October 9, 2002

Introduction
Thank you, Janet. It's been just over nine months since I last spoke with the Trade Support Network as a group, and it's a pleasure to be with you again today.

I think all of you know that U.S. Customs has been working hard over the past year to increase homeland security — to address the terrorist threat facing our nation. But I hope you also know that U.S. Customs has also been working hard to do things to work with and help the trade community.

When I took over as Commissioner, one of my priorities was to dramatically shorten the time it took for Customs to issue commercial rulings, and to eliminate the rulings backlog. The backlog when I started was 757 matters and the average time to get a ruling was two years! This was totally unacceptable.

I challenged our Office of Regulations and Rulings (OR&R) to eliminate the backlog and issue rulings within 90 days — because I understand how important it is for the trade community to get those rulings, and get them in a timely manner.

I am pleased to tell you that OR&R has risen to the challenge. Our rulings backlog has been eliminated and so have the inordinate delays. As of September 30 &mdash the end of the fiscal year — we are completely current with our rulings. They are being issued within 90 days. This is a dramatic reduction in the time it was taking to get rulings out. I want to recognize the good work done by Deputy Commissioner Doug Browning and Assistant Commissioner of OR&R Mike Schmitz, and by their hard working staffs, in accomplishing this important task.

We have also taken steps to expedite clearance at and through the border — at a time when increased security measures could have hindered such expedited clearances. We are doing this through several measures, including our Free and Secure Trade program, or " FAST," which I expect to be operational at six Northern Border locations by later this year — by this winter — and the Customs-Trade Partnership Against Terrorism, "C-TPAT," which over 700 companies have signed up for so far. That's an incredible response to the only significant government-private sector partnership designed to improve security in the wake of the 9/11 terrorist attacks

We also have our importer self assessment program (ISA) up and running. We have begun receiving applications for this program, which, as you know, will facilitate the audit process for importers.

And we are also continuing our modernization efforts — to better align the business practices of Customs with the business practices of the trade community — to make it easier for us to work together. Forums like TSN are indispensable to this effort.

TSN's importance in helping us modernize our Customs systems cannot be overstated. The U.S. Customs Service is facing new challenges that make the improvement of our systems even more significant and urgent. The terrorist threat is real and ongoing, and one of the ways we must address that threat is by continuing to develop new and better ways of collecting the information we need for effective risk assessment.

Because TSN is made up of representatives from all facets of the trade, it has a critical role to play in helping us tackle this challenge. We need your input and your support. And, let me tell you, I appreciate the input and support I have seen from TSN during the year that I have been Commissioner. With your help, we are developing ACE in a way that maximizes its extraordinary potential.

Twin Goals of Customs
As I said, our Nation unfortunately still faces a very real terrorist threat. Because of that continuing threat, the U.S. Customs Service has an obligation to make our borders safer, to keep out terrorists and terrorist weapons.

But our obligation to do this, to make our borders and our nation safer, includes making sure that we continue facilitating legitimate goods and people through our borders as efficiently as possible. This is because the U.S. Customs Service has twin goals: increasing security and facilitating trade. Believe me, we know that we must protect American livelihoods as well as American lives.

So over the past year, we have developed and implemented many important initiatives designed to carry out both of those goals. And as we have done this, we have expanded on our long tradition of working closely with the trade community.

Proposed Regulation
And this brings me to the main focus of my talk today — the so-called "24-hour" regulation I proposed in August. That regulation, as I believe you know, would require ocean carriers to transmit manifest information 24 hours in advance of lading at the foreign port, for cargo being shipped to the U.S.

The proposed regulation also requires carriers to provide more complete information on the contents of that cargo. The regulation, therefore, would eliminate incomplete or vague descriptions of cargo, such as FAK (Freight of All Kinds) and STC (Said to Contain). These vague descriptions are incompatible with the U.S. Customs Service's need to target and secure containers that pose a potential high risk for terrorism.

I think it would be fair to say that the proposed regulation has generated a lot of comment. That is understandable, and that is as it should be.

Because the proposed regulation would bring some changes to the way many people in the trade community do business, it is important for us to hear from the various participants of the trade community about it. And we are hearing from them. And we will work with them to address their concerns.

I am impressed by the thoughtfulness of the comments we received — most of which posed operational concerns. And I note that virtually every comment recognized the need for better information about containerized cargo. Indeed,

I am heartened by the fact that most commenters supported the fundamental purpose of the 24-hour rule. But I also recognize that there are different views on how to implement such a rule and how quickly it can be implemented.

The comments also included questions about whether bulk and break bulk carriers should be included, and whether Customs should take steps to protect the confidentiality of certain types of manifest information.

But, as I said, I am gratified by the nearly unanimous recognition in the comments that something must be done to improve security within the system. And that is absolutely right. Something must be done to make our system more secure against terrorism, including nuclear terrorism. The status quo is not an option.

But I hear the trade community loud and clear. Whatever we do to improve security, should be done, if at all possible, without slowing down the movement of legitimate trade, or without slowing the "just-in-time" economy.

We are evaluating all comments. All substantive comments are being considered in developing a final rule, but beyond that, I don't believe I can prudently comment regarding the precise nature of a final regulation.

I believe the best way, though, of explaining the need for the 24-hour regulation is to start with the Container Security Initiative, or CSI, which I proposed this past January and which is now an important component of the President's National Strategy for Homeland Security, and has also been adopted as an action item by the G-8.

CSI is based on one simple, and unassailable, premise — the American people, and the global trading system, are more secure if we screen cargo containers that present a high risk for terrorism as early as possible, and certainly before they reach U.S. shores.

There can be no serious debate that CSI — targeting and screening high-risk containers before they are loaded and shipped to U.S. ports — provides improved security for the primary system of global trade — containerized shipping.

To implement CSI, we are partnering with foreign governments. U.S. Customs officers work side-by-side with officials from our partner customs agencies at foreign ports — at "CSI ports." They target and screen high-risk containers for security inspections using technology — including radiation detectors and large-scale x-ray and gamma ray machines — before the cargo is shipped to U.S. Ports — Newark or Los Angeles or Charleston. This makes America and the global trading system more secure. It also makes trade more efficient. The screenings can be done at the CSI ports during periods of down time — the time period where containers sit on the docks waiting to be loaded on a vessel.

And, once the screening is done "there" — at a CSI port — it will not, except in rare cases, need to be done again here in the U.S. You do not need to do the security screening twice. Nearly all CSI-screened cargo will speed right through on arrival in the U.S. It will get the fast lane into U.S. commerce.

So where are we with CSI? We started implementing CSI with Canada last spring. In Europe, we have already signed agreements with the governments of The Netherlands, Belgium, France, and Germany. And I recently returned from a very successful trip to Asia, where Singapore, Hong Kong, and Japan agreed to participate in CSI.

My initial goal was to start CSI in the top 20 ports in terms of volume of cargo containers shipped to the U.S., and 11 of those ports have already agreed to participate. And I expect to be signing other agreements with other governments covering more of those top 20 ports in the near future.

And we do not intend to stop with the top 20 ports — they were simply the logical place to start because, as many of you know, those ports account for over two-thirds — nearly 70% — of all of the containers shipped to U.S. seaports.

So CSI is off to a strong start. And it is a reality. It is operational in Rotterdam and will soon be operational in Le Havre, Antwerp, Bremerhaven, Hamburg, Singapore, Hong Kong, Yokohama, Nagoya, Kobe, and Tokyo — representing almost 40% of cargo containers shipped to the U.S.

How the 24-Hour Rule Fits Into CSI
How does the 24-hour rule fit into CSI? Quite simply, it is essential to CSI's success. Why is this true? As all of you know, approximately 6 million cargo containers enter the United States every year. This inexpensive system of trade, for all of its great efficiency, was never built for security. It is vulnerable. The nightmare scenario — that terrorists would use one of those 6 million containers to conceal a weapon of mass destruction or other terrorist weapon — is a real possibility.

We must face up to the frightening reality that, in the post 9/11 world, the United States and the global economy, are targets for catastrophic attack. Only a few days ago, Al Jazeera broadcast an audiotape purportedly of Osama Bin Laden in which he vows to strike at the economic system of the U.S. And civilized trading nations. And there is a risk that one of the many cargo containers that enter the United States could be used as a means of delivering such a horrific blow.

Some in Congress have looked at this alarming prospect, and have concluded that the American people will only be safe if 100% of all containers heading for America are inspected by Customs or the Coast Guard. Indeed, some have even proposed legislation to mandate this, such as HR 5420 (the "Port Protection Act of 2002"), which was introduced by Congressman Nadler last month.

I strongly disagree with this conclusion, and with the mandate of HR 5420. As all of you know, we should not and need not inspect every container headed for the U.S. Even if the resources were available, such an approach would likely result in enormous delays.

And inspecting every container would be wasteful and make no sense, because most containers pose no security risk. Those containers should speed their way through the global trading system and through U.S. Customs. They do not need to be inspected or individually screened for security.

But in looking at the 6 million containers heading to our shores, how do you tell which ones are low risk, and which ones are high risk for terrorism? It is through information — timely, complete, and accurate information regarding the containers — what's inside, who is shipping the cargo, who the consignee is, and so on.

Put differently, if Customs does not have timely and accurate information, it is unable to sort out the high-risk containers from the low-risk containers. And if we cannot do that, the American people — or their elected representatives — will demand that many more containers be inspected, even those that may ultimately be low risk, or absolutely no risk whatsoever. If Customs does not have the information to make intelligent targeting decisions, it will not be able to determine what is, in fact, low risk. And in the post 9/11 world, if we do not know enough about a container entering the United States, we have to deem it as high risk. And if it's high risk, it's going to be inspected.

Because right now, Customs is screening every container arriving at U.S. Seaports that we deem high risk based on targeting and advance information. Containers as to which there is insufficient information to target must default into the high-risk category.

So we need timely and accurate descriptions of cargo and other information about the containers headed for U.S. Seaports.

Why do we need the information 24 hours before lading in a foreign port? Because without the 24-hour rule, we cannot implement CSI, we cannot substantially increase the security of the global trading system, and we cannot provide the efficiency benefits to the trade that CSI will bring, such as the "fast lane" through U.S. Ports upon arrival.

To actually target and screen high-risk cargo containers in foreign ports such as Rotterdam or Singapore, we need information about that cargo — before it leaves the foreign port. Certainly, some of this information may come from our CSI partners. But we must get most of the information ourselves, through a regulation such as the proposed 24-hour rule, and we must get it before the cargo leaves for the United States.

Analysis of the manifest information before lading, as proposed in the Customs regulation, will give us the opportunity to identify and rapidly target high-risk containers before they leave outbound for U.S. Ports, and have those containers — which I expect will be a relatively small percentage of the total — screened for security before lading — screened rapidly through large scale x-ray type machines and by radiation sensors.

We will have made sure that whatever needs to be done to eliminate a potential threat is done before the vessel sails — not after it arrives, which, in the age of potential nuclear terrorism, would be too late.

CSI Will Not Slow the Flow of Trade
I am confident that CSI will not slow the flow of trade. Most of the screening at CSI ports would take place, as I said earlier, during the window of "down time" — which is, on average, several days — when containers are sitting in a terminal yard waiting for the vessel to arrive and be loaded. This may enable us to shave hours, if not days, off of the shipping cycle.

As I said before, a security screening only needs to be done once, and if it's done in Rotterdam or Singapore, it doesn't need to be done in Newark or Los Angeles.

Under CSI, we would complete the targeting process, as we do right now, before arrival, using the U.S. Customs Automated Targeting System, ATS, through which we process manifest information. ATS is a sophisticated rules-based system, capable of sorting and processing vast quantities of information very rapidly, to help us determine which containers are high risk.

For the vast majority of these 6 million cargo containers entering the U.S. — approximately 97% of them — we already receive some form of advance manifest information. All of that information is currently being run through ATS. The information is scored and a risk assessment is made in a very short time frame —within a few seconds — before the vessel carrying the container arrives at the U.S. port.

Our National Targeting Center, which is staffed on a 24/7 basis, coordinates with our officers in the field, monitoring the information that comes in and the security actions that are taken. Each and every high-risk container, not screened at CSI ports, is segregated and goes through a security screening after arriving at U.S. Seaports.

Customs' Targeting Center takes advantage of strategic intelligence received, and continually reassesses the efficiency and effectiveness of our targeting rules — that helps us in striking an appropriate balance between security and facilitation. By the way, for the first time, we are doing our targeting through the National Targeting Center on a national basis, as opposed to on a port-by-port basis. Uniformity is good for you, and it is good for us.

I have heard some in the trade raise the question whether U.S. Customs can accept and use the information requested in the 24-hour rule. The answer is yes, we can. We already are getting most of it in advance in the Automated Manifest System. The system exists. We already have developed the Automated Targeting System. It is fully operational.

We can accept and use this information slightly earlier. And we need it — now. We are not asking for anything we can't effectively use.

What we are proposing to do through CSI is the same process we have already implemented before arrival and at arrival — we simply propose completing this process before the vessel leaves the foreign port, (wherever possible —and it is now possible to do this with CSI) instead of before it arrives at the U.S. Port.

By advancing the process, we gain enormous security and efficiency (and predictability) benefits.

The bottom line is: we need the information earlier and we need it to be more complete and accurate.

Because it involves getting and using information about containers before the containers leave the foreign port, the proposed new regulation is, as I mentioned earlier, essential to CSI's effectiveness.

24-Hour Rule Would Apply to All Cargo Shipped to the U.S.
However, the proposal is not that the regulation apply only to cargo containers shipped from CSI ports; rather, it would apply to all cargo containers shipped to the United States from all seaports. Good targeting is necessary for containers shipped from all ports to the United States, not just those shipped from CSI ports to the United States.

As we move forward with the regulation, we are eager to work with the trade community, taking into account valid concerns raised about the regulation — both now and after a final regulation is implemented, so that we can continually assess practical operational issues. Those in the trade community hold an important key to the security of the global trading system and homeland security, and the U.S. Customs Service is committed to working together with the trade to develop a system that works well for all involved.

We have a proven track record. We have already done this with the airline industry, who, like the trade community, hold an important information key for homeland security. After 9/11, we worked closely with the airlines to acquire the necessary information for our Advanced Passenger Information System, APIS, which helps us target and evaluate passengers who pose potential security risks. We implemented APIs requirements with sensitivity toward the airlines' concerns. We listened to them throughout the process, even amending the implementation timetable and milestones for compliance as necessary. And, I'm happy to say, we have achieved a 99% compliance rate on the critical required data elements.

We want to do the same thing with the oceangoing trade community, working with you throughout the process, but keeping in mind the need to put in place a long-term security strategy to protect oceangoing trade. Long-term strategies require small investments today. The airlines have demonstrated that they understand that, as have the companies that have partnered with us in C-TPAT and the countries that have partnered with us on CSI.

We also must keep in mind the need to implement a new regulation in a timely manner. We cannot drag our feet on this. The terrorist threat continues today, and the maritime trading system remains vulnerable — unacceptably vulnerable. Time is our enemy, so, although we know that businesses will need some time to alter their business practices, we also know that we must all act as quickly as we can.

I expect that we will be putting out a final regulation in the near future, and I look forward to working with the trade as we begin to implement it.

Protection and Facilitation of Trade Remain our Twin Goals
As the Customs Service presses forward with initiatives we have already developed — initiatives like FAST, C-TPAT, CSI, and the proposed 24-hour regulation — and as we continue to develop other initiatives that will help us do our jobs better, I want you to remember this: both the protection and the facilitation of trade remain important twin goals of our mission. These goals do not have to be mutually exclusive.

It is true that combating terrorism is the number one priority of the U.S. Customs Service — and it will be our number one priority for the foreseeable future. The threat of international terrorism is real and ongoing, and, like it or not, we must adapt our systems to address the new threat we face.

But as we do this — as we adapt our systems — we will continue to work with the trade to make sure that we preserve, and whenever possible, even improve the efficient movement of legitimate trade.

Thank you.