As I look around the room, I see many familiar faces from previous meetings of the Trade Support Network, and other trade meetings as well. It is such a pleasure is to be here with all of you – and that’s not only because it gets me outside the Beltway madness, or because the weather is so much nicer here in California than Washington in February. Yes, these things certainly make my visit more enjoyable, but really, it’s just great to be here talking with you.

This is a particularly good week from my standpoint – I am getting to spend time with the two most important partnerships we have – the Trade Support Network today and the C-TPAT group tomorrow. While I’ll save most of my accolades for C-TPAT until tomorrow, I have to pause a moment and say that C-TPAT is truly a remarkable program. Think about how C-TPAT started and how far it’s come – with the memories of September 11th driving us, the government and private industry joined together to create a safer world. I know many of you are members of C-TPAT and I want to commend you for being part of both TSN and C-TPAT – you are critical to our success on all fronts. I hope to see some of you at the C-TPAT seminar tomorrow – and I’ll try my best not to give the same speech!

But enough about C-TPAT – at least for the moment. Let me take a few moments to comment on the value of this audience – the Trade Support Network. For some time now, the TSN has been one of U.S. Customs and Border Protection’s most supportive trade groups – but even more than that, the TSN is a collaboration – a collaboration within the trade community, and a collaboration of the trade and CBP. Collectively, you represent CBP’s most important stakeholders: importers, exporters, brokers, carriers, service providers, FTZ operators, 3 PLs, the list goes on and on. As representatives of the nearly 200 companies who make up the TSN, you provide essential input to the design and development of our modernization projects. The TSN’s regular meetings are valuable opportunities for you to connect with one another – and for us to hear from you, provide you with updates, and talk about how we are moving forward, together.

In preparing for my remarks today, some of the staff thought I ought to speak to the recent event making the news, the change in management of terminal operations in six ports through the acquisition of the Peninsular and Oriental Steam Navigation Company (P&O) by Dubai Ports World. And although I usually do listen to my staff, in this case, I didn’t agree. For me to talk to you about how port operations and international businesses work would be somewhat incongruous. You are one audience we don’t need to convince that this sale is not going to jeopardize port security. You know better than anyone about ownership and working relationships of various aspects of the international trade process. And, you also know the fundamental role of CBP and the Coast Guard in port security. And, of course, you know that this business transaction does not in any way change the operations – or security – of our nation’s ports.

So, instead of Dubai Ports World, let’s talk about what we all came here to discuss: ACE. As I mentioned, the TSN is one of our most important partnerships – and it is the TSN, with CBP, who is building ACE. This effort, to modernize and build the technology foundation for trade, makes our partnership unique and unprecedented. To the best of my knowledge, no major IT system has been developed in such a collaborative manner. From the very beginning of our modernization efforts, we asked the trade community to participate in the development process, to talk about your requirements, and advise us as to how we could best meet your needs. Many of you may remember the early days of Customs modernization – back in the 1990s. At that time, some wondered whether our efforts would ever get off the ground. The odds were, in fact, stacked against us. According to the research firm Gartner Group, 75 percent of all large systems are operational failures. For every 6 program startups, 2 programs are canceled. And, a staggering 75 percent of all e-business projects fail to meet their objectives because of fundamental flaws in project planning.

But we have defied the odds by working together. For the past several years, we worked with you to begin to develop new and innovative solutions to our modernization challenges. And what I find most remarkable is how the partnership has stood the test of time, and has been flexible enough to change as circumstances changed.

Back in those early days of Customs modernization, we worked together to convince others that ACE was necessary. Through these efforts, much of which I credit to the trade community, our vision spread and momentum began to build. Finally, in 2001, ACE was launched, with solid trade support and with a funding stream.

Of course, at that time, we were focused on the trade processing capabilities we wanted to build in ACE. The events of September 11, 2001, however, changed how we view trade in the context of national security. After 9/11, Customs – and later U.S. Customs and Border Protection – shifted our focus to a priority, anti-terrorism mission. But within this mission, there are two goals – our twin goals as we like to say: border security and trade facilitation. That is, while we work vigorously to prevent terrorists and their weapons from entering the United States, we are just as determined to facilitate the flow of legitimate trade and travel. These efforts are inextricably linked. With the volume and complexity of trade today, we cannot focus on our anti-terrorism mission without ensuring that legitimate trade is not just unimpeded, but actually expedited. These twin goals support both the national and the economic security of the United States.

We were therefore compelled to take a new look, concurrently, at our trade facilitation and border security goals. We accelerated border security aspects of the program to help ensure delivery of those capabilities that would better protect our citizens, infrastructure, and our way of life. And while the expanded focus initially may have caused some concerns, you stuck with us as we built a new program plan that would embrace both of our twin goals.

As can be expected with a program as large scale and complex as ACE, we have had some challenges as we have expanded the vision. But we have taken on each challenge as it came our way, and we have moved from vision, to planning, to building, to implementation. ACE is no longer some concept swirling around in our heads, nor is it a sketch on an architect’s drawing board. In the four and a half years since 9/11, we have worked together to make ACE into the integrated, user-friendly and effective system that it is today. ACE is a reality, and our progress in implementing ACE is something in which all of us here in this room should take a great deal of pride.

ACE is now operational at 46 ports along the northern and southern borders: in Washington, Arizona, North Dakota, Minnesota, Michigan, and most recently, Texas and New Mexico. Later this spring, ACE will become operational in California, thus completing deployment along the two thousand mile border between Mexico and the United States.

We are working diligently to finish deployment at all 91 land-border ports. We will eventually reach all ports when, in the coming years, we deploy capabilities for air, rail, and sea cargo processing. With ACE now operating on both the northern and southern borders, that brings CBP one step closer to a nationwide system to enhance border security and facilitate legitimate trade. When fully implemented, the ACE electronic manifest, or “e-Manifest” feature will provide more efficient border processing throughout our land border ports, as well as important new data integration to help our screening and targeting efforts.

Let me acknowledge here and now that as we have deployed the ACE automated truck manifest capabilities, we have learned a lot. Our CBP Officers and members of the trade community have provided important feedback on both the usability of ACE, and on the most efficient and effective methods for deploying ACE. We are taking these lessons learned and incorporating them into our planning for future development and deployment so that we can deliver ACE even better. Our goal is to always be on the lookout for new and innovative ways to make ACE more user-friendly, timely and cost effective.

While acknowledging the challenges, we in CBP are extremely pleased about ACE and what it’s doing to improve trade processing. As many of you know, companies may file an e-Manifest through an Electronic Data Interchange (EDI), or through the ACE Secure Data Portal, which also provides added reporting capabilities. We currently have nearly 40 companies certified to file e-Manifests through EDI. Certification is not needed to file an e-Manifest through the portal.

There is no better gauge of how we are doing with ACE than to get customer feedback. I’m happy to say that much of that feedback is positive, and I think it’s important to share with you what some of your colleagues are saying about e-Manifest.

Mullen Group, Inc. of Aldersyde, Alberta was one of the first Canadian companies to submit an e-Manifest via EDI. Mullen Group Director of Border Services Sandra Perrigo said the program is “working great … e-Manifest has made processing so much easier for the drivers. The drivers are a lot happier now and have a strong preference for ACE ports.”

From ABF Freight Systems, Inc., in Fort Smith, Arkansas, Administration and Customs Compliance Manager Jevon Jamieson reports, “Since the first of the year, we’ve been processing e-Manifests with 100 percent success. The drivers really like the system, and the time its saves them. I intend to move ACE into our Winnipeg facility, and foresee immediate success.”

J.D. Transport President Jose Santana, whose company filed the first e-Manifest on the southern border at Nogales, Arizona, said, “We stood at the port with stopwatches, and it took less than 45 seconds for the truck to be processed. This system makes it more secure to transfer goods. We can track what is in the shipment, where it is now, and where it is going. Fast delivery leads to fresher produce, which is the major import from the southern border, and quick arrival to markets leads to better business and buyer gratification.”

United Parcel Service recently filed the first e-Manifest in Detroit and was an early adopter of the feature. According to UPS Customs and Trade Compliance Manager Mike Richardson, “UPS supports CBP’s efforts to move from paper processing to electronic transmissions. This will help CBP with targeting and enforcement efforts, expedite processing at the border for CBP and the trade community and reduce cost for carriers. Since UPS captures the majority of this information via internal systems, the best solution for UPS was to transmit via EDI. Other companies should get involved with ACE early to allow for issues to be resolved whether anticipated or not.”

Steve McQueary, general manager of Brownline Trucking in Mount Vernon, Washington, was the first to file e-Manifests through the ACE Secure Data Portal. He tell us, “In the past, the CBP officer had to struggle to explain to a trucker with a stack of paperwork how to get cleared through the border, which is even harder with a language barrier. Suddenly with ACE, the officers have all the correct information in front of them, so those officers can focus on the drivers, not the paperwork. Instead of relying on a paper manifest scribbled by a truck driver crumpled up in the truck, the electronic manifest takes a huge burden off the driver and carrier both, with more accurate data.”

And Olmstead Transportation of Mount Vernon, Washington has filed the largest volume of e-Manifests through the portal to date, more than 300. Olmsted President Bart Smith said, “Drivers are saving on average three to four hours per day, per driver, which increases their overall earnings.” He said the border-crossing environment is also safer. “With shorter lag times, there is less exposure to potential accidents waiting in line. Before, guys in line were getting impatient and causing fender benders. We see less of that now at ACE ports.”

Nearly 2,000 e-Manifests have been filed to date through the portal or EDI. But with the tens of thousands of carriers that conduct business in the United States, each of which filing manifests with every trip, we need to realize the full benefits of e-Manifest in a more timely manner. While we’re making progress on expanding use of e-Manifest, we need to increase the pace of our efforts to get participation from all carriers. To accomplish this objective, later this year we will begin making use of the e-Manifest mandatory. We will be phasing in this mandatory e-Manifest policy on a port-by-port basis. We will conduct extensive outreach to notify carriers in advance to ensure a smooth transition, and schedules will be provided in advance through the Federal Register and the CBP website. To support the influx of e-Manifest users, we are expanding our portal support to provide trade and CBP support on e-Manifest issues.

While we expand e-Manifest capabilities to ports nationwide, we continue to make progress on other aspects of the ACE program. As you may recall, in July 2004, we implemented the ACE monthly statement capability, which enabled us for the first time in Customs and CBP history to collect payment of duties and fees monthly, and provide monthly account statements.

The ACE monthly statement and payment capability is the cornerstone of our transition from a transaction-based collection process to an integrated, account-based system.

Clearly for CBP, this is a more efficient process. But it is also a boon for the trade community. It simplifies the payment process for importers and brokers. It provides an electronic record for large and small companies alike to trace their import activities and a fast and user friendly way to generate reports. And, most importantly, it is cost effective and good for your business.

ACE is not only providing enhanced tracking and reporting, it is also providing monetary benefits to the trade community. Specifically, ACE periodic payment users have the ability to wait until the 15th working day of the next month to pay for shipments released during the previous month. This provides a potentially significant cash flow benefit – the capability to make periodic payments on an interest-free basis.

The word on the benefits of periodic payment is spreading. We are seeing a growing momentum in use of this feature. It took just over a year for the total amount of ACE monthly payments to reach $1 billion – which it did in July 2005 -- but only four months to more than double that amount. The total amount of duties and fees paid since the first payment was made in July 2004 is now approaching $3 billion and in this month alone, a total of nearly $350 million in payments were collected through monthly statements. We now have nearly 1,500 ACE portal accounts established, and more than 300 non-portal accounts. Many companies are now paying duties and fees exclusively through the ACE monthly statement process.

As we continue to make enhancements to the periodic monthly payment, e-Manifest, and other ACE capabilities, our goal is to ensure the process is as smooth and expeditious as possible – so that goods can flow as freely as possible in and out of our nation. Moving goods to market faster and at lower cost will have positive impacts on the U.S. economy, benefiting consumers and business alike.

I would like to take a moment and talk to you about the future of ACE. Over the next several years, we will continue to develop and deploy ACE using the “building block” – or phased – approach. We will integrate or replace virtually all CBP trade processing systems. By 2010, we expect ACE to be fully deployed. And, in all we do, we will continue to build on our successes and leverage “lessons learned” to make ACE even better. With its capacity for growth and scalability to add new technologies to handle an increasingly complex trade environment, ACE will enhance the ability of CBP employees to do their jobs well into this century.

At this time, we are in the process of preparing for the next phase of ACE development – the new ACE Entry Summary, Accounts, and Revenue – or ESAR – feature. We will begin national activation early next year. In 2007, all ACE participants – thanks in large measure to your input and your efforts – will have access to these enhanced account capabilities. Members of the trade community have been actively involved in workshops to develop these ACE features, and we need your continued engagement to ensure that the system meets trade user needs.

Possibly the greatest impact of ESAR will be the reduction in the amount of paper CBP requires in the trade process. Currently, approximately 20 percent of all entries require paper. Federal Express tells us that each month, they provide CBP with over two million pieces of paper. Two million! This has to change. And so, with the second suite of capabilities provided under ESAR – known as A2 – we will see a dramatic change in the way we do business through enhanced account capabilities, impacting virtually all CBP business processes.

In designing ESAR, we will re-evaluate the way we do business and determine what information is really needed. It is not enough to simply automate a maze of requirements that made sense before we had the capability to do better, but which now, may slow our progress. Have you heard of automating the cowpath? I’m sure you can guess what it means -- we want to make sure we don’t modernize the same worn cow path, with a foundation of rigid old procedures to automate something we may not really need. We have the opportunity to further streamline our operations, reduce or eliminate redundant requirements and reduce paper handling. With A2, we may even be able to eliminate as many as 300 procedural steps from the Automated Commercial System code!

If I were to stop here with this summary of current and future ACE capabilities, I would leave out one of the most critical aspects of why we are building ACE. ACE is not about CBP alone, or even this agency and its trade partners. The promise of ACE also includes a single window for the trade -- an unprecedented integration of data and communication capabilities among CBP, the trade community, and other federal agencies with trade responsibilities. We currently have twenty-eight (28) federal agencies on board to integrate with ACE in the next few years through our International Trade Data System initiative – ITDS – and we expect to add more as the system is developed.

And I don’t need to tell you that providing the trade community with a streamlined filing process to fulfill multiple government trade data requirements will eventually result in faster cargo release and more timely status notifications, plus provide additional border security for citizens through the sharing of information.

But ACE is more than just technology. ACE is also the foundation upon which other key CBP programs – such as the Customs-Trade Partnership Against Terrorism and the Container Security Initiative – are built. ACE is the tool that will integrate – and ultimately strengthen – C-TPAT and CSI. ACE has moved from being a technology objective in and of itself to being an enabler – we expect that it will provide the cargo management and screening and targeting capabilities that will help us realize the full potential of these and other programs.

As I mentioned earlier, many of you are members of C-TPAT and some of you will be attending tomorrow’s meeting in Costa Mesa. The timing for the TSN and C-TPAT conferences couldn’t be better. Both ACE and C-TPAT are critical programs that enable CBP to carry out our border security and trade facilitation missions. For those of you who are not C-TPAT members, I encourage you to join. It is only through close cooperation with the ultimate owners of the supply chain: importers, carriers, brokers, warehouse operators, and manufacturers, that we will be able to provide the highest level of security. By participating in this worldwide supply chain security initiative, your company will help ensure a more secure supply chain for your employees, suppliers, and customers.

C-TPAT not only offers businesses an opportunity to play an active role in the war against terrorism and secure its own supply chains, it also provides cargo processing benefits such are reduced inspections.

And of course, if you haven’t already done so, I encourage every one of you in this room – and everyone in the international trade and transportation communities – to sign-on to ACE, sooner rather than later – to take advantage of the many capabilities this new system has to offer. Several of you have volunteered to serve as Trade Ambassadors, to help us spread the word about ACE. We thank you for your efforts. As more businesses participate, the trade process will be enhanced for all. Indeed, participation in both CAT and ACE provides the “full package” with respect to processing efficiencies and cargo security, and the benefits that are derived from both.

I also mentioned the Container Security Initiative. Under the CSI program, a small number of CBP officers are deployed to work with host nation counterparts at major ports around the world to target high-risk cargo containers. Its purpose is to protect containerized shipping from exploitation by terrorists. As you know, containerized shipping is a critical component of global trade because most international trade moves or is transported in containers. About two thirds of all the containers that arrive by sea to the U.S. come from or through the twenty largest ports. In Los Angeles alone, over four and a half million containers arrived in FY 2005!

We currently have 42 ports participating in CSI, stretching from Canada to Brazil and Argentina in the Americas, to ports in Europe, in Asia and the East, all the way to Durban, South Africa.

The trade process for all shipments, whether through a CSI port or not, depends on targeting and risk analysis. Our cargo targeting system, another key component of ACE, ensures that we screen all cargo for risk, and then, inspect all high risk cargo, while facilitating the flow of cargo that does not present a risk.

It’s important for those of us involved in ACE to understand how these key programs fit together to facilitate trade and enhance border security. ACE is the technology tool that will integrate and ultimately strengthen each of these programs to create a sum greater than any one of its parts. ACE will provide the cargo management and screening, and targeting capabilities that will help us realize the full potential of these other programs. ACE will also have the capability to serve as a foundation for operations throughout the Department of Homeland Security, as well as other government agencies through ITDS.

There are many clear signs that TSN members have grasped the significance of ACE in facilitating trade and enhancing border security and one of them is the Supply Chain Security Committee, the establishment of which was announced at the TSN meeting just one year ago. The response and interest in this committee was astounding – literally over 100 of you signed up! Rather a large committee, I would say. However, the co-chairs quickly overcame the size issue by forming sub-committees. This is a good move, and one that we in the bureaucracy always endorse.

But seriously, the Committee, which had a successful meeting yesterday, is an important way to link the efforts to build ACE with the overriding objective of supply chain security. And, I would like to announce that we are in the process of changing the government chair of the committee from Tom Bush – who has taken on a new position within CBP – to Todd Owen, who many of you know, has been doing an outstanding job of managing C-TPAT for the last year. While we are sorry to lose Tom as the chair, it is very fitting that Todd take over – another sign of the inextricable link between our security and trade programs. And of course, we are very pleased to have Jim Phillips as the trade chair of the committee.

In the months and years to come, we in CBP remain committed to looking strategically at every aspect of ACE. We are continually questioning and evaluating ourselves – looking critically at our processes. We are evolving and adapting, and as always, looking to you to provide us with advice and counsel.

The progress that we have made – and the continued support that we have received from Congress and the Department of Homeland Security – is a result of the hard work of the ACE program team and you in the trade community. Thank you for the part you have played in ACE – and for your investment in the Trade Support Network. Your efforts have allowed us to develop and implement technology that both enhances our nation’s security and fosters our economy.

ACE has come a long way in a few years. It is today’s reality and the promise of tomorrow. And as we continue on this journey together, I look forward to working with you.

Thank you.

Acting Commissioner Spero reserves the right to edit her written remarks during her oral presentation and to speak extemporaneously. Her actual remarks, as given, therefore, may vary somewhat from the written text.