

I believe trade advice to the senior management of Homeland Security will be vital in assessing what is working and what is not 

working going forward. The Customs receives valued input, problem identification and problem-solving via the trade support groups 

like the Commercial Operations Advisory Committee and the Trade 

Support Network. The willingness of Customs and the industry to 

jointly work together to identify issues affecting the commercial 

sides of trade along with enforcement and co-develop workable solutions is the cornerstone that exemplifies Customs versus other 

customs’ services around the world. 

The Customs provides valued input into other countries to advance their management of risk to our country. The joint role of enVerDate Sep 04 2002 05:02 Sep 07, 2002 Jkt 081233 PO 00000 Frm 00039 Fmt 6633 Sfmt 6602 E:\HR\OC\B233.XXX B233
36

forcement and commercial facilitation is crucial to better develop 

models of trade prior to arriving to the United States. 

As me move forward in Homeland Security, we should consider 

making some beneficial changes that would both enable the trade 

and Customs to better achieve border and economic security: 1) 

elimination of reconciliation for all entries that provide only statistical updates but no impact on revenue, 2) simplify and reduce the 

size of the harmonized tariff schedule; 3) provide total electronic 

interface for all required data; 4) eliminate any paper document requirements; 5) eliminate the releasing of confidential and tradesensitive data to nongovernment agencies; 6) operate ports 24 

hours, 7 days a week; and 7) reduce the required data for exports 

and imports to a single set as conceived under the ITDS model. 

Mr. Chairman, Mr. Rangel, I want to thank you for the opportunity and, most importantly, for your leadership on fostering trade 

and fostering a modern trading system. I appreciate the opportunity to comment on this transfer of Customs to Homeland Security. In closing, the continued advancement of Customs’ role in 

Homeland Security can provide a valuable baseline. Commercial 

success is achieved in concert with enforcement via an efficient and 

balanced Customs’ process. 

Thank you. 

[The prepared statement of Mr. Cook follows:]

Statement of Jerry Cook, Vice-President of International Trade, Sara Lee 

Branded Apparel 

Introduction 

Mr. Chairman and honored Members of the Ways and Means Committee, my 

name is Jerry Cook and I am the Vice-President of International Trade for Sara Lee 

Branded Apparel. Some of our better-known apparel brands include Hanes, Champion, Bali, Wonderbra, Playtex and Just My Size. I am an active member in various 

trade groups including AAEI, JIG, AAFA, BACM and a former member of the Advisory Committee on the Commercial Operations of U.S. Customs. 

I am presently a member of the ISAC–15 as well as a member of the Trade Support Network. Sara Lee Branded Apparel is a charter member of the Customs-Trade 

Partnership Against Terrorism (C–TPAT) and a member of BASC (Business Against 

Smuggling Coalition.) Thank you for this opportunity to testify today on the proposal to create a U.S. Department of Homeland Security and the transfer of all assets and authority of the U.S. Customs Service to this new Homeland Security Department. 

Mr. Chairman, my remarks are based on my experiences working with the U.S. 

Customs Service and the various regulatory agencies that manage our exports and 

imports. It is my belief that the proposed transfer of the U.S. Customs Service and 

consolidation of the border security agencies into a new Homeland Security Department can only be beneficial if enforcement and commercial operations remain together. 

The U.S. Customs Service is an integral partner in our supply chain strategy. In 

addition to the U.S. Customs mission to manage anti-terrorism and drug enforcement along our nation’s borders, Customs successfully managed last year:

• Over 23 million entries 

• Over 472 million passengers 

• Over 300 ports of operation 

• Over 142 million conveyances 

• The collection of over $23 billion in duties and fees

Customs achieved this milestone while seizing over 1.7 million pounds of narcotics. Their achievement was accomplished with 19,000+ employees and in partnership with the business community. In addition, Customs continued to forge ahead 

with the development of the ACE system and to began building a new critical partnership with the business community known as C–TPAT (Customs-Trade Partnership Against Trade.) 

37

Additionally, the U.S. Customs Service maintained the primary data repository 

for over 40 other government agencies and enforced over 400 laws ranging from 

public health, safety, social, economic, environmental, and transportation in a time 

sensitive environment. The ability to execute these respective activities is not only 

critical for our public safety, but in fostering our economic security.

Critical to the Business Community—The Totality of the U.S. Customs Service Must Be Transferred Together

With the advancement of the MODACT, the essential ingredients of combining 

trade facilitation along with enforcement were critically linked to improve security, 

compliance and predictable business execution. The U.S. Customs Service has 

served for many years in this dual role. During their 200+ years of operating, the 

U.S. Customs Service has developed a series of rules, regulations, but most importantly a process in which commerce is executed in a transparent and predictable environment. 

The successful trade programs that the Ways and Means Committee crafted into 

legislation have created economic opportunities. The economic development of trade 

has decreased security threats to the United States beyond our borders. The sustained economic development of regions like the Caribbean Basin, Mexico, Sub-Saharan Africa and the Mid-East have placed the on-going development of those regions dependent on an efficient Customs Service. 

To delink Customs’ enforcement from the business facilitation would likely have 

unintended consequences to the business community and the respective agencies involved in managing trade and managing enforcement. 

In short, the process of enforcing trade laws has advanced a hybrid solution that 

both informs the trade community of the respective programs and seeks joint ownership in critical areas. Given the ‘‘hands-on’’ management style required to manage 

the operational and enforcement aspects of trade, I believe it is critical that those 

respective missions stay together to provide the balance, insight and agility necessary to work through issues we jointly encounter.

Accelerate and Insure A Robust And Fully Integrated Electronic Exchange 

Solution—ACE (Automated Commercial Environment)

While the full development and implementation of the Homeland Security Department is contemplated, we need to insure the hard work and leadership of this Committee and others to develop the ACE system in timely achieved. As a member of 

the Trade Support Network, Customs repeatedly seeks insight and inclusion on the 

development of the new Automated Customs Environment. U.S. Customs strives to 

insure that it not only incorporates the trade community’s needs, but to also insure 

that ACE is able to facilitate the key roles of enforcement, risk assessment, centralized data repository for the U.S. Government and Account Management. 

It is important to note that as the blueprints for the Homeland Security Department are drafted, resources are provided to insure that the vision of ACE is fully 

achieved and the benefits to trade are incorporated. U.S. Customs has fostered a 

model to gain the voluntary support of the trade community for key enforcement 

iniatives by their genuine understanding and interest in assisting valid trade to 

enter efficiently, challenge unknown shipments to determine their validity and 

thwart illegal trade from gaining access to the USA. 

The ability to rapidly move data within the agency begins with source data populated once into one repository. The ACE program envisioned a robust environment 

that can both facilitate risk assessment and reduce the cost burden of paper documents and re-loading data. 

Within the trade role of Customs, the determining factors for shipment admissibility are more often commercial related than anti-narcotic or anti-terrorism. The 

ability to determine and advise correct classification, valuation, country of origin, 

trade preference program, trade mark and status of an entry or release are all aspects that affect the same agent/inspector examining a shipment. 

If the two roles were separated based purely on enforcement versus commercial, 

the definition of what constitutes enforcement vs. commercial would likely lead to 

an endless level of appeals while trade is idled. The U.S. Customs Service has incorporated not only the traditional law enforcement issues, but manages to understand 

the complex commercial issues. The separation of these two roles will likely leave 

trade in an unmanageable environment. 

The advancement of the U.S. Customs systems and the associated modernization 

efforts are critical to the new Homeland Security Department. By adopting ACE as 

the core platform for the Homeland Security, the respective process necessary to secure economic exchange will be incorporated the first day. I realize that the ultimate 

decisions will be decided jointly between Congress and the Administration, but I enVerDate Sep 04 2002 05:02 Sep 07, 2002 Jkt 081233 PO 00000 Frm 00041 Fmt 6633 Sfmt 6621 E:\HR\OC\B233.XXX B233
38

courage you to assure the full trade community that the intended benefits of ACE 

are a high priority of the Homeland Security Department.

Homeland Security Needs Trade Advisory Input to the Senior Level

Perhaps the single biggest issue facing Homeland Security would be the unintended consequences of separation of the enforcement efforts from the commercial 

role. 

In the development and implementation of the Homeland Security Department, 

input from the trade on trade specific issues and concerns is crucial. As a former 

member of the COAC (Advisory Committee on the Commercial Operations of Customs), I believe trade advise to senior management of Homeland Security will be 

vital in assessing what is working and what is not. 

The U.S. Customs Service receives valued input, problem identification and problem solving via trade support groups like TSN (Trade Support Network). The willingness of the U.S. Customs Service and industry to jointly work together to identify 

issues, opportunities and co-develop workable solutions is one of the cornerstones 

that exemplifies the U.S. Customs Service advancements versus other nations’ Customs Service. The ability to interface directly with the trade has advanced the joint 

partnership programs vital to enforcement like BASC and C–TPAT. 

Customs has a successful record of engaging the trade community to achieve enforcement, trade programs, issue identification and development of effective problem 

solving solutions. The U.S. Customs Service has facilitated our joint success in both 

enforcement and commercial advancement. 

The U.S. Customs Service provides valued input to other countries to advance 

their management of risks to the USA. The U.S. Customs provides assistance for 

other nations to develop their trading solutions. The joint role of enforcement and 

commercial facilitation is crucial to develop better models prior to trade arriving at 

the U.S. borders.

As We Advance Homeland Security-We Need to Focus Our Efforts

We are facing this challenge together. Our ability to achieve cross-border operational effectiveness will ultimately determine if we succeed or fail. As design and 

functionality are developed, we should consider making some beneficial changes that 

would enable both the trade and Customs Service to better achieve border and economic security.

1. Elimination of reconciliation for all entries that provide statistical updates 

only and have no impact on revenue. 

2. Simplify and Reduce the Harmonized Tariff Schedule. 

3. Provide a total electronic interface for all required data to eliminate paper 

documents. 

4. Eliminate the releasing of confidential and trade sensitive data to non-governmental agencies. 

5. Operate ports 24 hours/7 days a week. 

6. Reduce the required data for exports and imports to a single set of data to 

satisfy both transactions as conceived under the ITDS model.

Closing

Mr. Chairman and Members of the Ways and Means Committee, I want to thank 

you for your continued leadership on trade and fostering a modern trading system. 

I appreciate the opportunity to comment on the transfer of all of the U.S. Customs 

Service to the Homeland Security Department. In closing, the continued advancement of the U.S. Customs Service role into Homeland Security can provide a valuable baseline. Commercial success is achieved in concert with enforcement. 

Thank you.

Chairman THOMAS. Thank you very much, Mr. Cook. 

Ms. Kelley, your written statement will be made a part of the 

f record. You can address us in any way as you see fit. And you are 

here as the National President of the National Treasury Employees 

Union. I am very interested in what you have to say.

STATEMENT OF COLLEEN M. KELLEY, NATIONAL PRESIDENT, 

NATIONAL TREASURY EMPLOYEES UNION 

Ms. KELLEY. Thank you very much, Mr. Chairman, Ranking 

Member Rangel, and distinguished Members of the Committee. I 

39

very much appreciate the opportunity to present NTEU’s views on 

the President’s proposed Homeland Security and the impact on 

Customs of that proposal. 

As the President of the National Treasury Employees Union, I 

have the honor of leading a union that represents over 12,000 Customs’ employees who provide the front line of defense to our country every day and trade facilitation. The Customs’ inspectors, canine enforcement officers, and import specialists make up our Nation’s first line of defense in the wars on terrorism and drugs, as 

well as facilitating lawful trade into the United States. With a fiscal year 2002 budget of approximately $3.1 billion, Customs facilitates more trade and interdicts more drugs than any 

other agency. The Customs also provides the Federal Government 

with the second largest source of revenue. As you noted, Mr. Chairman, Customs deposited over $22 billion into Treasury this past 

year. 

In 2001, Customs’ employees seized over 1.7 million pounds of cocaine, heroin, marijuana, and other illegal narcotics. Customs also 

processed over 500 million travelers last year, including 1 million 

cars and trucks. Over the last decade, trade has increased by 137 

percent. 

In addition, there are increased threats of terrorism, dramatic increases in trade resulting from the North American Free Trade 

Agreement, and new drug smuggling challenges. And yet, Customs 

has confronted its rapidly increasing trade workload and homeland 

security mission with relatively static staffing levels and resources. 

Unfortunately, this situation is not like to change under the 

President’s Homeland Security proposal. The President has stated 

that his proposal will not include any additional funding that will 

enable Customs and its personnel to successfully accomplish their 

missions of trade facilitation and border security. 

A number of these resource issues were addressed by this Committee in H.R. 3129, the Customs Border Security Act of 2002, 

which is part of the trade package before Congress. This legislation 

would authorize over $4 billion for a number of Customs’ priorities 

such as staffing, commercial and noncommercial activities, narcotics detection equipment, child pornography prevention, the ACE 

computer system, and the air and marine interdiction units. 

Both the American public and trade community expect the borders to be properly defended while at the same time being able to 

efficiently and safely facilitate trade across that border. The government must show the public that it is serious about protecting 

the borders and facilitating trade by fully funding agencies such as 

Customs who are tasked with defending the borders and enforcing 

the trade laws of the United States. 

No organizational structure will be successful, no matter how 

good it may look on paper, if the government does not provide proper funding for its border agencies. 

The President’s Homeland Security proposal seeks to consolidate 

Customs, INS, Border Patrol, Animal and Plant Health Inspection 

Service, the Transportation Security Agency, and the Coast Guard 

into one division entitled Border and Transportation Security. Only 

the Coast Guard would be maintained as a distinct entity under 

the President’s proposal. 

40

Each of these agency’s missions are unique. Combining each 

agency’s field of expertise will lead to losing that expertise. 

The fact that Customs would not be a distinct entity within 

Homeland Security would deal severe blows to the distinct missions in which Customs has world-class expertise: trade facilitation, the collection of revenue, and as the first line of defense in 

the wars on terrorism and drugs on our Nation’s borders. 

In the last 5 years alone, Customs has witnessed a 60-percent increase in trade entries processed, and this rate is expected to grow 

an average of 8 to 10 percent a year. 

Keeping Customs as a distinct entity within the department, as 

it is proposed in both the Lieberman and the Thornberry Homeland 

Security bills, would help to retain the emphasis on the importance 

of Customs’ trade-related duties. 

In closing, the Administration has indicated that it wants new 

flexibility in the legislation that will establish Homeland Security. 

The President’s proposal would allow two political appointees, the 

Secretary of Homeland Security and OPM Director, to set and to 

change the rules affecting pay, benefits, whistleblower protection, 

collective bargaining, and even merit principles. I urge Congress 

not to take away the rights and the benefits that are currently 

available to the employees who may be merged into this new department. 

Before, during, and after September 11, front line employees 

have acted heroically to protect our freedom. They do not deserve 

to lose theirs. 

Thank you for the opportunity to share NTEU’s thoughts on 

these very important issues. And I look forward to working with 

the Committee on this and many other issues related to homeland 

security, trade facilitation, and Customs. 

[The prepared statement of Ms. Kelley follows:]

Statement of Colleen M. Kelley, National President, National Treasury 

Employees Union 

Chairman Thomas, Ranking Member Rangel, distinguished Members of the Committee, I would like to thank the Committee for the opportunity to comment on the 

President’s proposed Department of Homeland Security and its impact on the Customs Service. 

As President of the National Treasury Employees Union (NTEU), I have the 

honor of leading a union which represents over 12,000 Customs employees who are 

stationed at 301 ports of entry across the United States. Customs inspectors, canine 

enforcement officers, and import specialists make up our nation’s first line of defense in the wars on terrorism and drugs as well as the facilitation of lawful trade 

into the United States. In addition, Customs personnel are responsible for ensuring 

compliance with import laws and regulations for over 40 federal agencies, as well 

as stemming the flow of illegal contraband such as child pornography, illegal arms, 

weapons of mass destruction and laundered money. 

With a FY2002 budget of approximately $3.1 billion, the U.S. Customs Service facilitates more trade, and interdicts more drugs than any other agency. The Customs 

Service collects over $20 billion in revenue on over 25 million entries involving over 

$1.3 trillion in international trade every year. The Customs Service provides the 

Federal Government with its second largest source of revenue. Last year, the Customs Service deposited over $22.1 billion into the U.S. Treasury. 

The President’s FY2003 budget requests a funding level of $3.18 billion for the 

United States Customs Service. This request represents a token increase from last 

year’s appropriations. NTEU feels that this budget is simply inadequate to meet the 

needs of Customs personnel, especially in light of the incidents surrounding September 11th. 

41

In addition to appropriations, Customs also receives funds from the COBRA account. This user fee account funds all inspectors’ and canine enforcement officers’ overtime pay as well as approximately 1100 Customs positions across the country. 

This account is funded with user fees collected from air/sea passengers except from 

the Caribbean and Mexico, commercial vehicles, commercial vessels/barges and rail 

cars. The COBRA fund will expire on September 30, 2003, unless it is reauthorized by 

Congress before then. However, the President’s FY2003 budget does not call for the 

reauthorization of COBRA. COBRA must be reauthorized or Congress must appropriate additional funds to make up for the loss of the user fees. 

In 2001, Customs Service employees seized over 1.7 million pounds of cocaine, 

heroin, marijuana and other illegal narcotics—including over 9.5 million tablets of 

Ecstasy, triple the amount seized in 1999. Customs also processed over 500 million 

travelers last year, including 1 million cars and trucks. These numbers continue to 

grow annually. Over the last decade trade has increased by 137%. 

Yet, despite the increased threats of terrorism, the dramatic increases in trade resulting from NAFTA, and new drug smuggling challenges, the Customs Service has 

confronted its rapidly increasing trade workload and homeland security mission 

with relatively static staffing levels and resources. In the last ten years, there simply has not been adequate increases in staffing levels for inspectional personnel and 

import specialists, the employees who process legitimate trade, to successfully conduct their missions. Unfortunately, this situation is not likely to change under the 

President’s Homeland Security proposal. The President has stated that his proposal 

will not include any additional funding that will enable the Customs Service and 

its personnel to successfully accomplish their missions of trade facilitation and border security. 

For example, traffic volume at U.S. land ports-of-entry has steadily increased as 

our shared borders with Mexico and Canada have become more open as a result of 

the NAFTA and other trade initiatives. The steady increase of commercial and noncommercial traffic has led to increased wait times at many land ports-of-entry, particularly those along the Southwest border. Wait times along the Southwest border 

often extend to 45 minutes or more during peak hours. Such lengthy delays can be 

both irritating and costly to businesses and the traveling public. The lack of resources at ports-of-entry is also a problem along the Northern Border as well as seaports. The events of September 11 brought attention to the fact that the Northern 

border, the nations’ seaports, and the Southwest border are still in urgent need of 

additional personnel and resources. In fact, Customs’ recent internal review of staffing, known as the Resource Allocation Model or R.A.M., shows that Customs needed 

over 14,776 new hires just to fulfill its basic mission and that was before September 

11. 

For instance, with increased funding, modern technologies, such as Vehicle and 

Cargo Inspection Systems (VACIS), which send gamma rays through the aluminum 

walls of shipping containers and vehicles to enable Customs inspectors to check for 

illegal drugs or weapons of mass destruction, as well as decreasing the amount of 

time shipping containers are out of the supply chain, could be acquired. However, 

adequate and consistent funding to purchase, operate and maintain these technologies has not been forthcoming. Other technologies, coupled with proper personnel funding, such as portable contraband detectors (a.k.a. Busters), optical fiber 

scopes and laser range finders can be invaluable to Customs personnel protecting 

our borders from terrorists and illegal drugs. 

Included in the modern technology possibilities for Customs is the Automated 

Commercial Environment or (ACE). ACE could be an integral element for trade enforcement and in preventing cargo from becoming an instrument of terrorists. The 

current Automated Commercial System (ACS) is a 17 year old, outdated system that 

is subject to system crashes and freezes that wreak havoc on trade facilitation and 

employees’ ability to do their jobs. Although a system upgrade is necessary for Customs to meet its modernization efforts, NTEU would oppose funding a new system 

that shifts funds away from critically important staffing needs. 

A number of these resource issues were addressed by this Committee in HR 

3129—The Customs Border Security Act of 2002, which is part of the trade package 

before Congress. This legislation would authorize over $4 billion for a number of 

Customs priorities such as staffing, commercial and non-commercial operations, narcotics detection equipment, child pornography prevention, the ACE computer system 

and the air and marine interdiction units. 

As for the President’s Department of Homeland Security proposal, it seeks to consolidate the Customs Service, INS, Border Patrol, the Animal and Plant Health Inspection Service (APHIS), the Transportation Security Agency (TSA) and the Coast 

Guard into one division titled, Border and Transportation Security under the jurisVerDate Sep 04 2002 05:02 Sep 07, 2002 Jkt 081233 PO 00000 Frm 00045 Fmt 6633 Sfmt 6621 E:\HR\OC\B233.XXX B233
42

diction of a newly created Department of Homeland Security. I find this proposal 

to be extremely troubling for a number of reasons, one of which is the fact that the 

Customs Service would not be maintained as a distinct entity within the proposed 

Department of Homeland Security. Each of these agency’s missions are unique and 

should remain as distinct entities in any new agency. Combining each agency’s fields of expertise will lead to losing that expertise. 

The fact that Customs would not be a distinct entity within the Department of 

Homeland Security would deal severe blows to three distinct missions in which the 

Customs Service has world class expertise, trade facilitation, the collection of duty 

revenue, and drug interdiction at our nation’s borders. Each year more than 16 million containers arrive in the United States by ship, truck and rail. In the last five 

years alone, Customs has witnessed a 60 percent increase in trade entries processed, and this rate is expected to grow an average of 8 to 10 percent a year. 

To consolidate the Customs Service with five other agencies, only one of which 

remains a distinct entity, the Coast Guard, would be a long-term mistake for Customs. Customs’ trade facilitation mission would clearly not be the highest priority 

for the Department of Homeland Security. Keeping Customs as a distinct entity 

within the Department as proposed in both the Lieberman and Thornberry Homeland Security bills would help retain the emphasis on the importance of Customs’ trade related duties. 

Other trade issues such as textile transshipment enforcement, trade agreement 

circumvention, and the use of counterfeit visas to enter inadmissible goods would 

simply fall farther down the priority list in a newly created Department of Homeland Security. Many of these concerns have been voiced by a number of trade groups 

such as the National Foreign Trade Council and the Electric Industries Alliance. 

Both the American public and the trade community expect the borders to be properly defended while at the same time being able to efficiently and safely facilitate 

trade across that border. The government must show the public that it is serious 

about protecting the borders and facilitating trade by fully funding agencies such 

as the Customs Service who are tasked with defending the borders and enforcing 

the trade laws of the United States. No organizational structure change will be successful, no matter how good it may look on paper, if the government does not provide proper funding for its border agencies. 

On a final note, the Administration has indicated that it wants new ‘‘flexibility’’ in the legislation that will establish the Department of Homeland Security. While 

it is unclear exactly what is meant by that phrase, I urge Congress not to take away 

the rights and benefits that are currently available to the employees who may be 

merged into this new department. Before, during, and after September 11, front line 

employees have acted heroically to protect our freedom. They do not deserve to lose 

theirs. 

I have attached to my statement an article from Newsday that features Customs 

Inspector and NTEU member Diana Dean, who apprehended Millenium Bomber, 

Ahmed Ressam in Port Angeles, Washington. It makes the case more eloquently 

than I could, that she is the kind of person we want in a new Department of Homeland Security. But I fear that the ‘‘flexibilities’’ proposed by the President will lead 

to many fewer such dedicated people willing to work for the new Department. That 

would be a shame and I hope Congress will not let that happen. 

Thank you for the opportunity to share NTEU’s thoughts on these very important 

issues. I look forward to working with the Committee on this and many other issues 

related to homeland security, trade facilitation, and the Customs Service.

Chairman THOMAS. Thank you very much, Ms. Kelley. 

If we focus on the language difference that the gentleman from 

f New York pointed out, in terms of the Coast Guard being a distinct 

entity, I think most people could kind of rattle off, ‘‘Well, they’re 

the ones in the uniforms. They’ve got white ships and planes with 

an orange stripe. And they do X,’’ and so on. So if you turn then 

to Customs and you use that same yardstick in terms of Customs, 

if we want a distinct entity in there, what would be the cement 

that would hold that distinct entity together? 

When we look at it historically, it was probably obviously tied to 

those historical papers in terms of revenue. They collect revenue, 

but they do so much more. But they do it in conjunction with the 

collecting of the revenue. 

43

So the line of questioning I would like—and some of you will see 

Customs from only a particular viewpoint. 

And I agree with you completely; if we really want to have a secure border, Mr. Clawson, that getting ACE up and running and 

facilitating the smooth across the border, so there are no bottlenecks, hiccups, or problems, is significant and important in terms 

of security. So getting ACE up and running is in fact, as far as I 

am concerned, easily made a security argument. 

But if we are going to try to argue that they are a distinct entity, 

the question is, is revenue enough cement? Could you actually look 

at Customs today, and notwithstanding some people are virtually 

wholly revenue associated, others are primarily revenue associated, 

some are somewhat revenue associated, and some are not revenue 

associated at all, if you used revenue as the cement, that is probably not a good argument because people could go in and show divisions. 

So if we are going to rally around ‘‘keep Customs a distinct entity,’’ what is it that is tangible that we could use to identify them? 

And I guess the primary thrust of the question would go to you, 

Ms. Kelley, because you get see all of them together. These folks 

see pieces of them. 

So that would be, I think, the first thing we would have to ask. 

And then secondly, is the rationale for wanting to keep it a distinct 

entity sufficiently strong to outweigh the counterarguments, that if 

you really want a seamless, integrated security approach, there are 

areas of Customs that could be shifted, that make some sense, so 

that you just don’t parachute a distinct entity without ever doing 

some of the merging and restructuring. 

And then last, if you look at it, is there a way for us to build 

a distinct entity out of a piece of Customs or most of Customs or 

with slight modifications, which is not attackable, because it is tied 

to revenue? Because this Committee’s primary concern would be to 

follow the money. 

Ms. KELLEY. Well, I think that Customs’ mission is distinct 

from the other agencies, and I think that each of the pieces of 

those, while maybe it could be argued that the revenue doesn’t 

touch each and every one employee, I believe that the mission of 

Customs and the way they have delivered on it over these past 200 

years puts them in place as a very definable, distinct entity. One 

of the risks, of course, is losing the expertise that they have in each 

of these aspects of their mission. 

And one of the things that concerns NTEU, and as I have traveled around the country and watched the Customs’ employees do 

their work, is that there are some, I think, who believe that Customs and the other agencies that they see working side-by-side on 

the borders are interchangeable, and, therefore, they can each do 

each others’ jobs. And that just is not the case. 

They complement and supplement definitely, but they have distinct skills and expertise, which will risk being diluted if that distinction is not maintained. 

The Customs as it operates today, with the different facets of 

what it does, have all been linked and successfully linked and delivered as a part of Treasury obviously for years, for hundreds of 

44

years. And I see no reason why that should be changed in the future, even in a new department. 

Chairman THOMAS. I understand you don’t see a reason. Some 

of us may not see a reason. But that does not mean it is not going 

to happen. And so I appreciate your 100-percent defense of keeping 

it the way it is. We may need to look at how we could create a core 

structure which is undeniably tied to revenue, which maintains 

sufficiently a distinct entity, that we could run the tie through 

Treasury because of the revenue, and back to us. 

We would not have had this discussion 2 years ago. We would 

have been arguing about hours and why you pay time and a half 

and that sort of thing, for 1 p.m. in the afternoon. Put that behind 

us. We are under siege right now, in terms of coming up with a 

rationale that keeps Customs, Customs, or most of what Customs 

is Customs, rather than trying to present arguments to keep it the 

way it is. 

I think the momentum is not to keep it the way it is, because 

somebody decided not to write in ‘‘distinct entity.’’ As my friend 

from New York was pointing out, they also didn’t bother to write 

in Customs on the flow chart. So it tells you that some folk are not 

looking at it the way we think it should be looked at. And if we 

cannot get them to completely, 180 degrees reverse their argument, 

we better be coming up with a way in which we have a very strong 

argument that this is something that makes sense and works and 

this is how we would want it, and that we can defend it. That is 

all I am saying. 

Ms. KELLEY. If I could say this, Mr. Chairman, it is not clear 

to me why the Coast Guard was designated as a distinct agency, 

from a policy standpoint. And I have not thought about the question as you framed it, of cement running through it. I will do that, 

and I will be glad to share those thoughts with you within the next 

week or so, in writing, if that is acceptable. 

Chairman THOMAS. As soon as you can get back to me, because 

to me our strongest argument we make is—that is why I brought 

these documents—it started with money, it follows the money, 

Treasury is money, we are the tax Committee, it is revenue. That 

is, I think, our strongest argument. And let’s see what Customs 

looks like if we use that as the cement to build whatever the new 

model is. And I appreciate some help on that, because I do think 

that is an argument that I would very much like to make. 

Ms. KELLEY. Okay. 

Chairman THOMAS. But I do not know that we can make: 

‘‘Don’t touch a hair on the child’s head. It is perfect the way it is,’’

because some folks have said it may be perfect. 

We have a new problem, and we have to rethink the way we do 

things. 

Ms. KELLEY. I will be glad to provide you with my thoughts. I 

appreciate the opportunity. 

Chairman THOMAS. Thank you very much. 

Anybody else have a reaction to that? You don’t have to. 

Mr. CLAWSON. I was going to say, we would like to also supply 

something, because I agree with your analysis that we do need—

there are parts of Customs that I respectfully disagree, that are 

very similar. There is a degree of interchangeability. When you do 

45

a land border crossing, you do not see Immigration and Customs 

at the land border crossing; they are doing each other’s work right 

now and have been for years. 

So I guess what I am saying is, I agree totally with you. We need 

to figure out a way to craft where we are, and we will help you 

with that. 

Chairman THOMAS. And interestingly, the involvement of commerce I think would be, with the revenue collected by that, would 

be one of those aspects. And then take a look at what people in 

terms of enforcement, to what extent, is it primarily enforcement, 

secondarily collection or primarily collection—some discussion 

along that line. 

And I will not share your thoughts with anyone, Ms. Kelley. Let’s 

see how much is left or not left. 

Ms. KELLEY. Okay. 

Chairman THOMAS. Because I think that is something we need 

to do fairly quickly so this Committee can recommend a firm position that we feel very comfortable defending, so that we can make 

sure what all of us want is at least maximized under the new 

structure. 

Ms. KELLEY. Okay. 

Chairman THOMAS. Thank you. 

Mr. COOK. Mr. Chairman, one comment that is worth considering. When you look at the composite of international trade, a lot 

of it is component manufacturing moving about. And you are looking at duty revenue, but there is a tax revenue on the other side. 

The successful ability of U.S. corporations in this country to be engaged in trade, if it stops, it impacts our business and has a significant impact on the IRS side. 

So if you are looking at the flow of the money, that commercial 

viability becomes very important, being in this country altogether, 

if you are going to have problems moving products in and out. I 

would think from a policy perspective, you would not want to lose 

vision of that in homeland security, because it really is about securing our economic independence. 

Chairman THOMAS. You are absolutely correct. And I think, at 

least in the short run, we have not focused on the fact that as fundamental as anything is the economic security and viability, to be 

able to allow for some of the other activities as well. 

The gentleman from New York. 

Mr. RANGEL. Mr. Chairman, I do not know if additions of Customs over the years, it seems to me that they should be protected 

intact unless there is reason why the flexibility that the Secretary 

would have would require in our national defense that it should be 

changed. 

But if this is the hearing, all it has done is to raise the questions. 

And clearly, the Undersecretary, who just got on this job last summer, had indicated in his testimony that the bill is the thinking of 

the President. But we do not know why Customs was dropped off. 

We do not know what changes they intend to have with Customs. 

And if Customs is dismantled, I assume somewhere along the line, 

since we have congressional oversight, we are going to have to explain why the changes were made. I do not know how you intend 

to proceed, if this is it. 

46

I know Ms. Kelley is going to send us a lot of questions, but how 

are we going to have answers to her questions? And what do we 

do? Ask Ms. Kelley to come back and have this exchange? 

That is why I thought, since we have jurisdiction over the Secretary of Treasury, that it is so important, one, to have the questions raised by those people that believe that they may be adversely affected, to lock in, as the other Committees have—because 

I am convinced that is why some of these people have their own 

rectangle and that is why Customs fell off at the end, because 

someone insisted on it. 

And I am not saying, in the final analysis, that whoever drafted 

the legislation did not put a lot of thinking into it, but how do we 

find out why they set it up as they did? How do we know that role 

they intend for Customs to have in the future? 

It is one thing to say it is going to be intact. It is another thing 

to say they want maximum flexibility. 

Chairman THOMAS. If I might respond? 

Mr. RANGEL. Yes, sure. 

Chairman THOMAS. If the gentleman is coming to the conclusion that this hearing perhaps raises more question than it answers, then I think this will be a very valuable hearing, because 

it is very difficult for this Committee to proceed unless we get answers to those questions. 

And if the gentleman assumes that those boxes were created on 

that piece of paper with significant interaction by other Committees, and the laxity of this Committee’s involvement did not get us 

a box, I can assure you, in my conversations with other Committee 

chairmen, they do not believe that is the case. I believe there is a 

significant amount of ‘‘there but for the grace of God’’ in a number 

of Committee jurisdictions. 

However that was created, I believe that we need to go forward 

in an orderly fashion, ask the questions. And if we do not get answers, then we are either going to have to have another hearing 

or we will craft what we believe to be the appropriate response 

based upon our attempts to answer the questions that are created. 

And we will then move forward with what we believe is our solution. 

Frankly, without having Customs in a particular box and already 

determined tells me we have an excellent opportunity to offer a solution to the problem, because if they already thought they had a 

solution to the problem, we would have to talk them out of their 

solution into ours. So I do not see it quite the same way the gentleman from New York does. I see this as an opportunity to shape 

where and how Customs is placed in this new structure far more 

than if they had told us they made up their mind, here’s the box, 

and that’s where it is. 

I thank the gentleman for the time. 

Mr. RANGEL. Well, Mr. Chairman, I have the utmost respect of 

the union representative of Customs, but it just seems to me that 

the Customs Commissioner may have a lot of questions as well, 

and as we heard those who use the services of Customs. So, yes, 

we can draft and decide what we want to do, but then where do 

we take it? 

47

In other words, it just seems to me that you cannot do this unless you have those people who work with Customs every day. And 

clearly, the Undersecretary does not. They report to him. But Ms. 

Kelley is on the frontline representing her Members. The Customs 

Commissioner is someplace else. We have to do this before the election, or whatever the President wants. 

And so it just seems to me, and you know how reluctant I am 

to get in the back room with you to work this thing out, which you 

are suggesting, but—— Chairman THOMAS. No, I am not suggesting that. Does the gentleman yield further? 

Mr. RANGEL. Yes, but you said that we will have—— Chairman THOMAS. If the gentleman’s concern is that he is disappointed that middle management is not here, so they can freely 

criticize upper management in the way in which this project is 

moving forward, he is probably not going to be happy. 

One of the reasons that I was pleased that the minority asked 

union representation is that I believe they could be a bit freer 

about looking at the way in which structures could be made. And 

I do believe there is, if the gentleman is serious about why someone 

who is in a middle management position is not here so they can 

criticize the structure under which they are supposed to be moving, 

then we have a great gulf between us. 

Mr. RANGEL. Mr. Chairman—— Chairman THOMAS. I believe the recommendation—— Mr. RANGEL. Mr. Chairman—— Chairman THOMAS. I just want to say this: I believe the recommendation of this Committee as to how this is handled will 

carry enormous weight with the leadership as they put the package 

together. We should focus more on the way it ought to be than the 

fact that we do not have somebody here that we can embarrass because you know they cannot answer—— Mr. RANGEL. Mr. Chairman—— Chairman THOMAS. In a way that either they want to or they 

won’t. 

Mr. RANGEL. It was you that brought the person here that 

could not answer the questions. 

Chairman THOMAS. I believe that is upper management, not 

middle management. 

Mr. RANGEL. Well, let me ask, Ms. Kelley, before you testified, 

did you have the opportunity to share your views with the Commissioner of Customs? 

Ms. KELLEY. I spoke briefly with him last week on my concerns 

about the fact that Customs is not a district entity, does not have 

appropriate resources, and the risk of losing the expertise. 

Mr. RANGEL. I would like to see whether or not—I am going to 

make a recommendation to the Chair that the Customs Commissioner and you, Ms. Kelley, would get together, because like any 

family, you can dispute with wages and hours and all of those 

things, but then when you find out that Customs itself may be 

under some type of attack, I am certain that you and the Customs 

Commissioner might have more in common in terms of making recommendations as to what would be effective than somebody who is 

just including you in an organization chart. 

48

If the Chair cannot find a way for that type of a meeting to take 

place, so that we can be helpful to the Customs Commissioner, so 

that we can be helpful to the rank and file, then I might be reaching out to you and to the Customs Commissioner in asking: what 

do you think about this idea; how do you think it can be improved; 

what recommendations would you make? I am certain that that 

would be more helpful to me than what I have been able to get 

from this hearing. 

So if there is no other scheduled hearing where I can ask these 

questions, then I would ask, in a very informal way, on behalf of 

the minority, that we can meet and meet with the Customs Commissioner and see what we can do to be helpful to our Nation, to 

the new department, and to Customs, that I think deserves this 

type of oversight. 

Ms. KELLEY. I will pleased do whatever I could to help. 

Mr. RANGEL. Thank you, Mr. Chairman. 

Chairman THOMAS. I thank the gentleman. Does the gentlewoman wish to inquire? 

Ms. DUNN. Thank you very much, Mr. Chairman. 

I wanted to ask Mr. Farrell to clear up a couple of things that 

have concerned me. In your testimony, Mr. Farrell, you refer to 

concerns being raised by your customers, the folks that you do 

business with at the Port of Tacoma, about the lack of uniformity 

in the process of physically inspecting container cargo, and I am assuming that is among the ports in the United States. I am wondering if you could give us your thoughts on this. 

The concerns that I have heard have to do with the fact that 

there are added costs and there are time delays that are being experienced by shippers in dealing with ports where there is, for example, 100-percent inspection of containers selected out of the 

numbers that are shipped into the port. I am wondering if you can 

just give us your thoughts on what is happening. 

Mr. FARRELL. I can indeed. In the various ports, Customs’ inspections take place at different levels and different volumes. In 

other words, percentage of the cargo that comes through the port 

and then percentage of the cargo in an individual container that 

actually is inspected. I am given to understand, from my conversations with Customs, that these numbers are based on their own 

rules and determinations about which cargoes to inspect and to 

what extent. 

However, what we haven’t been able to communicate is the basis 

on which those decisions were made and gather actual data from 

what those impacts are. What I can tell you is that we have anecdotal evidence from our customers that there is a difference in the 

intensity of enforcement of regulations across the entire West 

Coast port range, and that when a container is detained for an inspection, that container comes offline, it may be delayed anywhere 

from a half day to 3 days, and they carry additional costs for the 

actual physical unloading and inspection of the cargo. 

It is as if while getting on an airplane, or attempting to get on 

an airplane, your bag is taken aside for inspection; you miss your 

flight; and for the privilege, you are sent a bill at the end. 

The concern that we have, again, I mentioned diversion. Tacoma 

and Seattle, as well as New York-New Jersey, Boston, and others, 

49

are close enough to international borders to be effected by this type 

of activity. And it is important that we be able to communicate 

with Customs clearly and definitively about what actually is happening, what is the data, and how are these decisions being made. 

We are the port are in close communication with our local Customs’ people, and I also have spent time with people here in Washington at Customs, and have spent some time with Members of our 

delegation to try to gather that data and try to improve those communications in such a way that our anecdotal evidence can either 

be shown to be correct or shown through the data to be incorrect 

and why. 

Ms. DUNN. Well, we are going to have to watch over that. Do 

you feel that you have had adequate opportunity to share that with 

the Customs Commissioner? 

Mr. FARRELL. I have had opportunity to share it with the higher levels of Customs, and I am optimistic that we may have some 

results that come from that. 

Ms. DUNN. Wonderful. Let me ask you a last question here, and 

it has to do with your testimony that alluded the competitive disadvantage that certain ports have with other Nations. Of course, 

our being close to Canada means that the ports in Washington 

State, but also those on the East Coast, and actually along our 

whole western coast, are disadvantaged by a number of things, including the payment of the harbor maintenance tax, which affects 

several of us on this Committee, where we believe we get very little 

out of the payment of that tax. It is a tax on a container that does 

not occur at the Port of Vancouver in Canada, for example. 

I am now concerned because I am hearing regularly about the 

threat of cargo diversion to ports in Canada, and I know also that 

they have made major gains over the last few years in market 

share, taking directly away from the ports that we have on the 

West Coast. 

I am wondering if you could quantify for us your view of this 

growth for the Port of Vancouver that detracts from our ports on 

the West Coast and the East Coast, and tell me if there is something that we need to be doing about this, and how it is exacerbated by the problems we are running into now with the time 

delays. 

Mr. FARRELL. Thank you for your question. I can give you a 

couple of ways of looking at this question. The first and clearest is 

the Port of Vancouver. In 15 years, since the institution of the harbor maintenance tax, container volume at the Port of Vancouver 

has increased by 414 percent. Over the same period of time, the 

container growth in the Port of Tacoma has been 98 percent, and 

in Seattle, 55 percent. So it is clear to us that as the trade volume 

grows, we are seeing a share of that cargo shifted north across the 

border as a result of the tilting of the playing field by institution 

of that tax. 

You mentioned earlier that I spent some time at the Massachusetts Port Authority. We have the same issue there with the Port 

of Montreal. 

Ms. DUNN. Excuse me, Mr. Chairman, I really would like to 

have us be an audience. This is so important, and I would really 

like to have other Members of the Committee hear it. 

50

Chairman THOMAS. I’ll tell the gentlewoman that there is a 

record being made, and there is a discussion going on, which is fundamental to it. I apologize, and I will turn my attention to the 

statements that are being made. 

Mr. FARRELL. The harbor maintenance tax is an issue that the 

Massachusetts Port Authority addressed by asking and receiving 

from the Massachusetts State Legislature a State rebate for the 

harbor maintenance tax to companies based in Massachusetts that 

used Massachusetts ports to ship goods, as a way to blunt the impact that the Port of Montreal was having in that area due to the 

harbor maintenance tax. 

So those are the two examples. Now, how does the security environment that we currently find ourselves in relate to that will certainly, as we look at enhancing security in our ports and at our 

border crossings, and we look to the Customs’ CSI to partner with 

foreign ports, the first of which are the Canadian ports of Montreal, 

Halifax, and Vancouver, B.C., it is critically important that whatever security procedures we put in place at U.S. ports be balanced 

with ports across our borders, so that we do not have again a further slanted field, which affects both the commercial aspects of our 

business, in terms of the jobs related to moving of cargo, but also 

a security perspective. 

Again, you are only as safe as your neighbor. You are only as secure as your neighbor. And that is why we have worked together 

with the ports of Seattle and Everett to make sure that our security initiatives are carried out jointly. 

Ms. DUNN. Thank you very much. Thank you, Mr. Chairman. 

Chairman THOMAS. Does the gentleman from California, Mr. 

Becerra, wish to inquire? 

Mr. BECERRA. Thank you, Mr. Chairman. 

First, thank you to all of you for your testimony. And I will try 

to contain myself to just a couple of questions. 

If I could start with Ms. Kelley, I would like to see if I can get 

you to give me a little more information about section 730 of the 

proposal to create this new Homeland Security. I know that you 

have expressed concern that section 730 would not carry with it or 

would allow the department not take with it the various civil service protections—whistleblower protection, retirement, health benefit protections—that you currently receive as employees within 

Treasury or any department of the Federal Government. 

Is there any circumstance in which you think Treasury employees or Customs’ employees would accept a provision similar to section 730, which is the current proposal that President Bush has 

sent over to us? 

Ms. KELLEY. I don’t see how, because what the language says, 

as I read it, is that, on the day of the transfer that every thing 

stays intact. But whether it is 1 day, 1 week, or 1 month thereafter, that authority would lie with the Secretary of the department 

and the OPM Director. 

And I guess at the bottom of all this for me is that employees 

of Customs, the employees of these agencies have done the work 

that they do on the front line for our country for decades as union 

Members, with these rights, and it has never ever been an issue 

51

of their ability to do their jobs. So why a flexibility like this is 

needed is not understood by me. 

We have asked a lot of questions, and it has never been made 

clear what the intent is to do with this. So the intent is unclear, 

and it is hard to address any specifics that they might have in 

mind. 

Mr. BECERRA. On that point of having asked the questions, can 

you give me a better sense of what type of consultation you were 

afforded or NTEU was afforded with respect to the develop or formulation of the proposal that the Administration submitted to Congress? 

Ms. KELLEY. Into the formulation, I would say zero. The day 

after the President’s announcement, before the language was actually shared with anyone, I did have the opportunity to meet at the 

White House with Clay Johnson, Kay Coles James from OPM, and 

Mark Everson from the Office of Management and Budget. And 

they wanted to hear our concerns, and this was one of the concerns 

I clearly articulated. 

So I guess from that standpoint, you could say they at least 

knew. And the response I got ranged from a stare to: ‘‘We understand the issue.’’

When the language was then finally made available, it was clear 

that any input we had or any opportunity we had to provide information was not included in the language. 

Mr. BECERRA. And when you say you shared your concerns, it 

was beyond just the issue of section 730? 

Ms. KELLEY. Yes. At the time section 730 did not exist, but we 

had a fear that this was going to happen, just from things that the 

President said in his address and from media reports later, in the 

next 48 hours or so, talking about flexibility. And so that kind of 

sent up the signals that we should be concerned. 

So I was trying to anticipate what might happen and have a conversation that hopefully would stop it from happening. But that did 

not occur. 

Mr. BECERRA. Other than the day before the proposal was presented publicly, did you have any other opportunities to comment 

to the Administration? 

Ms. KELLEY. Actually, the conversation I just described was the 

day after the President’s announcement. And then the next opportunity came the day before the language was made available. And 

it was a meeting held at OPM for a large number; employee organizations were invited. 

I described that as a ‘‘Q’’ session, because they wanted to hear 

our questions, but there were no answers that were provided. But 

it was clear the next day, when it was published, that the language 

had already been written, and it really didn’t matter. 

I did reiterate that day everything I had said at the White 

House, but to no avail. 

Mr. BECERRA. Thank you. 

A question about the ACE system, the new automated system 

that hopefully we will have in place, anyone wish to comment 

about how we integrate that new system into this broader or larger 

agency, having to fulfill functions that go beyond what we thought 

52

it would be used for, and whether or not you think that we can accelerate it quickly enough? 

So, can we use it still? Is there something we have to do now to 

retool to make sure that we can use it for more than just Customs, 

since it is going to be under this new Homeland Security? And do 

you believe that we can try to accelerate its implementation sufficiently to have a good system that will be capable of meeting the 

needs that we have under this new department? 

Mr. CLAWSON. Yes, in answer to your question. I think that it 

is currently structured in such a way with what is called the International Trade Data System, ITDS, which is made up of 12 departments on a board, and that that is intended to provide this service 

across the government as one point, so it is more than just Customs. So that type of integration is already anticipated and has already somewhat been underway. It will have to be tweaked, obviously, in a new department, but I think it can be done. 

I think the bigger concern that we have, those of us who worked 

on the coalition for automation funding and whatever else, is that 

it is just taking too long. And I don’t know what that means, in 

the sense that I am not a programmer, I don’t do these kinds of 

things, but I know that enormous things happen in this country, 

we have great people who are doing wonderful things. It seems 

somehow that the team that is building this with Customs, and I 

do not know all the ins and outs, because they do not really tell 

you that, the behind-the-scenes stuff, but I know that they have 

been at this for an awful long time, in terms of concepts and whatever else. 

And I think they are getting, finally, underway a bit. But they 

have to figure out a way to accelerate it. I agree with you. 

Mr. BECERRA. But, Mr. Clawson, your sense is that the infrastructure, the hardware, software, everything that makes up ACE, 

is still applicable, given its heightened demand? 

Mr. CLAWSON. Yes. The architecture was done initially in such 

a way that it was modular and could be added on to, because they 

did not want to go through what we have done, that in 5 years or 

10 years, it can be obsolete. So this was a growing, viable kind of 

system, the way it is designed. And maybe that is what is taking 

it so long to get off the ground. But I have a comfort level with the 

architecture; I have a discomfort level, very much, with the speed 

which it is being built. 

Mr. BECERRA. Thank you. 

Mr. COOK. Congressman, a couple of comments on that. One, I 

think the ACE design and the platform and the team that is doing 

it is a very capable team. And I think where they are, they have 

rightfully spent a lot of time to step back and ‘‘let’s not automate 

the paper process; let’s really dig in and now that we have a great 

tool that we are designing, let’s change that.’’ I think to your point, 

it is probably more important now to accelerate the development 

and implementation of ACE, because in the absence, we are liable 

to build a parallel system to fill some other need that may be coming up because of security, and then we really will have a problem 

of a bifurcated system. 

The second one is that we in the trade community, to the government, really need to mandate that the other government agencies 

53

rely on ACE, because one of the problems we are facing is that it 

is voluntary that other governmental agencies use it as their data 

interface with trade. If it is not mandatory, then you stand a great 

chance of building very redundant systems that are very expensive 

and always trying to synchronize those, which does complicate the 

development and implementation of ACE. 

And the third part is that we today in the trade arena require 

an enormous amount of data that really serves very little long-term 

use. A lot of it is for rounding up for census, but doesn’t really provide the core mission of ‘‘what do I need to collect revenue, what 

do I need for enforcement and risk assessment?’’ And I think, if we 

go back and spend some more time to ferret out that, we can probably see ACE become a much more dynamic—I see ACE as really 

being the underlying system for all of homeland security, because 

it is advanced data, it is arriving data, it is post-data, it is identifying who shipped it, who is bringing it, and who is receiving it, 

and what commodities are coming. And that gives you the tool to 

do risk assessment and commercial clearance. 

Mr. BECERRA. Thank you. 

Mr. FARRELL. And I would second what both of these gentlemen have to say, and say that regardless of the ultimate disposition of Customs, the sooner we get this system in place, the better. 

Mr. BECERRA. And it can be done quicker, do you think? 

Mr. FARRELL. I would think so, yes. 

Mr. BECERRA. Thank you. 

Chairman THOMAS. I would tell the gentleman from California 

that it is probably misnamed if we call it ‘‘ACE.’’ It is probably 

about a three of clubs. 

[Laughter.] 

Chairman THOMAS. And the problem is, it is well-financed; 

therefore, given the changing technology in the area, as you putter 

along, you are overtaken by new technology. If they could simply 

pick up the SKU system at Home Depot, they would really be on 

the cutting edge. 

It has been underfinanced, and there is no integration in the approaches you heard. And I think we have going to have simply impose some requirements here to get it done. We have this problem 

with Social Security interfacing with IRS and everyone else. Now, 

that is a trillion dollar problem in other parts of the government. 

This is a distinct area in which, if we put mandatory requirements, 

minimum information, maximum flexibility, and speed at getting it 

done, because a border that is clogged up and is not moving is more 

insecure than a border that moves smoothly and you know who is 

where doing what. 

This is a contribution that will come out of these hearings as we 

go forward, because if we have billions of dollars for homeland security, we ought to have a little bit for doing this particular function, because they raise enough revenue to pay for themselves, and 

that is not always the case in the other areas where enormous 

amounts of money are being spent. Security is security, and when 

you can get a return on your investment, you ought to work on this 

area. 

Mr. BECERRA. I agree, Mr. Chairman. 

54

Ms. THURMAN. I want to thank all of you. I know some folks 

are a little more frustrated, but I honestly believe that this Committee has the ability to tell the executive branch, if we are good 

enough, what the Customs’ structure ought to look like under the 

new Homeland Security arrangement. And that is what we will attempt to do. 

I look forward to getting the materials back from you. I know 

that we probably raised more questions. That may have been the 

intent of the Chair. Thank you very much. 

[Whereupon, at 7:37 p.m., the hearing was adjourned.] 

[Questions submitted from Chairman Thomas to Secretary 

O’Neill, and his responses follow:]

QUESTIONS SUBMITTED BY CHAIRMAN THOMAS TO SECRETARY 

O’NEILL 

Question:

Can Customs perform its functions well if Congress mandates that Customs’ revenue functions must remain intact and could not be reorganized internally or with 

other Homeland offices until such time as the Administration identifies specifically 

what it proposes? 

Answer:

The President’s proposal would move Customs intact to Homeland Security in 

order to minimize any disruptive effects. One of the main reasons for creating the 

new department is to achieve synergies and efficiencies among the now disparate 

agencies and the new Secretary would be given broad authority to do so, but any 

changes would need to be made only after further careful study. This is an issue 

on which the Administration would work closely with the Committee to address its 

concerns. 

Question:

The fact that Customs collects revenue creates special circumstances and needs 

for Customs that other Homeland component offices will not experience. Do any 

other government offices or agencies being transferred to Homeland Security collect 

revenue as Customs does? 

Answer:

Many agencies collect fees, fines, or penalties. Customs, however, also collects tariffs, which total about $20 billion annually. 

Question:

Are there specific parts of Customs whose exclusive or substantial function is to 

collect revenue? Please identify for the Committee those roles within Customs such 

as the Import Specialists and the Office of Rulings and Regulations that have a primary role in the collection of revenue. What percentage of Customs inspectors perform primarily revenue collecting functions? 

Answer:

Certainly, while there are some functions in Customs, such as those of the import 

specialists and the Office of Regulations and Rulings, that are more directly focused 

on tariff collection than others, these same people also make decisions regarding the 

basic admissibility of merchandising to the U.S. Inspectors on the border rely on expert technical and legal advice to help identify trade fraud and the regulation writers rely on their close contact with the field inspectors to help them craft trade rules 

that will both keep trade moving and permit effective, efficient enforcement. The 

regulatory audit function is another activity that is focused on tariff revenue collection, but the information that auditors develop about businesses and trade patterns 

help to target anomalies and risky shipments for enforcement actions. Inspectors 

are trained to perform trade enforcement as well as contraband, drug and security 

enforcement. We wart people examining shipments because of trade enforcement 

concerns to be alert for security risks. It is difficult, if not impossible, to separate 

the percentage of time individual inspectors devote to these various functions because they are intertwined. 

55

Question:

Customs does so many things other than just searching for narcotics or preventing terrorists from entering the U.S. How will the President’s proposed changes 

in organizational structure change the nature of what Customs does? 

Answer:

The President’s proposal would move Customs intact. Consequently, nothing in 

the nature of what Customs does would change. 

Question:

Customs collects over $1 billion in user fees from importers. According to law, 

those fees must be used for commercial purposes only. How can Congress keep track 

of how the commercial fees will be spent by the Administration? 

Answer:

Unless Congress changes that law, the same restrictions on user fees that apply 

now would apply in the future. Under the President’s proposal, Customs would be 

moved intact, and the same process of evaluating costs that Customs goes through 

now could be used in the future. 

Question:

If, Congress were to prohibit decreases in staffing and funding for Customs trade 

offices, would this ensure that trade activities are not inadvertently strangled? 

Answer:

The President’s proposal recognizes the importance of trade activities. In addition, 

Governor Ridge and Customs Commissioner Bonier have publicly committed to supporting the trade function as it moves to the never Department. We would want to 

work with Congress to take advantage of possible efficiencies that we may be able 

to realize, for instance efficiency gains from further automation and completion of 

the ACE system. 

Question:

Has Customs done arty projections to determine if there will be a significant cost 

to move to a new Department? 

Answer:

There should not be any because Customs would retain its current headquarters 

and other locations. In addition, the consolidation of the different border entities 

under one agency has the potential to create additional efficiencies in the future. 

Question:

Have increased security measures affected imports in any way? Can you give us 

specific cases? 

Answer:

Certainly there were border delays in the week following September 11th. Customs responded quickly to reduce bottlenecks and minimize the impact on the economy while maintaining a heightened level of alert. Customs has since implemented 

innovative approaches to reduce the impact of the security threat. The Container 

Security Initiative (CSI), with cargo examination at the point of export rather than 

import, helps prevent delays at the border as well as reducing the threat to the 

homeland, The Customs-Trade Partnership Against Terrorism (C-TPAT) enlists the 

private sector in the fight against terror. Both are creative alternatives to the traditional border search. 

Question:

What trade authority does Customs have granted directly from statute, as opposed to delegated by the Treasury Department? 

Answer:

Most Customs related authority is currently granted statutorily to the Secretary 

and delegated to the Commissioner. We are reviewing the trade statutes to identify 

those authorities granted to the Commissioner, and will provide that information to 

the Committee as soon as that effort is completed. 

[Questions submitted from Mr. Rangel to Secretary O’Neill, and 

his responses follow:]

56

QUESTIONS SUBMITTED BY MR. RANGEL TO SECRETARY O’NEILL 

Question:

Please advise me of any legislative provisions that you would like addressed in 

the bill (1) to ensure proper transfer of Customs to the new Department; (2) to preserve the effectiveness of Customs operations in protecting our borders and facilitating the commercial flow of trade; (3) to ensure retention of Customs employee job 

responsibilities and the employment protections currently under Title V; and (4) to 

maximize Customs’ ability to fight our war on terrorism, and other important responsibilities currently part of the Customs mission. 

Answer:

The bill proposed by the President addresses these issues in the following manner. 

The legislation includes specific provisions for the orderly transition of Customs to 

the new Department. The bill would provide for a 12-month transition period, during which time the President would direct when individual components would be 

transferred. The bill also provides other authorities for functions necessary for an 

orderly transition, such as support services, details, interim appointments, and the 

transfer of personnel, assets, and liabilities related to the components being transferred. 

The President’s proposal seeks to create an efficient structure to help ensure that 

our ports of entry and other critical assets are protected, and his proposed combination of key components will help do so. To recognize the importance of Customs’ trade functions, section 401 of the proposed legislation includes within the jurisdiction of the Under Secretary for Border and Transportation Security a number of 

‘‘primary responsibilities,’’ including: ‘‘(1) preventing the entry of terrorists and the 

instruments of terrorism into the United States; (2) securing the borders, territorial 

waters, ports, terminals, waterways, and air, land, and sea transportation systems 

of the United States.—(4) administering the customs laws of the United States; and 

(5) in carrying out the foregoing responsibilities, ensuring the speedy, orderly, and 

efficient flow of lawful traffic and commerce.’’ Under the bill, Customs would continue to fulfill all of its existing functions. The 

new Department would collect import duties and remit these funds to the Department of the Treasury. There would be no loss of revenue as a result of this reorganization. 

Customs also strongly believes that any effort to improve our border security must 

include the direct involvement and input of the trade community. The success of 

programs like Customs Container Security Initiative (CSI) and the Customs-Trade 

Partnership Against Terrorism (C–TPAT) demonstrates how Customs effectively 

and efficiently balances its dual missions of security enforcement and trade facilitation. Under the President’s plan, Customs will continue to administer and enforce 

the Customs laws, protect our borders against terrorists and terrorist weapons, and 

facilitate the flow of legitimate commerce. 

When an organization becomes a part of the new Department, employees will 

transfer with existing pay and benefits intact. When the Department is established, 

employees represented by unions will continue to be represented because their bargaining units will move with them to the Department. The proposed legislation does 

not impair employees’ collective bargaining rights in any way or change existing authorities. 

The President’s legislative proposal would unify authority over major Federal security operations related to our borders, territorial waters, and transportation systems. The new Department of Homeland Security would assume responsibility for 

operational assets of the U.S. Customs Service, Coast Guard, Immigration and Naturalization Service and Border Patrol, the USDA’s Animal and Plant Health Inspection Service and the Transportation Security Administration—allowing a single government entity to manage the U.S. borders. This is intended to improve coordination 

and communication among border agencies, enhance intelligence sharing, and increase operational efficiencies. 

Question:

What is your understanding of why the responsibilities of the Bureau of Alcohol, 

Tobacco and Firearms relating to firearms and explosives are not part of the President’s plan for transfer to the new Department? 

Answer:

As you indicated, the President’s proposal does not include moving the Bureau of 

Alcohol, Tobacco and Firearms (ATF) to the new Department of Homeland Security. 

While a number of options were considered, this was the final decision based on 

what needed to be done immediately to secure the homeland. 

57

Under the President’s proposal, the new Department would have law enforcement 

responsibilities as they pertain to securing and policing our borders, ports, airports, 

and territorial waters. The U.S. Secret Service, also proposed for transfer, would 

maintain its law enforcement functions, as well. 

We recognize that other proposals have been made regarding ATF and the reorganization of Federal law enforcement (e.g., Webster Commission). The President’s proposal is designed to cover the changes that need to be made immediately to accomplish the priority goal of securing the homeland as quickly as possible. The 

Treasury Department will be pleased to continue to work with the Committee on 

areas of concern as the legislation advances consistent with the President’s proposal. 

[Questions submitted from the Committee to Director Ridge, and 

his responses follow:]

QUESTIONS SUBMITTED BY THE COMMITTEE TO DIRECTOR RIDGE 

1. Will the Customs Service remain intact within the Department of 

Homeland Security or will portions be merged with other agencies either 

initially or at some time later?

ANSWER: The President proposes transferring the entire Customs Service—its 

border security, trade/revenue, and investigative missions—into the new Department 

of Homeland Security. Certainly, the new Secretary will likely consider how to best 

organize the new Department in order to maximize efficiencies and synergies and 

minimize redundancies and overlapping missions. The Administration also expects 

the new Department to study the different agencies’ management systems with a view 

to attaining efficiencies in personnel management, fiscal oversight, procurement, contracting, and other administrative areas.

2. Under the President’s proposal, a number of agencies are keeping their 

identity within the new Homeland Department, such as the Coast Guard 

and the Secret Service. Why is the Customs Service not being maintained 

as a discrete entity?

ANSWER: The Administration believes that the new Secretary of Homeland Security should have the management flexibility to minimize operational redundancies 

and overlapping missions. The Administration is also interested in achieving overhead efficiencies within the new Department. This may mean that some overlapping 

functions presently performed by some agencies might be consolidated. 

3. The Administration’s bill at § 402 identifies the Coast Guard, the 

Transportation Security Administration, the Immigration and Naturalization Service, and the Animal and Plant Health Inspection Service as being 

in the new Border Security Office. Who would be in charge, and what will 

these offices do differently once under the Homeland Security Department?

ANSWER: Section 402 of the draft bill prepared by the Administration proposes 

that an Under Secretary for Border and Transportation Security be in charge of these 

agencies. The Under Secretary’s responsibilities would include: (1) preventing the 

entry of terrorists and the instruments of terrorism into the United States, (2) securing the borders, territorial waters, ports, terminals, waterways, and air, land, and 

sea transportation systems of the United States, (3) administering the immigration 

and naturalization laws of the United States, including the establishment of rules 

governing the granting of visas and other forms of permission to enter the United 

States to individuals who are not citizens or lawful permanent residents, (4) administering the customs laws of the United States, and (5) ensuring the speedy, orderly, 

and efficient flow of lawful traffic and commerce in carrying out these responsibilities. 

The agencies being transferred to the new Department—The Coast Guard, the Customs Service, the Immigration and Naturalization Service, the Animal and Plant 

Health Inspection Service, and the Transportation Security Administration will retain their statutory missions within the Department of Homeland Security. The principal advantage of transferring these agencies to the new Department is to consolidate responsibility for the inter-related tasks of border and transportation security 

within a single department whose primary mission is homeland security. The Under 

Secretary for Border and Transportation Security will be able to address problems 

that have plagued federal border-control efforts to date—lack of coordination and cooperation among the numerous agencies involved in border management; overlap and 

duplication of efforts; fragmented authority and responsibility; and interagency rivalry.

4. The fact that Customs collects revenue creates special circumstances 

and needs for Customs that other Homeland component offices will not exVerDate Sep 04 2002 05:02 Sep 07, 2002 Jkt 081233 PO 00000 Frm 00061 Fmt 6633 Sfmt 6621 E:\HR\OC\B233.XXX B233
58

perience. Do any other offices or agencies being transferred to Homeland 

Security also collect revenue as Customs does?

ANSWER: Transferring Customs’ trade and revenue collection function into the 

Department of Homeland Security will achieve the larger objectives of the President’s proposal by (1) ensuring the proper balance between security and trade facilitation, 

(2) limiting the size of the Federal Government, (3) ensuring accountability and coordinated policymaking, and (4) promoting the collection and analysis of all information related to homeland security. 

While Customs’ trade / revenue function is extremely important—the Service pro- vides the nation with its second largest source of revenue, returning $22.1 billion to 

the Treasury in 2001—all of the border-management agencies the Administration 

proposes be transferred to the new Department collect fees, fines or penalties.

5. How can the Committee be sure that the trade mission of Customs will 

continue to be funded in the budget of the new Department?

ANSWER: Should the Customs Service be transferred to the new Department of 

Homeland Security, The Administration will continue to develop a proposed budget 

for all of Customs’ statutory functions, and will continue to transmit the budget to 

Congress within the Administration’s fiscal year budget proposals. The Congress will 

be able to verify the Administration’s commitment to Customs’ trade mission and, 

should it conclude that budget levels should be changed, make adjustments to the 

proposal during the appropriations process. 

6. Will Customs continue to be the lead office of the collection of trade 

data or will another part of Homeland Security take over this function?

ANSWER: Yes. Customs will retain the mission of collecting trade data. 

7. If Congress mandates that Customs’ revenue functions will remain intact, even within the new Department, and could not be reorganized or 

with other Homeland offices until such time as the Administration identifies specifically what it proposes, is there any reason to believe that Customs could not perform its functions appropriately? 

ANSWER: The President’s proposal would move the Customs Service intact to the 

Department of Homeland Security. He believes that because of the interrelated tasks 

the Service currently performs, moving the Service in whole is important. The Administration fully expects that Customs will continue to discharge its revenue functions upon its transfer to the new Department. Given the Committee’s 200 years of 

jurisdiction over the Custom Service, however, we would, of course, welcome the Committee’s input on this important function. 

The Customs Service’s trade and revenue collection mission is an operational one 

that involves both enforcing trade laws (e.g., determining and verifying the classification, valuation, and country of origin of goods brought into the U.S.) and collecting 

duties. As part of this function, the Customs Service also determines the admissibility 

of goods by enforcing quotas and other trade restrictions. 

This mission involves far more than the mere collection and remittance of funds 

to the Treasury. The process begins with inspectors and other frontline personnel who 

examine goods and paperwork to verify some of the critical components of admissibility and duty determinations— classification, valuation, country of origin, and 

quantity, among other things. After a duty is paid, Customs regulatory auditors may 

examine the records of an importer for compliance purposes and, depending on the 

outcome of that audit, may refer the matter to Customs Service special agents to open 

a criminal investigation. The criminal investigation, in turn, may lead to recovery 

of lost duties and substantial civil and/or criminal penalties.

Not only does the trade and revenue collection function cut across the entire Customs Service, it is a key part of the Customs Service’s border security mission for several reasons: 

First, the trade and revenue collection function is carried out by the same Customs 

Service personnel that ensure border security. The front line personnel that perform 

trade enforcement and compliance activities at the border, such as physical inspections and paperwork verifications, are the same personnel that perform inspections 

for security and other enforcement purposes.

Second, the trade and revenue function provides the Customs Service with the information that it needs to carry out its border security mission. For example, a trade 

compliance examination (i.e., physical inspection) of a shipment at the border, or an 

audit of an importer, may reveal that the importer maintains poor controls over its 

inventory and thus should be considered a security risk. As a result of that risk determination, the importer would be subjected to more physical inspections at the border 

to ensure that it does not intentionally or inadvertently bring contraband into the 

U.S. 

8. What will happen to the continuing development of the new Customs 

computer system, the Automated Commercial Environment (ACE), during 

59

the transition to the Department of Homeland Security? What steps will be 

needed to join the Customs computer system with that of the other agencies?

ANSWER: Systems plans for the components, which will enter the new department, will be carefully but promptly assessed to make sure they are consistent with 

both enterprise-wide requirements and specific statutory functions. There will be consolidation of systems where justified, with great care paid to make sure there is no 

interruption of critical functions. It is likely that the rapid development of the ACE 

system will continue as will the interagency community’s development of an International Trade Data System that creates a harmonized system for import-related 

data. These systems will likely become a cornerstone of the Department of Homeland 

Security’s enterprise architecture. 

9. Customs collects over $1 billion in user fees from importers. According 

to law, those fees must be used for commercial purposes only. How can 

Congress keep track of how the commercial fees be will spent by the Administration?

ANSWER: Unless Congress changes the laws governing user fees, the present restrictions on user fees collected by Customs will apply if the Service is transferred 

to the Department of Homeland Security. The draft bill prepared by the Administration does not change Customs’ congressional reporting requirements. Accordingly, 

Congress’ oversight capabilities in regard to collection and expenditure of importers’

user fees are not reduced in any way by the President’s proposal.

10. Has the Administration done any projections to determine if there 

will be significant cost to move a new Department?

ANSWER: Earlier this year, the Office of Management and Budget (OMB) examined the costs associated with and the efficiencies that would result from the establishment of a single agency comprising the Customs Service, the enforcement elements of INS, the Coast Guard, and the border inspectors of the Department of Agriculture. OMB estimated that combining these components into a single agency would 

have short-term costs and the potential for long-term redeployed resources. Short 

term costs associated with personnel buy-outs, relocation costs, and facility costs 

(breaking and entering new leases) would be covered from within the existing administrative budgets in these agencies.

sponses follow:]

[Letter submitted from Mr. Rangel to Ms. Kelley, and her ref June 27, 2002

Colleen M. Kelley 

National President 

National Treasury Employees Union 

901 E Street, NW 

Suite 600

Washington, DC 20004

Dear Ms. Kelley: 

Thank you for your testimony at the Committee’s hearing on June 26th about the 

President’s plan to create a new Department of Homeland Security. I, and the other 

Committee Democrats, support the President’s effort and will work, on a bipartisan 

basis, to ensure development of a new federal Cabinet-level Department that effectively protects this country from the global threat of terrorism. As you know, the 

Ways and Means Committee is responsible for developing amendments to the President’s plan as relates to the U.S. Customs Service, and we hope to make such recommendations by July 10, 2002. 

In order to move quickly in evaluating the President’s plan for Customs under the 

House Leadership’s schedule, I request that you advise me of any legislative provisions that you would like addressed in the bill (1) to ensure proper transfer of Customs to the new Department; (2) to preserve the effectiveness of Customs operations 

in protecting our borders and facilitating the commercial flow of trade; (3) to ensure 

retention of Customs employee job responsibilities and the employment protections 

currently under Title V; and (4) to maximize Customs’ ability to fight our war on 

terrorism, continue its drug interdiction programs, and other important responsibilities currently part of the Customs mission. 

Also, as you agreed at the hearing, I ask that you meet with Customs Commissioner Bonner to discuss the future of Customs in the new Department. I am confident that meaningful dialog between the Customs Commissioner and NTEU officials representing Customs will assist you in answering the questions listed above 

60

and in providing this Committee with valuable information and a clear direction on 

how we should proceed. 

Given the short timeframe under which the Committee is working, I request a 

written response to these questions by Tuesday, July 2, 2002. Please feel free to contact the Committee Democratic staff at 202–225–4021. Also, please provide a copy 

of your response to 1106 Longworth House Office Building. 

Thank you for your assistance. 

Sincerely, 

Charles B. Rangel 

Ranking Democrat 

National Treasury Employees Union 

Washington, DC 20004–2037

July 2, 2002

Honorable Charles B. Rangel 

Ranking Member 

Committee on Ways and Means 

1106 Longworth House Office Building 

Washington, DC 20515

Dear Ranking Member Rangel: 

I again want to thank you for the opportunity to testify before the Committee on 

the President’s proposal to create a Department of Homeland Security and its effects on the Customs Service missions of trade facilitation. I also appreciate the opportunity to offer possible legislative provisions for inclusion in legislation creating 

a new Department of Homeland Security. 

I would like to address the issues you raised in the same order as in your letter. 

First, to ensure proper transfer of Customs to a Department of Homeland Security, 

it must be maintained as a distinct entity. Congressman Mac Thornberry’s Homeland Security legislation, HR 4660 contains a provision that would achieve this goal. 

The provision is section 102 Part (2) which states, 

TRANSFER OF AUTHORITIES, FUNCTIONS, PERSONNEL, AND ASSETS TO 

THE DEPARTMENT. 

The authorities, functions, personnel, and assets of the following entities are 

transferred to the Department: 

(1) The Federal Emergency Management Agency, the 10 regional offices of which 

shall be maintained and strengthened by the Department. (2) The United States

Customs Service, which shall be maintained as a distinct entity within the 

Department. (3) The portions of the Immigration and Naturalization Service responsible for law enforcement and border management, including the Border Patrol 

and Divisions of Inspections, Investigations, and Detention and Removal. (4) The 

United States Coast Guard, which shall be maintained as a distinct entity within 

the Department. (5) The Critical Infrastructure Assurance Office. (6) The National 

Infrastructure Protection Center and the National Domestic Preparedness Office of 

the Federal Bureau of Investigation. (7) The Animal Plant Health Inspection Service 

of the Department of Agriculture. 

Second, to preserve the effectiveness of Customs operations in protecting our borders and facilitating the commercial flow of trade, the government must show the 

public that it is serious about protecting the borders and facilitating trade by full 

funding agencies such as the Customs Service which is tasked with defending the 

borders and enforcing the trade laws of the United States. The President’s proposal—HR 5005, currently calls for no additional funding for any agencies that may 

be consolidated into a new Department of Homeland Security. No organizational 

structure change will be successful, no matter how good it may look on paper, if the 

government does not provide proper funding for its border agencies. 

Third, to ensure retention of Customs employees and to ensure that employee protections currently provided under Title 5 are retained, it is imperative that the 

merit system that has evolved for over 100 years and has produced the most corruption free civil service in the world be maintained. 

To accomplish this goal, section 730 and 732 (bl of the President’s proposal—HR 

5005, must be removed. Section 730 provides that every section of Title 5 of 

them.?7o de, which-sets out 7a of the rules, benefits and rights that currently apply 

to Federal employees, may not apply to them once they are transferred to the new 

Department of Homeland Security, unless two political appointees, the Secretary of 

Homeland Security and the Director of OPM so choose. 

A list of the main sections of Title 5 is listed below, but included are whistleblower protection, pay and benefits, including health care and retirement, antiVerDate Sep 04 2002 05:02 Sep 07, 2002 Jkt 081233 PO 00000 Frm 00064 Fmt 6633 Sfmt 6621 E:\HR\OC\B233.XXX B233
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discrimination rules, the right to join a union and the merit system rules that prohibit political patronage. The legislation needs to ensure that employees of the new 

Department will be able to have a union and collectively bargain the same way employees who currently hold these jobs in their current agency do. 

Under the President’s proposal—HR 5005, the Secretary of Homeland Security 

and the Director of OPM would be allowed to prevent each and every one of these 

sections of law from applying to each and every employee of the new Department 

of Homeland Security. New personnel rules, created by these two political appointees, could be changed at any time. Every new Homeland Security Secretary 

and OPM Director would have the opportunity to rewrite them as they saw fit. 

Section 732 (b) would allow the Secretary to hire any or all of the employees of 

the new department at any pay level, for any length of time. It is my understanding 

that the only agency that currently has an exemption such as this is the CIA. 

The General Accounting Office and others have repeatedly warned Congress that 

the Federal Government faces a human capital crisis. The ranks of employees at or 

near retirement age have swelled to roughly half of the work force. How will the 

Department of Homeland Security be able to retain its most experienced employees 

when they will be faced with the possibility of losing the rights and benefits they 

have enjoyed for their entire career? More importantly, how will the Department of 

Homeland Security be able to attract the highly skilled employees it needs when 

employee pay, benefits and rights will be open to change at any time by political 

appointees that change every few years? 

The employees that will be moved into a new Department of Homeland Security 

have been fighting the war against terrorism, before, during and since September 

11th. They have captured potential terrorists, seized illegal contraband and prevented financial transactions that would provide potential terrorists access to the 

money they need to implement attacks. They have been fighting to protect our freedoms. This proposal would take away theirs.

Here is a list of the important sections of Title 5:

Ch.23—merit system principles; Ch.43—performance standards; Ch.53—pay, including FEPCA; Ch.63—leave; Ch.71—labor/management relations, including the 

right to belong to a union; Ch.72—anti-discrimination, including whistleblower protection; Ch.73—conduct standards, including Hatch act; Ch.83—CSRS retirement; 

Ch.84—FERS retirement; Ch.89—FEHBP. 

Fourth, to maximize Customs’ ability to fight our war on terrorism, continue its 

drug interdiction programs and other important responsibilities currently part of the 

Customs mission, the Customs Service must be fully funded to provide the proper 

number of personnel and resources to carry out their missions. In addition to full 

funding, additional legislative provisions that would be extremely beneficial to maximize Customs’ employees ability to accomplish their missions include:

Addition of Journeyman 11 status for Customs personnel: 

Language should include the following to ensure that the recent announcement to increase the Journeyman status of Customs employees by the Commissioner of Customs is statutorily provided:

AUTHORIZATION OF APPROPRIATIONS FOR CUSTOMS STAFFING 

(1) IN GENERAL—There are authorized to be appropriated for the Department 

of Treasury such sums as may be necessary to provide an increase in the annual 

rate of basic pay——

(A) for all journeyman Customs inspectors and Canine Enforcement Officers who 

have completed at least 1 year’s service and are receiving an annual rate of basic 

pay for positions at GS–9 of the General Schedule under section 5332 of title 5, 

United States Code, from the annual rate of basic pay payable for positions at GS–

9 of the General Schedule under such section 5332, to an annual rate of basic pay 

payable for positions at GS–11 of the General Schedule under such section 5332; 

(B) for the support staff associated with the personnel described in subparagraphs 

(A), at the appropriate GS level of the General Schedule under such section 5332.

Addition of Journeyman 12 status for Customs Import Specialists: 

Language should include the following to increase the Journeyman status

of Customs Import Specialists to Journeyman 12:

AUTHORIZATION OF APPROPRIATIONS FOR CUSTOMS STAFFING——

(1) IN GENERAL—There are authorized to be appropriated for the Department 

of Treasury such sums as may be necessary to provide an increase in the annual 

rate, of basic pay——

62

(A) for all import specialists who have completed at least one year’s service and 

are receiving an annual rate of basic pay for positions at GS–11 of the General 

Schedule under section 5332 of title 5, United States Code, from the annual rate 

of basic pay payable for positions at GS–11 of the General Schedule under such section 5332, to an annual rate of basic pay payable for positions at GS–12 of the General Schedule under such section 5332; (B) for the support staff associated with the personnel described in subparagraphs 

(A), at the appropriate GS level of the General Schedule under such section 5332. 

Additional language for Law Enforcement Officer Status (6c) coverage for

Customs personnel: 

Language should include the following to enable Customs inspectors and

canine enforcement officers to be recognized as law enforcement officers:

To amend chapters 83 and 84 of title 5, United States Code, to include inspectors 

and canine enforcement officers of the United States Customs Service as law enforcement officers. 

SEC. 1. CIVIL SERVICE RETIREMENT SYSTEM. 

Section 8331 of title 5, United States Code, is amended—(1) in paragraph (20) by 

inserting’, customs inspector, customs canine enforcement officer, after ’administrative position; (2) by striking ‘and’ at the end of paragraph (27); (3) by striking the 

period at the end of paragraph (28) and inserting a semicolon; and (4) by adding 

at the end the following: ’(29) ‘customs inspector’ means an employee of the United 

States Customs Service, the duties of whose position are primarily to—’(A) enforce 

laws and regulations governing the importing and exporting of merchandise; ’(B) 

process and control passengers and baggage; ’(C) interdict smuggled merchandise 

and contraband; and ’(D) apprehend (if warranted) persons involved in violations of 

customs laws, including an employee engaged in this activity who is transferred to 

a supervisory or administrative position; ’(30) ‘customs canine enforcement officer’

means an employee of the United States Customs Service, the duties of whose position are primarily to work directly with a dog in an effort to—’(A) enforce laws and 

regulations governing the importing and exporting of merchandise; ’(B) process and 

control passengers and baggage; ’(C) interdict smuggled merchandise and contraband; and ’ (D) apprehend (if warranted) persons involved in violations of customs 

laws, including an employee engaged in this activity who is transferred to a supervisory or administrative position. 

SEC. 2. FEDERAL EMPLOYEES RETIREMENT SYSTEM. 

Section 8401 of title 5, United States Code, is amended——

(1) in paragraph (17)——

(A) in subparagraph (C) by striking ’and’ at the end; 

(B) in subparagraph (D) by adding ’and’ at the end; and 

(C) by adding at the end the following: 

(E) a customs inspector, and customs canine enforcement officer; 

(2) by striking ’and’ at the end of paragraph (33); 

(3) by striking the period at the end of paragraph (34) and inserting a semicolon; 

and (4) by adding at the end the following: ’(35) ’customs inspector’ means an employee of the United States Customs Service, the duties of whose position are primarily to-’(A) enforce laws and regulations governing the importing and exporting 

of merchandise; ’(B) process and control passengers and baggage; ’(C) interdict 

smuggled merchandise and contraband; and ’(D) apprehend (if warranted) persons 

involved in violations of customs laws, including an employee engaged in this activity who is transferred to a supervisory or administrative position; ’(36) ’customs canine enforcement officer’ means an employee of the United States Customs Service, 

the duties of whose position are primarily to work directly with a dog in an effort 

to-’(A) enforce laws and regulations governing the importing and exporting of merchandise; ’(B) process and control passengers and baggage; ’(C) interdict smuggled 

merchandise and contraband; and ’(D) apprehend (if warranted) persons involved in 

violations of customs laws, including an employee engaged in this activity who is 

transferred to a supervisory or administrative position; and 

SEC. 3. ADMINISTRATIVE PROVISIONS. 

(a) EMPLOYEE CONTRIBUTIONS—Any individual who has served as a customs 

inspector, and customs canine enforcement officer, before the effective date of this 

Act, shall have such service credited and annuities determined in accordance with 

the amendments made by sections 2 and 3 of this Act, if such individual makes payment into the Civil Service Retirement and Disability Fund of an amount, determined by the Office of Personnel Management, which would have been deducted 

and withheld from the basic pay of such individual (including interest thereon) 

63

under chapters 83 and 84 of title 5, United States Code, as if such amendments had 

been in effect during the periods of such service. 

(b) AGENCY CONTRIBUTIONS—Not later than 90 days after a payment made 

by an individual under subsection (a), the Department of the Treasury shall make 

a payment into the Civil Service Retirement and Disability Fund of an amount, determined by the Office of Personnel Management, which would have been contributed as a government contribution (including interest thereon) under chapters 83 

and 84 of title 5, United States Code, for the service credited and annuities determined for such individual, as if the amendments made by sections 1 and 2 of the 

Act had been in effect during the applicable periods of service. 

(c) REGULATIONS—The Office of Personnel Management shall determine the 

amount of interest to be paid under this section and may promulgate regulations 

to carry out the provisions of this Act. 

SEC. 4. EFFECTIVE DATE. 

This Act and the amendments made by this Act shall take effect 90 days after 

the date of enactment of this Act.

Additional language for raising the overtime cap for Customs Personnel: 

Language should include the following to enable Customs employees to

avoid being subject to arbitrary decisions by Customs management on what overtime cap is established nationwide:

Corrections Relating to Fiscal Year Cap: 

(1.) Amend 5(c)(1) of the Act of February 13, 1911 (19 U.S.C. 267(c)(1)) to read 

as follows: Notwithstanding any other provision of law, the aggregate of overtime 

pay under subsection (a) of section 267 of U.S. Code Title 19 (including commuting 

compensation under subsection (a)(2)(B) of this section and premium pay under subsection (b) of this section that a customs officer may be paid in any fiscal year may 

not exceed $35,000, except that the Commissioner of Customs or his designee may 

waive this limitation in individual cases to prevent excessive costs or to meet emergency requirements of the Customs Service. 

(2.) TREATMENT OF CERTAIN PAY FOR RETIREMENT PURPOSES? Section 

8331(3)(G) of title 5, United States Code, is amended to read as follows—— ‘with respect to a customs officer (referred to in subsection (e)(1) of section 5 of 

the Act of February 13, 1911), compensation for overtime inspectional services provided for under subsection (a) of such section 5, but not to exceed 50 percent of any 

statutory or administrative maximum in overtime pay for customs officers which 

is in effect for the year involved;’ In closing, we believe that retaining all current Title 5 protections is critical to 

ensuring that Customs Service employees are able to continue to provide world class 

service and fight the war on terrorism. In addition, the proper funding, maintenance 

of employee rights, and legislative changes outlined here will ensure that Customs 

successfully continues its missions of trade facilitation and drug interdiction in the 

new Department of Homeland Security. Should you have any additional questions, 

please do not hesitate to contact me or Paul Giuliano or Maureen Gilman in NTEU’s Legislative Department at (202) 783–4444. 

Sincerely, 

Colleen M. Kelley 

f National President

[Submissions for the record follows:]

American Apparel & Footwear Association 

Arlington, Virginia 22209

8 July 2002

The Hon. Bill Thomas 

Chairman 

House Ways and Means Committee 

Washington, DC 20515

Dear Mr. Chairman: 

On behalf of the American Apparel & Footwear Association, I am pleased to provide comments in connection with your review of the creation of the Homeland Security Department. 

The American Apparel & Footwear Association (AAFA) is the national trade association representing apparel, footwear and other sewn products companies and their 

suppliers, which compete in the global market. AAFA Members make and market 

their products in the United States and throughout the world. AAFA’s mission is 

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1See Bob Williams & David Nather, Homeland Security Debate: Balancing Swift and Sure, 

CQ Weekly, June 22, 2002 at 1642. 

to promote and enhance its Members’ competitiveness, productivity and profitability 

in the global market by minimizing regulatory, commercial, political, and trade restraints. 

At the outset, we would like to affiliate ourselves with the comments and testimony of Jerry Cook from Sara Lee Branded Apparel, one of our member companies. 

In particular, we strongly endorse the concept that the enforcement and trade facilitation elements of the current mandate of the U.S. Customs Service must remain 

together and must work together. Any proposal that separates these two functions 

would create uncertainty and confusion in the operation of the trade. 

Our association recently endorsed a new trade policy that promotes, among other 

things, commonsense Customs practices to facilitate legal trade, responsible 

sourcing from countries that do not support terrorism, and continued funding for the 

ACE program. 

Accordingly, we encourage you to build into this new Department a continued and 

healthy appreciation for the principles that Congress endorsed when it passed the 

Mod Act nearly ten years ago. The concepts of shared responsibility that have 

worked since then can and must continue to work, especially as we undertake new 

responsibilities in this new environment. On that point, I would note that the AAFA 

has for several years now heavily promoted customs compliance programs among its 

Members, including the Worldwide Responsible Apparel Production (WRAP) program, which provides for factory certification and independent monitoring on such 

issues as labor, customs compliance, anti-transshipment, and anti-narcotics. 

Finally, it is absolutely essentially that Customs be mandated to complete its 

work in creating and implementing the ACE computer modernization project. We 

have been pleased that funding for this program is moving forward and would encourage you to use your leadership to ensure continued funding for this multi-year 

project. 

If done carefully, a new Departmental entity can smoothly carry out the twin 

mandates to secure our homeland against terrorist attacks while promoting and facilitating legal trade. Most of our Members make and manufacture products 

throughout the world and depend upon sophisticated supply chains that extend 

through ports and across borders in order to get the right product to the right market at the right price and at the right time. We stand behind nobody in our commitment to ensure secure supply chains to prevent terrorist attacks on either those 

supply chains or on our homeland itself. At the same time, we stress that a Customs 

operation mired in overly restrictive procedures that do not recognize commercial 

practices can obstruct the trade dramatically. It is for this reason that we were 

pleased to hear Commissioner Bonner and Homeland Security Director Ridge recently assure the trade that the new Department of Homeland Security will keep 

trade facilitation among one of its top goals. 

Please accept my best regards, 

Stephen Lamar 

f Sr. Vice President

Statement of Timothy H. Edgar, Legislative Counsel, American Civil 

Liberties Union 

On behalf of the American Civil Liberties Union (ACLU) and its approximately 

300,000 Members, we welcome this opportunity to provide this testimony for the 

record on the President’s proposed legislation to create a Department of Homeland 

Security, the Homeland Security Act of 2002 (‘‘HSA’’). We commend you for examining these issues in today’s hearing. 

The ACLU is a non-partisan, non-profit organization dedicated to preserving civil 

liberties and the principles of our constitutional democracy, including open and accountable government. 

The proposed Department of Homeland Security will be a massive Cabinet-level 

department, containing over 170,000 employees and twenty-two federal agencies.1 It 

will have substantial powers, and will include more armed federal agents with arrest power than any other agency. In considering the proposed Department, Congress should ask itself not only whether the proposal represents sound public management, but also whether the Department will have structural and legal safeVerDate Sep 04 2002 05:02 Sep 07, 2002 Jkt 081233 PO 00000 Frm 00068 Fmt 6633 Sfmt 6621 E:\HR\OC\B233.XXX B233
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2Department of the Air Force v. Rose, 425 U.S. 352 (1976). 

guards in place that are sufficient to keep the agency open and accountable to the 

public. 

Unfortunately, the draft legislation not only fails to provide such safeguards, it 

eviscerates many of the safeguards that are available throughout the government 

and have worked well to safeguard the public interest. As proposed, the plan:

• Hobbles FOIA—Any information voluntarily submitted to the department 

about terrorist threats to the nation’s infrastructure are exempt from Freedom of Information Act disclosure, drastically limiting the agency’s responsibility to answer public questions about how well it is addressing these 

threats. (HSA § 204). • Limits citizen input—Advisory committees to the department, which normally include citizen input, hold open meetings and must be balanced in 

viewpoint would be immune from these safeguards of the Federal Advisory 

Committee Act, further undercutting the agency’s accountability to the public. 

(HSA § 731). • Muzzles whistleblowers—Employees of the new agency could be stripped 

of the protections contained in the federal Whistleblower Protection Act. This 

would eliminate guarantees that—were the agency to overreach its mandate 

or engage in questionable activities—such abuse would be disclosed and the 

agency held accountable to Congress and the American public. Protection for 

the bravery like that displayed by FBI Agent Coleen Rowley would not exist 

in the new agency. (HSA § 731). 

• Lacks strong oversight—Given the enormous potential power of the proposed agency, its Inspector General must not be hampered like those in other 

federal law enforcement agencies. Currently, the cabinet secretary in charge 

would have veto power over the IG’s audits and investigations. (HSA § 710). 

• Threatens personal privacy and constitutional freedoms—Many of the 

information sharing provisions in the HSA are vague and do not provide sufficient guarantees to protect privacy or constitutional freedoms.

Finally, we firmly reject proposals to include in the Department of Homeland Security the intelligence gathering functions of the Central Intelligence Agency (CIA), 

other foreign intelligence agencies, or the Federal Bureau of Investigation (FBI). Intelligence gathering operations abroad are, as a practical matter, largely immune 

from constitutional constraints. The CIA and other agencies that gather foreign intelligence abroad operate in a largely lawless environment. To bring these agencies 

into the same organization as the FBI risks further damage to Americans’ civil liberties. As a result, Congress should resist any attempt to endow the Department 

of Homeland Security with new intelligence gathering powers or to fold the FBI and 

CIA into the new agency. Instead, Congress should put in place clear limits to prevent the Department from permanently retaining files on Americans that relate to 

First Amendment activities and have no connection to any criminal activity. 

I. The Homeland Security Department Must Be Open and Accountable

The President’s plan does not contain sufficient structural guarantees to ensure 

that this vast new Department will be accountable to the public, both to ensure it 

is doing its job and to ensure against abuse. Instead, the plan eviscerates many of 

the existing safeguards for government agencies. These provisions should be eliminated, and a strong mechanism should be put in place to ensure against abuse.

Freedom of Information Act (FOIA) Exemption

The ACLU strongly opposes section 204 of the proposed legislation, which creates 

a broad new exemption to the Freedom of Information Act (FOIA), 5 U.S.C. § 552. 

Section 204 provides that information that companies or others voluntarily provide 

to the Department about ‘‘infrastructure vulnerabilities’’ and other information said 

to be relevant to terrorism will be exempt from FOIA. These terms are not defined 

by the proposed legislation and could potentially cover a host of information. This 

is a deeply misguided proposal, and it should be rejected. 

The FOIA is the bedrock statute designed to preserve openness and accountability 

in government and new exemptions to its provisions should not be created lightly. 

As the Supreme Court has made clear, ‘‘Disclosure, not secrecy, is the dominant objective of the Act.’’ 2 Open government is a core American value. It should not be 

set aside for reasons other than genuine necessity. 

The FOIA already contains a number of common sense exemptions that would 

cover critical infrastructure information the disclosure of which could result in 

harm. The FOIA does not require the disclosure of national security information (exVerDate Sep 04 2002 05:02 Sep 07, 2002 Jkt 081233 PO 00000 Frm 00069 Fmt 6633 Sfmt 6621 E:\HR\OC\B233.XXX B233
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3Senate Governmental Affairs Committee Holds Hearing on Private and Public Information 

Sharing and Infrastructure Security (FDCH Transcripts), May 8, 2002. 4 Id.

5 Id.

6Washington Internet Daily, April 18, 2002. 7See Aviv Lavie, Media: Sensing the Censor, Ha’aretz (Tel Aviv, Israel), May 29, 2002. 

emption 1), sensitive law enforcement information (exemption 7), or confidential 

business information (exemption 4). 

Courts have carefully weighed the public’s need for disclosure against the possible 

harms of disclosure under FOIA’s traditional exemptions. In deciding whether to 

disclose technical information voluntarily submitted by private industry, courts have 

given substantial—many in the public interest and FOIA requester community 

would say excessive—deference to industry demands for confidentiality of business 

information under exemption 4. 

Generally, information that a business voluntarily submits to the government on 

the basis that it be kept confidential is already exempt from disclosure if the company does not customarily release such information to the public and preserving 

confidentiality is necessary to ensure that the government will continue to receive 

industry’s cooperation. See, e.g., Critical Mass Energy Project v. Nuclear Regulatory 

Commission, 975 F.2d 871 (D.C. Cir. 1992). It is difficult to see how any truly sensitive business information that was voluntarily submitted by a company concerning 

the vulnerabilities of its critical infrastructure could be released under this standard. 

Indeed, supporters of a new FOIA exemption for critical infrastructure information have, when pressed, been forthright in admitting that such legislation simply 

is not needed to protect sensitive information from disclosure. For example,

• Senator Bennett, chief sponsor of legislation creating a new critical infrastructure exemption, has admitted that ‘‘[t]he Freedom of Information Act itself’’ currently allows sensitive information to be protected. ‘‘That is, there are provisions in the Act that say information need not be shared’’ with the public.3

• John S. Tritak, Director of the Critical Infrastructure Assurance Office of the 

U.S. Chamber of Commerce, says ‘‘You could say that [in the] current environment, if you’re very careful and you watch out, the old existing exemptions 

will cover any concerns that may arise under FOIA, not to worry.’’ 4

• Ronald L. Dick, Director of the National Infrastructure Protection Center of 

the Federal Bureau of Investigation (FBI), has said ‘‘[M]any legal authorities 

have agreed that the Federal Government has the ability to protect information from mandatory disclosure under the current statutory framework.’’ 5

• VeriSign public policy director Michael Aisenberg has said worries about disclosure were overblown because FOIA already protects sensitive information, 

and new legislation is simply not needed ‘‘substantively.’’ 6

Rather than put forward evidence that some information about critical infrastructure exists that is not adequately protected, supporters of a new exemption have 

said ‘‘it doesn’t matter’’ whether current law provides adequate protection. Rather, 

it is said, a new exemption is needed because of a ‘‘perception’’ in private industry 

that there is some risk, however remote, that information that is voluntarily submitted to the government might be at risk of disclosure under FOIA. 

If industry is unwilling to provide information to the government, despite adequate legal protection, the solution is not to change the law but to change the 

misperception by issuing legal guidance making clear the parameters of the FOIA 

as it currently exists. If a misperception exists that truly sensitive information that 

is given to the government cannot be protected from disclosure, it is hard to see how 

that will change if another exemption is enacted. 

Perhaps most importantly, creating an overbroad exemption for ‘‘critical infrastructure information’’ would undermine, rather than enhance, security. Such an exemption would permit private industry and the government to shield from the public the actions they are taking—and, more importantly, the actions they are not taking—to protect the public from attacks on critical infrastructures. 

Secrecy can hinder anti-terrorism efforts. Earlier this year in Israel, the media 

obtained a government report that discussed the potential vulnerability of a fuel 

depot to terrorists—exactly the sort of information about ‘‘infrastructure 

vulnerabilities’’ that might be exempt from FOIA under the proposed legislation. 

Military censors blocked publication of the report, and persuaded the mayor of Tel 

Aviv not to go public with a campaign to fix the problem. Nothing was done. Terrorists then attacked the fuel depot. In that case, public debate might well have forced 

action to address the problem.7 The United States should not make the same mistake. 

67

8The FACA does not apply to the CIA or the Federal Reserve System. 5 U.S.C. App. II § 4(b). 

For the all of the above reasons, ACLU opposes the enactment of a new FOIA 

exemption for critical infrastructure information. At the very least, however, any 

new exemption that Congress enacts should be subject to the following responsible 

limits: 

First, any new exemption must be limited to clearly marked cyber-security documents, i.e., reports that describe cyber-attacks on a company’s computer systems 

that have resulted or could result in some harm to its critical infrastructure. It 

should not apply to information about all vulnerabilities in critical infrastructure. 

Proposals to exempt information that is voluntarily shared with the government 

were developed to deal with the discrete and relatively new problem of cyber-attacks. To expand the scope of information that is exempted to include information 

about vulnerabilities to traditional physical attacks would interfere with a host of 

environmental and public safety regulatory regimes that have been developed over 

decades. 

Second, any new exemption must be for written documents only, not ‘‘information’’

of all sorts. It would be virtually impossible to determine if information possessed 

by the government was the result of some oral conversation with a private sector 

company, making a FOIA exemption that covered such information unworkable and 

potentially devastating to the public’s right to know. 

Third, any new exemption must be limited in time, and should last for months, 

not years. A company which controls infrastructure that is vital to the public must 

have an incentive not only to share information, but also to do something to make 

itself less vulnerable to such attacks. A time limited exemption will give responsible 

companies and government agencies an incentive to fix their problem with due 

speed. Without a time limit, companies and the government can simply sit on the 

problem without any pressure to act. 

Fourth, a new exemption should be an alternative to existing FOIA protections, 

not a new club to wield against FOIA requesters. Companies that wish to take advantage of the new exemption should clearly state on the relevant document they 

are requesting confidentiality under that exemption. Companies that fail to fix their 

vulnerabilities within a reasonable time limit, even with the protection of the new 

exemption, should not be allowed to take advantage of FOIA’s other potentially applicable exemptions to cover up their failure to act after that time limit has expired. 

If companies believe the information they desire to share is protected under another 

FOIA exemption, they should be required instead to rely on that other exemption 

at the time of submission. 

Finally, strict reporting requirements and a sunset clause should be included in 

the legislation to determine whether the new regime is working.

Federal Advisory Committee Act (FACA) Exemption

Section 731 of the HSA provides that advisory committees established by the Secretary of the Department of Homeland Security are exempt from the Federal Advisory Committee Act (FACA), and that Members of such advisory committees are not 

subject to certain restrictions on federal employees’ conduct. 

The FACA was passed in 1972 to promote the values of openness, accountability, 

and balance of viewpoints, and to ensure administrative efficiency and cost reduction. FACA imposes requirements on agencies 8 when they establish or utilize any 

advisory committee, which is defined as a group of individuals, including at least 

one non-federal employee, which provides collective advice or recommendations to 

the agency. 5 U.S.C. App. II, § 3(2). When an agency seeks to obtain such advice 

or recommendations, it must ensure the advisory committee is ‘‘in the public interest,’’ id. at § 9(2), is ‘‘fairly balanced in terms of points of view represented and the 

function to be performed,’’ id. at § 5(b)(2), and does not contain Members with inappropriate special interests. Id. at § 5(b)(3). If these criteria are satisfied, the agency 

must file a charter for the committee. Id. at § 9(c). 

Once an advisory committee is operating, the agency also must comply with requirements designed to ensure public access and participation. FACA requires an 

agency to provide adequate public notice that it is establishing an advisory committee, id. at § 9(a)(2), conduct open meetings, id. at § 10(a), keep minutes of those 

meetings, id. at § 10(c), make available for public inspection and purchase all documents prepared for or by advisory committees, id. at §§ 10(b), 11(a), and permit all 

interested persons to attend, appear before, or file statements with any advisory 

committee. Id. at 10(a)(3). These openness requirements ensure public monitoring 

of advisory committees and reduce the likelihood that advisory committees can serve 

as secretive channels for special-interest access to government agencies. FACA’s 

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9The WPA does not apply to the CIA, FBI, Defense Intelligence Agency (DIA), the National 

Imagery and Mapping Agency (NIMA), the National Security Agency (NSA), and, ‘‘as determined by the President, any Executive agency or unit thereof the principal function of which 

is the conduct of foreign intelligence or counterintelligence activities.’’ 5 U.S.C. 2302(a)(2)(C)(ii). 

However, employees of the FBI are covered by similar whistleblower protections contained at 

5 U.S.C. § 2303, but must make their disclosures to an official designated by the Attorney General. 

right of access to advisory committee records is subject to the same nine exemptions 

that apply to access to agency records under the FOIA, which we believe are sufficient to guard against any disclosure of truly sensitive information. 

By exempting from FACA requirements any advisory committees established by 

the Secretary of the Department of Homeland Security, the HSA severely undermines the openness and public-access goals of FACA. Although the HSA provides 

that the Secretary shall publish notice in the Federal Registrar announcing the establishment of an advisory committee and identifying its purpose and Membership, 

the meetings will not be open to the public, formal minutes of committee activity 

during those meetings will not be kept, and the public will not have access to view 

or purchase documents prepared for or by those advisory committees. Public access 

to and participation in advisory committees are essential to guarding against special-interest access to advisory committees and influence upon government decisionmaking. 

In addition, the HSA exempts Members of advisory committees established under 

the Department of Homeland Security from federal laws restricting federal employees and officers (including Members of advisory committees) from participating in 

or advising the government upon matters about which there exists a conflict of interest. See 18 U.S.C. §§ 203, 205, 207. Combined with the lack of public access to 

and participation in advisory committee proceedings, exemption from these laws 

threatens to erode FACA’s requirement that advisory committees’ Memberships reflect a balance of viewpoints, and undermines the goal of accountability.

Waiver of Whistleblower Protection Act (WPA) and other Title 5 Protections

The federal Whistleblower Protection Act (WPA) was enacted to ensure that federal employees 9 who believe that a violation of law, mismanagement or other abuse 

has occurred may come forward and disclose that information without fear of summary dismissal or punitive action. The WPA protects federal employees from adverse action on the basis of a disclosure of information if the employee ‘‘reasonably 

believes [the information] evidences a violation of any law, rule, or regulation or 

gross mismanagement, gross waste of funds, an abuse of authority or a substantial 

and specific danger to public health and safety.’’ 5 U.S.C. § 2302(b)(8). An employee 

is not protected if the disclosure involves classified information or if the disclosure 

is specifically prohibited by law. Id. The Act contains administrative remedies, administered by the Merit System Protections Board, and an employee may also seek 

judicial review in the United States Court of Appeals for the Federal Circuit. 5 

U.S.C. §§ 1221, 7703(b). In this way, the WPA guarantees that federal agencies are 

held accountable to the American public if they overreach their mandate or engage 

in questionable activities. 

The HSA permits the Secretary to sweep away the Whistleblower Protection Act, 

and all other protections for federal employees under Title 5, for the purpose of establishing a ‘‘Human Resources Management System’’ (HSA § 730) that is ‘‘flexible, 

contemporary, and grounded in the public employment principles of merit and fitness.’’ By allowing the Secretary to make these personnel rules ‘‘[n]otwithstanding 

any other provision of this title,’’ i.e., Title 5, the HSA does not guarantee employees 

of the Department of Homeland Security the protections of the WPA. Without such 

protection, employees who are in the best position to spot problems, violations of the 

law or dangers to the public are effectively silenced.

The Homeland Security Department’s Inspector General May Lack Authority

We are concerned that the Homeland Security Act does not adequately provide 

for a fully functioning Inspector General (IG). Section 103(b) provides for the creation of an Inspector General pursuant to the Inspector General Act of 1978. However, section 710 of the HSA gives the Secretary of Homeland Security authority to 

override Inspector General Investigations in several areas including: (1) intelligence, 

counterintelligence, or counter terrorism matters; (2) ongoing criminal investigations 

or proceedings; (3) undercover operations; (4) the identity of confidential sources, including protected witnesses; (5) matters that constitute a threat to persons or property protected by the United States Secret Service and (6) other matters that constitute a serious threat to national security. Given the mission of the Homeland SeVerDate Sep 04 2002 05:02 Sep 07, 2002 Jkt 081233 PO 00000 Frm 00072 Fmt 6633 Sfmt 6621 E:\HR\OC\B233.XXX B233
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10For a memorandum explaining how these changes threaten constitutional rights, see Interested Persons Memorandum of Marvin J. Johnson, ACLU Legislative Counsel, June 6, 2002, 

available at <http://www.aclu.org/congress/l060602c.htm>. 

curity Agency, it is conceivable that many of the functions performed by this new 

agency could be said to fall under one of these exempted categories. 

Other agencies have similar provisions that require the inspector general to be 

under the direct authority of the Department Secretary (e.g. Treasury, Department 

of Justice, Postal Service) when the IG is investigating areas of national security. 

We understand the need to protect information that if released could pose a danger 

to national security. However, many of the agencies that are going to become a part 

of the new Homeland Security Act such as FEMA, the INS, the Animal and Plant 

Health Inspection Service of the Department of Agriculture and the Coast Guard 

have functions much broader than dealing with national security. We are concerned 

that transferring these agencies into a Department whose primary function is to 

protect the United States against terrorism could erroneously be perceived as elevating their regular duties to those of national security, thereby making such currently non-exempt activities exempt from Inspector General oversight. 

We recommend further study of this issue before legislation is approved, regular 

oversight by Congress and a requirement for the Homeland Security Department to 

report to Congress concerning how often the Inspector General is prevented from 

performing its duties due to section 710 exemptions, and the standards by which 

the Secretary exercises such authority.

II. The Homeland Security Department Should Not Invade the Privacy or 

Constitutional Rights of Americans

Finally, the creation of a new Homeland Security Department naturally leads to 

concerns that such a large government agency could abuse its authority by invading 

the privacy or freedoms that Americans hold dear. Common sense protections can 

ensure against such abuses. 

Because a primary function of the new Department is to receive and analyze information, Congress should insist on appropriate safeguards to protect the privacy 

of the information and to make sure that it is not used inappropriately. For example, there should be procedures to limit the use and disclosure of the collected information; rules that require the information to be secure and confidential; procedures 

to remove and destroy old data and remedies for the violation of statutory and constitutional rights and penalties for misuse of personal information.

The Intelligence Gathering Functions of the CIA and FBI Should Remain Separate 

and Outside the Homeland Security Department

We commend the Administration for leaving the intelligence gathering function 

out of the new Department. The HSA leaves those functions to the Central Intelligence Agency (CIA) and other intelligence agencies and to the Federal Bureau of 

Investigation (FBI). While the government must do a better job of analyzing the intelligence information it already collects from both foreign and domestic sources, the 

Congress should not approve new intelligence gathering powers, much less a new 

intelligence gathering agency, without a showing that such powers are truly needed 

and do not unnecessarily tread on Americans’ civil liberties. 

Under our system of government, the CIA and other intelligence agencies are 

tasked with collecting foreign intelligence abroad. As a practical matter, these foreign activities have been largely immune from constitutional limits and from oversight by the federal courts, although they are and must remain subject to oversight 

by the Congress. On the other hand, the FBI collects foreign intelligence in the 

United States, and also investigates and prevents criminal activity. These domestic 

activities are clearly constrained by statute and by the Constitution. The FBI’s intelligence gathering functions are also subject to oversight by the Foreign Intelligence 

Surveillance Court. 

Blurring of domestic and foreign intelligence gathering functions could have a severe impact on civil liberties, potentially leading to widespread spying on Americans 

constitutionally-protected political and religious activity. This is already a danger 

under the relaxed FBI guidelines for domestic investigations recently announced by 

Attorney General Ashcroft.10 The Congress should resist any attempt to further 

erode these protections by including substantial intelligence gathering functions in 

the new Department of Homeland Security. 

The Homeland Security Department Should be Barred from Political Spying 

Instead of adding to the Homeland Security Department new intelligence gathering powers that could tread on civil liberties, Congress should consider adding 

70

11For a discussion of how the FBI engaged in illegal surveillance and harassment of Dr. Martin Luther King, Jr., see Marvin J. Johnson, ACLU Legislative Counsel, The Dangers of Domestic Spying by Federal Law Enforcement: A Case Study on FBI Surveillance of Dr. Martin Luther 

King (January 2002), available at <http://www.aclu.org/congress/mlkreport.PDF>. 

provisions that would prevent the Department from maintaining files on Americans 

that are not linked to any criminal activity, but instead relate solely to political beliefs and associations. Under the draft legislation, while the Department will not 

gather intelligence information, it will receive such information in the course of its 

efforts to prevent terrorism. 

Without safeguards, these provisions could lead to abuse. No one wants a repeat 

of the J. Edgar Hoover era, when the FBI was used to collect information about and 

disrupt the activities of civil rights leaders and others whose ideas Hoover distained.11 Moreover, during the Clinton Administration, the ‘‘Filegate’’ matter involving the improper transfer of sensitive information from FBI background checks of 

prominent Republicans to the White House generated enormous public concern that 

private security-related information was being used for political purposes. Congress 

should not provide a future Administration with the temptation to use information 

available in Homeland Security Department files to the detriment of its political enemies. 

One model the Congress could consider is Oregon Revised Statutes § 181.575. It 

provides that no state law enforcement agency may ‘‘collect or maintain information 

about the political, religious or social views, associations or activities’’ of a person 

or group unless such information ‘‘directly relates to an investigation of criminal activities’’ and there are ‘‘reasonable grounds to suspect’’ the subject ‘‘is or may be involved in criminal conduct.’’ Such sensible limits would ensure that the Department 

is focused on its mission of preventing unlawful terrorist activity, not on keeping 

tabs on unorthodox or unusual, but constitutionally protected, political or religious 

activity.

III. Conclusion

The creation of a new Homeland Security Department is truly a massive undertaking. It requires careful and thoughtful consideration. While Congress understandably wants to respond to the Administration’s initiative without undue delay, 

caution is needed to ensure that the basic principles of our government that ensure 

public accountability of government activity remain intact. 

Instead, the Administration’s plan weakens many of the laws that are vital to ensuring an open and accountable government, by creating unnecessary blanket exemptions to the Freedom of Information Act, the Federal Advisory Committees Act, 

and the Whistleblower Protection Act. The plan also fails to provide for an effective 

review mechanism, instead proposing an Inspector General that may lack sufficient 

power to provide an effective check on the powerful new Secretary of Homeland Security. Finally, while the plan should be commended for recognizing the importance 

of the distinction between foreign and domestic intelligence gathering for the protection of civil liberties, safeguards against political spying must be added to avoid a 

repeat of the abuses of the Hoover era.

fAmerican Petroleum Institute 

Washington, DC 20005–4070

July 31, 2002

The Honorable Bill Thomas 

Chairman, Committee on Ways and Means 

U.S. House of Representatives 

Washington, D.C. 20515

Dear Chairman Thomas: 

The American Petroleum Institute (API) appreciates the opportunity to provide 

the Committee with comments for the hearing on the proposed Department of 

Homeland Security (DHS). The American Petroleum Institute (API) represents over 

400 companies involved in all aspects of the oil and gas industry, including exploration, production, transportation, refining, and marketing. Because petroleum products make up a significant part of the U.S. domestic and foreign trade, API and its 

Members have extensive dealings with the U.S. Customs Service (Customs) on 

which they rely heavily for information and guidance. 

API strongly supports the President and Congress in their efforts to combat terrorism and has actively participated in the development and implementation of 

many of the programs instituted since September 11th. In particular, we support 

the concept of a Department of Homeland Security. 

71

Support for the Department of Homeland Security 

An integral part of the DHS will be the U.S. Customs Service. Today, the U.S. 

Customs Service has the combined roles of trade enforcement and trade facilitation. 

The continuity and enhancement of both of these functions is critical to API’s Members. The trade enforcement function of Customs is identifiably aligned with the 

core concepts and the DHS mission, principally protecting our homeland from terrorist attacks. 

The trade facilitation function of U.S. Customs within this new DHS environment 

is less clear. As currently formulated, DHS will primarily be an enforcement agency. 

API and its Members want to ensure that the trade facilitation functions of the U.S. 

Customs Service continue and are expanded during this transition. The trade facilitation function is critical to:

• ensure that legitimate trade thrives, • creation of jobs in America, • allowing competition in a global economy, and • fostering a strong American economy.

The trade facilitation function of Customs has led to innovative programs such as 

the Trade Support Network (TSN) and the Treasury Advisory Committee on Commercial Operations of the Customs Service (COAC). This function has been critical 

during the planning and implementation phases of programs such as the CustomsTrade Partnership Against Terrorism (C–TPAT), the Automated Commercial Environment (ACE), and the Importer Self Assessment (ISA) program. All of these efforts have freed up constrained Customs resources to focus on other critical programs, such as the halting of illegal trade, performing drug interdiction, and enforcing import/export restrictions. 

Proposed Solution to Ensure Continuing Trade Facilitation 

API and its Members believe that the critical role that trade facilitation plays in 

our economy should be formalized within DHS through a Trade Advisory Council 

(TAC). This council, comprised of representatives from the various trade communities, would provide input directly to the Under Secretary for Border and Transportation Security. The council would be critical to ensuring that views, needs, and concerns of the importing and exporting communities are communicated at the appropriate level. This council would also play an important role in ensuring that trade 

facilitation does not become a second tier priority behind enforcement in the new 

DHS environment. We believe that the TAC structure and responsibilities should 

be included in the DHS authorizing legislation. 

Further, we propose that either through legislative language included in the DHS 

authorizing legislation or through the legislative history of the bill, that Congress 

express its intent that current Customs programs that seek input from the trade 

community must continue without disruption in the new DHS environment. These 

programs include, but are not limited to the Trade Support Network (TSN) and the 

Treasury Advisory Committee on Commercial Operations of the Customs Service 

(COAC). 

The establishment of the formal structures outlined above will ensure that trade 

facilitation does not become a lesser priority in a department that will be heavily 

weighted in enforcement activity. The current legislation includes five (5) functions 

that the Under Secretary for Borders and Transportation Security ‘‘shall’’ perform. 

None of the listed functions specifically identify trade facilitation. The enforcement 

emphasis with DHS, while appropriate, could over time lead to a diminish role for 

trade facilitation. Congress, from the point of creation of DHS, must ensure that 

trade facilitation continues to be an important and core responsibility of the department. 

Movement of Certain Export Promotion Programs to the Department of Commerce 

API and its Members believe that certain export promotion programs that are currently managed by the U.S. Customs Service do not properly align with the goals 

of the DHS and should be transitioned to other appropriate government agencies. 

In particular, the duty drawback program is an export promotion program that does 

not naturally align with the DHS stated mission of protecting our homeland. The 

drawback program allows for the recouping of duties paid when an eligible export 

has occurred. Since its inception, the program has been a critical tool in developing 

and supporting American export activity. Congress should review the drawback program and other export related programs in order to determine a more appropriate 

department or agency than DHS for these programs. 

In particular, the drawback program naturally fits within the Department of 

Commerce’s stated mission of ‘‘job creation, economic growth, sustainable development and improved living standards for all Americans by working in partnership 

72

with business, universities, communities and workers to build for the future and 

promote U.S. competitiveness in the global marketplace by strengthening and safeguarding the nation’s economic infrastructure.’’

We appreciate the committee’s consideration of these comments and concerns. API 

and its Members are willing to assist the committee in whatever means possible 

during these important times. Should you wish to discuss the concepts outlined 

herein, please contact Michael Platner at 202/682–8418. 

Sincerely, 

Charles E. Sandler 

f Vice President

Statement of the American Textile Manufacturers Institute 

This statement is submitted by the American Textile Manufacturers Institute 

(ATMI). ATMI is the national trade association of the domestic textile industry, 

which employs approximately 435,000 individuals nationwide. 

First of all, ATMI understands and fully supports President Bush’s desire to create a U.S. Department of Homeland Security, and we urge Congress to ensure that 

this department is given the resources it will need to perform the vital tasks which 

will be assigned to it. 

At the same time, ATMI would like to caution that, in transferring the assets and 

authority of the U.S. Customs Service to the new Department of Homeland Security, 

great care should be taken to ensure that the essential mission of the Customs Service is not in any way weakened. Indeed, the various responsibilities already assigned by Congress to the Customs Service are absolutely critical to our nation’s security, and if anything the Customs Service should be given additional resources so 

as to better fulfill this task. 

By way of background, ATMI has had a long relationship with the U.S. Customs 

Service. ATMI and several of its member firms have trained scores of Customs 

agents in textile and apparel manufacturing materials, methods and procedures in 

order to provide them with the expertise required to detect fraud in textile and apparel trade. This expertise has been used by Customs production verification teams 

(aka ‘‘jump teams’’) and port personnel to ensure compliance with Customs laws and 

regulations and trade agreements—such as NAFTA—to which the United States is 

party. 

It is a regrettable fact that unscrupulous traders both abroad and in the United 

States have engaged in every kind of fraud known with respect to U.S. imports of 

textiles and apparel. The volume of fraudulently entered textiles and apparel is 

reckoned in the billions of dollars annually and, besides cheating the Treasury of 

significant revenue to which it is legally entitled, has had and continues to have a 

damaging effect on domestic producers and their workers. 

Other victims of these ongoing frauds are honest exporters and importers. 

Over the years Customs has interdicted large quantities of textile and apparel imports that attempted to enter domestic commerce illegally. Unpaid duties have been 

collected, fines and penalties assessed and culpable individuals sentenced. 

With respect to transshipment, the practice of falsely declaring the country of origin of imported products in order to evade quantitative restraints maintained under 

the World Trade Organization’s Agreement on Textiles and Clothing, millions of 

garments and made-up textile products have been charged against the quotas of the 

countries of true origin because of transshipment. Yet the illicit practices continue 

on a large scale. 

Therefore, ATMI and its member companies are understandably concerned that 

any redeployment of Customs’ assets from the Department of the Treasury to a 

newly created cabinet-level department must not in any way diminish or impair 

Customs’ ability to investigate, detect and interdict illicit textile and apparel trade. 

In its notice of the June 26 hearing on this subject, the Committee noted that one 

of Customs’ many responsibilities is ‘‘Protecting American business and labor and 

intellectual property rights by enforcing U.S. laws intended to prevent illegal trade 

practices...’’. ATMI is pleased that the Committee recognizes the importance of 

this element of Customs’ daunting mission. 

Traders who conduct their business legally also have an important stake in the 

operations of the Customs Service and have been quite vocal in their calls for greater speed, efficiency and simplicity in Customs procedures. To this end, ‘‘trade facilitation’’ has become their mantra and has garnered considerable attention within the 

Customs Service. The Committee noted in its June 19 Advisory that trade facilitation is one of Customs’ ‘‘core functions’’. ATMI does not disagree with this assessVerDate Sep 04 2002 05:02 Sep 07, 2002 Jkt 081233 PO 00000 Frm 00076 Fmt 6633 Sfmt 6621 E:\HR\OC\B233.XXX B233
73

ment, but does wish to caution that enforcement measures must exist so that illicit 

trade is not facilitated. 

In closing, ATMI supports inclusion of the Customs Service in the new Department of Homeland Security, and urges the Committee and the Congress to provide 

sufficient resources for the Customs Service to better fulfill its enormous responsibilities.

The Border Trade Alliance (BTA) has been monitoring plans to establish a DeStatement of the Border Trade Alliance, San Diego, California 

f partment of Homeland Security with great interest. Since 1986, our organization 

has advocated in favor of the resources needed by our land border ports of entry 

and the federal inspection services posted at those ports of entry, which together 

are critical to thwarting illegitimate trade and travel while facilitating the speedy 

passage of legitimate travelers and cargo. 

On April 11, 2002, the BTA Chair, Stephen Gross, testified before the Senate Government Relations Committee chaired by Senator Joseph Lieberman. In that hearing, Mr. Gross offered our organization’s support for Senator Lieberman’s plan to 

establish a Department of National Homeland Security with a cabinet level secretary to oversee it. Then in June, as we all know, President Bush offered a similar 

plan from his Administration to establish a Homeland Security Department. 

We are greatly encouraged by the momentum these proposals are gaining and 

welcome the opportunity to offer our years of our experience in cross-border affairs 

to provide insight as to the role that the U.S. Customs Service could play in this 

new Department of Homeland Security. 

The BTA has a long history of working with the Customs Service to achieve goals 

that are in the best interests of both the agency and the trade community. Based 

upon our years of working as an organization with U.S. Customs, and the experiences our individual Members have in their day-to-day dealings with Customs, we 

propose the following ideas to the Committee:

1) We remain convinced that good law enforcement equates to speedy trade facilitation. Further, we acknowledge that these changing times require new and innovative ideas in response to the need for greater security. We also ascribe to the principle that security must begin at the point of loading and not at the U.S. port of 

unloading. Therefore, as we approach the structure and focus of this new department, we cannot lose sight of the need for international accord on such topics as 

the types of security equipment to be used, the qualifications of the personnel who 

will operate it, the standards for the training of that personnel and agreed upon 

standards by which security will be measured. We also agree that risk management 

tools, human and artificial, must be employed and maximized in order to distinguish 

between those shipments which should move through the system with minimal scrutiny and those which warrant more attention. 

2) In this new era of increased security, we must not lose sight of the key role 

played by international trade. It is the life-blood of our economy, even when that 

economy is teetering, as it is right now. In the legislative language proposed by the 

Bush Administration, we were greatly encouraged to read that one of the responsibilities of the Under Secretary for Border Transportation Security (Section IV) will 

be to ensure the ‘‘speedy, orderly, and efficient flow of lawful traffic and commerce.’’

As noted above, the BTA is an organization which believes that increased security 

and more efficient trade facilitation can be synonymous. However, if this new department is focused solely on securing our physical boundaries, then our economic 

security will suffer. Many of our land border communities are poor and trade is 

their primary industry. We must continue to insure that we do not heighten security 

to the point where it strangles the economic viability of these communities or the 

rest of the country. 

3) With the new responsibilities proposed comes the need for new resources. For 

Congress to expect real results from the Department of Homeland Security and a 

smooth transition by Customs (and the other agencies) into the new department, 

then Congress must meet its responsibility to fund U.S. Customs (and the other inspection agencies that are part of this transition) at a level that realistically allows 

the agency to be equal to the new tasks it (and the other affected agencies) is being 

expected to tackle. It is no longer satisfactory to leave Customs at the same staffing 

level at which it has operated for the last ten (10) years. While it is important to 

make sure there are enough inspectors and agents to conduct proper examinations 

and follow-up, we should not lose sight of the fact there are many other positions 

within Customs which are equally important but much less high profile. For examVerDate Sep 04 2002 05:02 Sep 07, 2002 Jkt 081233 PO 00000 Frm 00077 Fmt 6633 Sfmt 6621 E:\HR\OC\B233.XXX B233
74

ple, Import Specialists, who often are Customs’ first line of contact with importers, 

deal with importers on a daily basis and are often in the best position to spot commercial fraud. Similarly, there are personnel which process the millions of entries 

filed each year. These and similar positions are just as important to the overall ability of Customs to do its jobs as the latest high-tech piece of X-ray equipment. 

4) We are aware the Committee is focused on Customs’ dual mission of law enforcement and trade facilitation. The Committee has listed the issues about which 

it wishes to receive information. Mindful of that list and our focus on land border 

trade and transportation, we wish to raise an additional issue about which we have 

felt strongly since our inception. Many of our Members cross the border daily (some 

even several times a day). Too often they and others have found long lines, even 

before the events of September 11th. The requirements to enter are often interpreted in contradictory manners depending on the agency personnel manning a 

given gate. Often there is a tremendous lack of coordination in terms of staffing 

needs as each inspection agency seeks to address its unique role. We have long supported what we have chosen to call unified port management (UPM). In its simplest 

terms, UPM means that one agency is put in charge of the staffing and similar administrative requirements at the ports of entry. By doing so, there can be proper 

planning for staffing needs, including peak and slow times. Therefore, if Homeland 

Security is properly administered, we can see the possibility for a real cost savings, 

both to taxpayers and to business. If legitimate cargo and travelers are able to cross 

more smoothly, their expedited treatment means less time is wasted and so the attendant costs are minimized. 

5) While we have never taken a formal position as to which agency should be put 

in charge, many of our Members have long felt that Customs is the agency which 

should be in charge for the simple reason that it is the only federal inspection agency which regularly reaches out to the trade community in trying to address its mandate. The most recent example of Customs good-faith efforts to work with the trade 

has taken the form of the Customs-Trade Partnership Against Terrorism (C–TPAT). 

The guidelines Customs published and the methodology it is using to roll out the 

program and administer it are the direct result of intense discussions with the 

trade. Unlike many other federal agencies, Customs regularly consults with its constituencies. In the case of C–TPAT, Customs initially met with the trade under the 

aegis of the Subcommittee on Border Security formed by Treasury’s Commercial Operations Advisory Committee. While many of the basics of C–TPAT were worked out 

there, Customs did not consult with only that group but has been regularly reaching 

out to the trade community through meetings with major trade associations. Customs should be encouraged to continue these efforts, as they are vital to making our 

borders secure. The other federal agencies in Homeland Security should be similarly 

encouraged to reach out to the trade community. In the end, we in the business 

community are the best source of solutions which are both practical and workable.

We thank you for this opportunity to comment on this important issue and welcome future opportunities where our insights may prove relevant. As the Ways and 

Means Committee continues to monitor the important subject of the role of U.S. 

Customs in the Department of Homeland Security, we offer the Border Trade Alliance’s 16 years of experience in border trade affairs should the Committee require 

any additional information as we all seek to better organize our government for 

homeland and economic security.

Statement of the National Customs Brokers and Forwarders Association of 

fAmerica 

The National Customs Brokers and Forwarders Association of America (NCBFAA) 

is pleased to provide its views on the President’s proposal to create a Department 

of Homeland Security. 

NCBFAA is the national trade association representing customs brokers, ocean 

freight forwarders, air forwarders, nonvessel operating common carriers (NVOCCs) 

and other intermediaries. Our Members are responsible for directing the flow of 

cargo on behalf of our customers, for handling interactions between shippers, carriers and consignees and for serving as the interface with regulatory agencies. Specifically, customs brokers are licensed professionals who interact directly with the 

Customs Service on behalf of the importing public. We represent small, medium and 

large importers, preparing their entries, collecting duties and other revenues, and 

ensuring that imported merchandise complies with U.S. law. 

NCBFAA strongly supports the President’s proposal to create a Department of 

Homeland Security. It brings under one roof all the disparate agencies tasked with 

75

that function, giving coherence and focus to the government’s homeland security 

mission. The proposal also provides the tools for the Secretary to coordinate the activities of these agencies. Previously, competition for mission authority and agency 

standing was counterproductive to the overall effort. Implementation of the President’s proposal will give the government a single, coordinated voice on security 

issues. 

NCBFAA recognizes the need to include the Customs Service within the new Department. After all, Customs has already been tasked by the President to assume 

a major role in protecting the borders from being compromised by terrorists. The 

Customs Service is the one agency with a sufficiently robust presence at the borders 

to perform this mission. The agency also has the unique combination of expertise, 

manpower, and infrastructure required to conduct this effort. 

The President’s proposal appropriately transfers all of Customs to the new Department of Homeland Security, recognizing that it is not possible to divide Customs’ trade and security responsibilities between Treasury and the new Department. Personnel engaged in commercial operations are also necessary and integral 

participants in security activities. The agency must remain intact. 

NCBFAA believes it is essential that commercial operations continue to have a 

preeminent role at Customs. In years past, the culture of enforcement has threatened to stifle the free flow of trade. Management has reduced its emphasis on facilitation and placed a higher premium on commercial enforcement. 

As the Customs Service makes a new home in the Department of Homeland Security, the significant role of trade cannot be lost to the demands of security. Properly 

structured and implemented, effective trade facilitation can actually enhance security, giving the agency the ability to better target its enforcement efforts to high risk 

shipments and activity. To ensure a proper balance of its dual roles, NCBFAA recommends the following:

• Within the Customs Service itself, security measures should be separated, 

whenever possible, from commercial measures. For example:

(1) Customs should not blur the line between commercial enforcement and 

security measures. An importer’s record on commercial compliance may 

have nothing to do with his ability to provide supply chain integrity. 

(2) A manifest should not become a ‘‘Noah’s Ark’’ for every form of necessary data element. [To the extent that expanded data requirements 

are added, however, the manifest data should not be publicly available 

through the Freedom of Information Act (FOIA).] A manifest should 

continue to function as a commercial document. Instead, for security 

purposes, NCBFAA recommends a separate security document. 

(3) Customs should not require commercial entry data (such as 6-digit HTS 

numbers, which may not be valid at earlier points in the entry process) 

at an inordinately early time when the requirement only encumbers 

trade and when less intrusive alternatives exist.

• Presently, commercial operations interests are represented at the highest levels of Customs [e.g., Field Operations, Office of Trade Relations, OR&R and 

the traditional role of the Deputy Commissioner].

These should not be diminished.

• Advocacy from the private sector has been built into the government structure (e.g., COAC, the Trade Support Network). This important partnership 

should be retained. 

• Resourcing for commercial functions must be generous since the funding 

source, the merchandise processing fee, more than provides those monies. A 

negative example this year is the underfunding of import specialists. 

• The Commissioner should recommend concrete steps, whether through organizational measures, resourcing or other means, to protect the status of commercial operations.

This concludes NCBFAA’s statement. We look forward to working with this Committee on the challenging task ahead.

Æ