I want to begin by expressing my thanks to the Subcommittee for its continuing support of U.S. Customs and its mission. You have played an invaluable role in assisting Customs with the guidance and the resources it needs to defend America's borders and to protect and promote America's economy.

The Customs Service has stood as a pillar of American stability and strength for over two hundred years, by defending our country's borders and by facilitating international trade and travel. That is why it is such an honor for me to serve as Customs Commissioner, and to have been chosen by President Bush to lead an organization whose origins stretch back the very founding of our Republic.

At the direction of the President, the battle against international terrorism is now the number one priority of the United States Customs Service. Over the past several months, I have visited Customs employees in locations throughout the U.S., and I can assure you that they are working extremely hard to protect our Nation. Their dedication and commitment are truly inspiring.

Their efforts have been supported greatly by the Congress and the Administration in PL 107-117, the 2002 Terrorism Supplemental, which provided approximately $400 million in additional counter-terrorism funding for our agency, and in the additional $365 million in program increases and annualizations provided in our fiscal year 2003 budget request.

The funding provided in the '02 supplemental and in our '03 budget will enable Customs to meet the full range of its mission-critical responsibilities. First among these, as I mentioned, is the battle against terrorism. As Commissioner, I will also devote needed resources to strengthen Customs' drug fighting capabilities, improve the management and overall operations of the agency, enhance Customs' relationship and partnership with the trade community, and build a new system of trade automation to strengthen our national security and improve the flow of commerce across our borders.

Mr. Chairman, I want to touch briefly on each of these priority areas in my statement, and outline the actions the Customs Service has taken or is planning to take in each. And I want to begin with our overarching concern, which is the critical role of Customs in our Nation's homeland security.

U.S. Customs' Top Priority: Counter-Terrorism
The Immediate Response
Immediately following the terrorist attacks on September 11, at 10:05 a.m. on September 11, Customs went to a Level 1 alert across the country at all official border entry points - land border ports of entry (POEs), seaports, and international airports. Level 1 requires sustained, enhanced scrutiny and questioning of those entering the U.S., and includes increased inspections of travelers and goods at every port of entry. Because of the continued terrorist threat, we remain at the Level 1 alert today.

As part of our response, we also implemented round-the-clock coverage by at least two armed Customs officers at every authorized, public land border crossing, even at low volume crossings along our northern border. To do this on a 24 by 7 basis, and to keep trade moving at our high volume ports - in Detroit, Buffalo, and elsewhere -- we temporarily detailed about 100 Customs inspectors to the Northern Border. To this day, Customs inspectors are, in many places, working 12 to 16 hours a day, six and seven days a week.

Despite the demands of extended shifts and a vastly increased workload, these employees have carried out their duties with quiet determination. Many even volunteered to go to remote border locations to serve and protect their country.

As U.S. Customs shifted into its highest security posture after September 11, we experienced extraordinarily lengthy delays at the northern border, especially at Detroit, Port Huron and Buffalo. The wait times at these ports of entry quickly swelled to 10 to 12 hours. I am pleased to report that, in response, Customs and the trade community immediately worked together to reduce those delays to pre-September 11 levels, without compromising our Level One security.

These initiatives included assigning additional Customs inspectors to these entry points and opening more lanes for longer hours, and with the assistance of Governor Engler of Michigan, detailing national guardsmen to assist Customs in prescreening passengers and cargo and conducting secondary inspections. We also posted - for the first time - wait times at the border on our Customs website, to assist importers and carriers with logistics. And we still do, for ports of entry on the Canadian and Mexican borders.

In the days immediately following September 11, Customs was also quick to join the investigative front in the war on terrorism. We assigned many of our special agents to Joint Terrorism Task Forces across the country, and at the SIOC at FBI Headquarters. At one point, almost a third of our investigative workforce, over 1000 agents, were engaged in investigations related to the terrorist attacks. That proportion has gradually declined since last October. Customs has also contributed approximately 110 agents to the federal sky marshal program. In addition, we have assumed a leading role in the Treasury Department's efforts to disrupt and dismantle terrorist financing networks, through our longstanding expertise in anti-money laundering operations.

The Response in New York City
Mr. Chairman, as you also know, the Customs Service was struck directly by the attacks of September 11. Our building at 6 World Trade Center, which served as Customs' Headquarters for much of our most important northeast operations, was completely destroyed by falling debris from the twin towers.

I toured that area during my first visit to the field as Customs Commissioner, the day after I was sworn in. I will never forget that trip, nor the images of destruction I witnessed. During that time, I also met with Customs employees from our World Trade Center site, all eight hundred of whom escaped unharmed. Ultimately, the loss of our building was nothing in comparison to the thousands of innocent people murdered on that day.

Nonetheless, the sudden disruption to such a large and important area of Customs' operations threatened to compromise the immediate security of area ports and the integrity of ongoing Customs investigations and trade and enforcement activities. But Customs' New York employees responded heroically to the challenge, setting up a temporary operations center within hours at nearby JFK airport. And within just three weeks of the attacks, they succeeded in permanently relocating our New York Customs Office into new office space in Manhattan. I believe that is a remarkable achievement by any standard.

In fact, we recently concluded a highly successful drug money laundering investigation in New York known as Operation Wire Cutter. Much of the evidence and case history for Wire Cutter was buried along with other files in the 6 World Trade Center rubble. After the attacks, our agents had to go back into the piles of debris, hoisted up in cranes, to salvage evidence for the case. Undeterred, they recovered crucial files that allowed them to continue their investigation and, just last month, bring down a notorious ring of Colombian money brokers involved in laundering illicit proceeds for the drug cartels.

Support of the Congress
The support of the Congress in providing immediate assistance to Customs was critical, and we are very grateful for that help. The approximately $36 million in up-front reconstruction funding enabled Customs to reestablish operations in New York and begin replacing badly needed equipment in a very short period of time.

I also want to acknowledge the immediate Congressional support for overtime funding for Customs inspectors and agents assigned to the battle against terrorism, and the support given to our Air and Marine units to patrol our airspace and our coastal waters. This prompt congressional response allowed Customs to secure our borders quickly in the face of an immediate threat.

Looking Ahead: Three Core Areas of Counter-Terrorist Response
Since the implementation of the Level 1 alert and the emergence of a clear new mission priority, we have identified three primary areas of focus in our efforts to protect America from international terrorism. They are: 1) border security; 2) the disruption and dismantling of terrorist financing networks; and 3) the monitoring of strategic exports. Customs is actively engaged and is playing a leading role in each of these areas of our national counter-terrorist response.

Border Security
First and foremost is the critical job of border security, and our mission to prevent individuals and items that may pose a threat to the United States from crossing our borders. This includes stopping and seizing terrorists, terrorist weapons and weapons of mass destruction that could be used in an attack on American soil. The actions we have taken to date -- our Level 1 alert, the mobilization of inspectors to the northern border, and the deployment of additional inspection technology to our borders since September 11 -- have all been directed at this goal.

At the same time, our ports of entry are the vehicles by which lawful international trade and travel enters the U.S. Accordingly, we must ensure that our anti-terrorism efforts do not slow legitimate international commerce and travel, for the health of the U.S. economy depends on the timely movement of goods and people into the U.S.

Customs is focusing on several initiatives because there is no single, key component of a strategy designed to increase security and facilitate trade. Instead, such a strategy involves a combination of factors: (A) expanding advance information on people and goods and improving targeting systems; (B) fostering initiatives that "push the border outwards" and extend our security perimeter; (C) developing industry partnerships to protect trade; D) strengthening northern border security through our partnership with Canada; E) enhancing information-sharing and cooperation with Mexico on our southern border; F) protecting ocean-going sea containers, a vital artery of global trade; G) deploying state-of-the-art inspection technology; and (H) increasing staff positions for border security.

As a first, fundamental step in coordinating these various initiatives, I established a new Office of Anti-Terrorism within the agency. I appointed an experienced security expert and senior military leader to head that office, who reports directly to me.

The Director of the Office of Anti-Terrorism is also helping to coordinate Customs' role within our national security architecture, with the Office of Homeland Security, our fellow border inspection agencies such as the Immigration and Naturalization Service and the U.S. Coast Guard, and other government entities. This cooperation is essential to ensure that we are effectively responding to the threat of terrorism and to our other mission priorities. In addition, effective coordination by all the government partners involved in counter-terrorism will help to relieve the strain that each of our agencies, individually, may face.

The Key Role of Advance Information and Targeting
Better, more effective targeting of high-risk people and goods will be achieved by improving the quality and the quantity of advance information we receive from airlines, shippers, and businesses. Having such information allows us to do a much more effective job of sifting out the potential threats from the vast flow of legitimate international trade and travel that Customs processes every day. Indeed, good information is the crux of effective targeting, and we have already taken steps to ensure that Customs receives more of it.

As part of our immediate response to September 11, we moved quickly to make available more information on arriving air passengers into the United States. We promptly sought, and the Congress promptly enacted, legislation that made the submission of data on incoming passengers to Customs' Advanced Passenger Information System, or "APIS," mandatory for all airlines. That law was passed last November as part of the Aviation Security Bill. Let me take this opportunity to thank the members here for their support of that bill. I told those airlines that initially balked at submitting APIS data to comply with the new regulations, which took effect in December, or face 100% questioning and inspection of all people and luggage disembarking from their flights. Not surprisingly, nearly all the airlines came around quickly and began supplying Customs with the needed information, even before the law took effect.

On February 18, 2002, Under Title 19, section 1436 of the United States Code, a civil monetary penalty was put into place against the pilot of any commercial passenger aircraft that fails to transmit APIS data. The penalties will range from $5,000 - $10,000 for each violation. For habitual violators, Customs has the authority to revoke landing rights, and we will for any airlines that seek to defy the new law.

In allocating funds from the FY '02 Supplemental and FY '03 budget, Customs has dedicated more than $49 million to upgrade and expand the Advance Passenger Information System (APIS). With this funding, the APIS will be able to collect and process advance information on all commercial passengers entering and exiting the United States. In addition, the APIS will be transformed into a real-time system that will run advance passenger information against law enforcement databases on a passenger-by-passenger basis and will issue board/no board recommendations to international carriers.

Securing the legislative mandate for APIS data represented a strong start in Customs' efforts to improve targeting with more advance information. However, we would also like to expand that mandate to cover shipments of goods entering the U.S. Currently, the submission of advance information on most trade entering the country is done on a voluntary basis. This information is not always complete or accurate. And it is not necessarily provided before cargo departs from the foreign port for the U.S.

Customs already collects a large amount of advance information on incoming shipments. In fact, we receive this information on 98% of the containers that land on our shores, thanks to a system known as the Automated Manifest System, or AMS. Customs has developed an extensive database of information on the shipping industry, its patterns, and all who participate in it through the manifests that every shipper is required to submit.

Using a targeting program known as the Automated Targeting System, we can sort through the vast AMS database and pick up anomalies and "red flags." Whatever deviates from the norm or is otherwise viewed as "high-risk" is scrutinized at the port of entry. This system has functioned as Customs' main method of picking the needles out of the haystacks, and it has served us well.

But this system could be improved. We need mandatory and accurate data in a form we prescribe. But even with those enhancements, if we select a container for inspection by x-ray technology at the port of entry on the suspicion that it contains a weapon of mass destruction, by that time it could be too late. And that is why we also need shippers and importers to provide more complete information up-front in the import process, before those goods leave their last foreign port.

S. 1214, which has passed the Senate, would make the filing of electronic transmission cargo manifest information in advance of port entry or clearance mandatory. For Customs, this would increase the amount and the timeliness of information fed into our targeting systems, thereby enhancing our ability to spot the red flags. We will continue to work with the Congress to secure much broader manifest advance information, not only for inbound cargo but for outbound trade, for outbound air passengers, and for inbound and outbound land and sea passengers.

Finally, to enhance our information-gathering abilities in our targeting of goods and people, I established the Office of Border Security at Customs to develop more sophisticated anti-terrorism targeting techniques. I have allocated almost $10 million over the next two years to provide the necessary computer equipment and permanent staffing for the office.

"Pushing the Border Outwards"
In approaching our primary mission of border security, I believe that Customs must also do everything possible to "push the border outwards" -- that is, to expand our perimeter of security away from our national boundaries and towards foreign points of departure. In other words, we can no longer afford to think of "the border" merely as a physical line separating one nation from another. We must also now think of it in terms of the actions we can undertake with our foreign partners and with industry to pre-screen people and goods before they reach the U.S.

The concept of "pushing the border outwards" focuses on building and reinforcing security layers against the terrorist threat, beginning with our immediate borders. The ultimate aims of "pushing the border outward" are to allow U.S. Customs more time to react to potential threats -- to stop threats before they reach us -- and to expedite the flow of low-risk commerce across our borders.

The Critical Role of the Trade Community
Any effort to "push the border outwards" must include the direct involvement of the trade community. In November, I proposed a new Customs Trade Partnership Against Terrorism to the trade community at a Customs-Trade Symposium I hosted. I am pleased to tell you that we are entering into partnership with some of the biggest U.S. importers. This Customs-Trade partnership will vastly improve security along the entire supply chain, from the factory floor, to foreign vendors, to our land borders and seaports.

"C-TPAT," as its acronym is known, builds on past, successful security models between Customs and the trade that were designed to prevent commercial shipments from being used to smuggle illegal drugs. The good news is that we already have much of the security template in place to protect trade from being exploited by terrorists. Our challenge now is to apply that to as broad a range of the trade community as possible.

In working with importers in the battle against terrorism, we are looking at such criteria as where their goods originated; the physical security and integrity of their overseas plants and those of their foreign suppliers; the background of their personnel; the means by which they transport goods; and those whom they have chosen to transport their goods into our country. We are examining the security practices of their freight transporters, and the routes their shipments travel. We are also reaffirming to importers the importance of "know your customer," and we are assessing the overall "air-tightness" of their supply chains. Every single link in that chain will be made more secure against the terrorist threat.

At the same time, Customs will provide incentives to companies who partner with us to improve our national security against the terrorist threat. Those companies that adopt or have a program that meets security standards will be given the "fast lane" through border crossings, and through seaports and other ports of entry. We are working on initiatives now to make that happen.

The benefits of the C-TPAT are threefold. First, the security of the U.S. against the terrorist threat will be increased with respect to shipments made by trade partners. Second, the volume of commerce that will need to be targeted and examined by the Customs Service will be reduced, thereby allowing us to concentrate our resources on high-risk shipments. Third, the U.S. economy will benefit because trade partners will be able to move goods into the U.S. more expeditiously and with less cost. Accordingly, I have allocated more than $11 million in combined FY '02 and FY '03 funding for the technology and staffing necessary to begin implementing this critical initiative.

The C-TPAT is also key part of our efforts to better secure our northern border with Canada. U.S. Customs and the Canadian Customs and Revenue Agency are working closely together to implement systems and programs that will both enhance security and at the same time allow for the free flow of commerce between our two countries. The C-TPAT is a core plank in the 30-point Secure and Smart Border Action Plan, which was part of the Smart Border Declaration signed in December 2001 by Homeland Security Director Tom Ridge and Deputy Prime Minister John Manley.

Under the Ridge/Manley plan, the United States and Canada are attempting to harmonize commercial processing between the two countries. The Canadian and U.S. governments have been working independently on systems designed to increase security of cargo and help sort low risk shipments from high risk ones. The U.S. Customs program, C-TPAT, and the Canadian Customs program, the Customs self-assessment program (CSA), are both designed to achieve the dual objectives of greater security and faster processing for low risk shipments. Some questions remain, however, as to the extent of security that should be required for shipments to qualify for low risk status. Discussions are ongoing between the two governments to resolve the few remaining security-related questions. The U.S. Customs Service is optimistic that the remaining issues will be quickly settled.

Strengthening our Northern Border and our Partnership with Canada
Last month, I met with the Commissioner of Canada Customs, the Commissioner of the U.S. Immigration and Naturalization Service, and the Deputy Minister for Citizenship and Immigration Canada to continue implementing the Ridge/Manley plan. We agreed on many action items and made substantial progress on others. This was the sixth meeting in four months between myself and Canada Customs Commissioner Rob Wright. I am travelling again to meet with Commissioner Wright in Vancouver beginning tomorrow.

In addition to harmonizing the standards of our respective industry partnerships, our talks are aimed broadly at expanding our security perimeter outward from our national borders. We are focusing on initiatives to improve information exchange and adopt benchmarked security measures. This will help us to expand our mutual border and reduce the terrorist threat to the North American continent, and it will expedite the flow of trade.

The Smart Border Declaration focuses on four primary areas: the secure flow of people; the secure flow of goods; investments in common technology and infrastructure to expedite trade and minimize threats; and coordination and information sharing to defend our mutual border. An action plan put together to advance the Smart Border Declaration includes initiatives that will allow us to do more prescreening of people and goods entering the U.S. from Canada, and vice-versa, far in advance of their arrival at the border.

Part of that plan includes placing U.S. Customs and Canadian Customs personnel in each other's ports to help in the targeting and pre-screening of cargo that arrives in one country and is headed to the other. To implement this initiative, I have directed that U.S. Customs inspectors be stationed in the ports of Vancouver, Halifax, and Montreal to assist in the targeting and pre-screening of cargo that arrives there and is destined for the U.S. That is happening as we speak. Likewise, Canada Customs will soon be stationing inspectors at U.S. ports such as Seattle and Newark. I have set aside approximately $2.4 million in FY '02 and '03 funding to place Customs inspectors in Canada to enhance our targeting abilities.

Using funding from FY '03, I have allocated almost $6 million to expand a NEXUS-like program to high-volume ports of entry along the Northern Border. The NEXUS program, which is being piloted in Port Huron, allows low-risk Canadian and U.S. residents to travel across the border with minimal customs or immigration processing by either country. Like the growth of the C-TPAT, the expansion of a NEXUS-like program will improve security by identifying low risk travelers and by allowing the Customs Service to focus its targeting and inspection resources on people about whom it knows relatively little.

Even with the implementation of these types of initiatives, the lack of certain infrastructure at the Northern Border would still be a significant impediment to enhancing security. As you know, before September 11, many of the low-volume POEs were closed for a portion of each day with nothing more than an orange cone to prevent someone from making an unauthorized crossing into the U.S. Since September 11, these low-volume POEs have been staffed 24x7 with two inspectors per shift to prevent such unauthorized crossings.

Over the longer term, the Customs Service could provide a comparable level of security for less cost by permanently "hardening" these low-volume POEs. Such hardening would include installing physical barriers, sensors, and monitoring devices at the low-volume POEs to prevent and detect unauthorized crossings. Accordingly, I have allocated $41 million to harden the low-volume POEs during FY '02 and FY '03.

Providing comparable security at the low-volume POEs would also include developing a mobile response capability to respond to unauthorized crossings. Indeed, such a capability could and should also respond to unauthorized crossings between the POEs. The principal benefit of developing such a combined response capability would be that it would allow agencies to pool existing resources and air assets, including helicopters. The Customs Service and the INS have agreed to launch the combined mobile response concept by establishing two teams at locations along the Northern Border. I have allocated approximately $10 million to fund the Customs Service's contribution to these two pilot projects during the remainder of FY '02 and in FY '03.

U.S. and Canada Customs will also integrate our systems for intelligence and information gathering to improve our mutual targeting abilities. We will engage in a broad range of information exchange, including APIS and trade data.

Mexico
We are also engaged in important bilateral discussions with Mexico to take similar steps to protect our southern border against the terrorist threat and improve the flow of trade. We are currently finalizing an eight-point declaration with Mexico that will allow us unprecedented access to information on trade and people coming in from that country. That declaration focuses on key areas such as the provision of Mexican APIS information; a possible joint system for processing rail shipments; shared border technology; and the assembly of a joint investigative task force to deter trade fraud.

The Container Security Initiative
In addition to meeting part of the goals of the Ridge/Manley declaration, the placement of Customs inspectors in Canada is a first step in another core area of our efforts to "push the border outwards," and that is implementation of the Container Security Initiative, or CSI. I proposed the CSI last month to address the vulnerability of cargo containers to the smuggling of terrorists and terrorist weapons.

Ocean-going sea containers represent a vital artery of global commerce. Over 200 million containers move between the world's major seaports each year. Forty-six percent of the total value of all imports received into the United States annually arrives by sea container. That percentage is higher for other countries that are even more dependent upon the use of seaports for international trade.

The sheer volume of sea container traffic and the multitude of opportunities it presents for use by terrorists are alarming. And the threat is by no means farfetched. Some of you may recall that last October, Italian authorities found a suspected Al Qaeda operative locked inside a shipping container bound for Canada. Inside the container were a bed and bathroom for the journey to Halifax, as well as airport maps, airport security passes and an airplane mechanic's certificate.

Of ever-greater concern are the possibilities that international terrorists such as Al Qaeda could smuggle a crude nuclear device in one of the more than fifty thousand containers that arrive in the U.S. each day. One can only imagine the devastation of a small nuclear explosion at one of our seaports.

Such an event would have a massive impact upon global trade and the global economy. Even a two-week shutdown of global sea container traffic would be devastating, costing billions. But the shutdown would, in all likelihood, be much longer, as governments struggled to figure out how to build a security system that could find the other deadly needles in the massive haystack of global trade.

Obviously, such a shutdown would also greatly impact the American economy, sending the prices of major imported products spiraling upwards. Cities and seaports dependent upon sea container trade would be crippled, as business would dry up - resulting in massive layoffs.

We must do everything possible to prevent this scenario from happening. For that reason, I have proposed a "Container Security Strategy" to protect the use of ocean-going sea containers in international trade. The core elements of that strategy are the following:

• Establish criteria for identifying high-risk containers
• Pre-screen containers before they are shipped to the U.S.
• Use technology to pre-screen high risk containers
• Develop and use smart and secure containers

The initial phase of the Container Security Strategy would focus on the top ten largest foreign seaports or "mega-ports" that are responsible for shipping the greatest number of sea containers to the U.S. We have identified these ten ports, which combined account for nearly half (49%) of all oceangoing sea containers arriving in the U.S. each year.

Working with these ten ports, I want to build a common security regime for the processing of sea containers. I want to see more pre-screening of cargo that is bound for the United States done overseas, at the port of origin or the port of transshipment, rather than at the port of entry in the U.S. For example, we should know all there is to know about a container that arrives in Rotterdam and is destined for the U.S. before that container even departs from the country of origin for the Netherlands. And if an anomaly appears, we should inspect it at that port, the outbound port - the port of origin, not the port of destination.

Again, I would stress the importance of advance information to achieve this level of pre-screening. The sooner in the importation process we can get that information from the shipper or carrier, the better. Ideally, we would like to have complete manifest information in electronic form the moment cargo leaves the factory, warehouse, or loading dock abroad en route to its final destination.

The Importance of Technology
Outbound inspections of containers at the mega-ports will also be enhanced by making the latest x-ray inspection machines and radiation detectors available to or required by all who participate in the Container Security Strategy. The use of inspection technology is a major asset in our current efforts to inspect cargo coming inbound to our ports of entry, both in terms of our ability to expedite trade and to detect security breaches in containerized cargo. I am referring to devices such as mobile, truck and seaport container x-ray systems that obviate the need for costly, time-consuming physical inspection of containers and provide us a picture of what is inside the container.

Thanks to the '02 Terrorism Supplemental, Customs will be able to acquire more non-intrusive technology to protect America. With this funding, we will deploy 16 Mobile VACIS systems, 64 Handheld Acoustic Inspection Systems, 172 Portal Radiation Detectors, 8 Tool Trucks, and 128 Isotope Identifiers to the Northern Border with Canada. We will also deploy 20 Mobile VACIS, provide 4 VACIS upgrades, and supply 10 Tool Trucks to enhance security at our seaports. The use of this technology will greatly enhance security as well as our capacity to speed the flow of commerce through our ports.

Other technology we are exploring includes a crane-mounted radiation detection system to detect radiological materials in containers. This system would supplement the four thousand radiation pagers currently in use by Customs officers. We're also moving ahead on the development of electronic seals that would alert us to cargo tampering while in transit.

Staffing
As important as our efforts to build international partnerships and acquire technology are in thwarting international terrorism, I must also stress the essential human element involved in a sound border security strategy. The most important component of Customs success in protecting American lives and the American economy lies in the men and women who work directly on our Nation's frontlines. I am referring specifically to the requirement for an adequate number of Customs inspectors, and canine enforcement officers at the border to meet our security and trade facilitation mission.

One need only recall that it was a Customs inspector, Diana Dean, who in December 1999 stopped an Algerian terrorist bomber from crossing into the United States from Canada with a trunk load of powerful explosives in his car. His mission, as we now know, was to blow up Los Angeles International Airport.

Inspector Dean relied on nothing but her Customs training to pick up on Ahmed Ressam's nervous behavior, his unusual travel itinerary, and his evasive responses to her questions. And thanks to her skill and professionalism, and the skill and professionalism of her fellow inspectors at Port Angeles, Ressam was arrested and a deadly terrorist conspiracy to do great harm to American lives was foiled.

In the near term, a substantial increase in inspectors is necessary to maintain our level one alert status while decreasing the extraordinary amounts of overtime being worked by Customs inspectors. It is also critical in ensuring the two inspectors per shift requirement for officer safety and for phasing-out increased levels of National Guard support. To actually increase security beyond that provided in our Level 1 alert status and facilitate trade, additional inspectors are required to conduct targeting analyses, operate additional non-intrusive inspection equipment, staff all available lanes, question more people, and perform additional physical inspections while quickly processing an increasing volume of commercial and passenger traffic.

Thanks to congressional initiatives in our FY '02 Appropriations and the FY '02 Terrorism Supplemental, immediate help is on the way. Over the remainder of FY 2002, Customs will be bringing on 591 new inspectors and canine enforcement officers to support northern border security. An additional 490 will be brought on to support maritime port security over the course of FY 02 and FY 03, and approximately 170 more inspectors will be hired over the course of the same period for the southwest border.

Anti-Terrorist Money Laundering
Staffing is also critical for Customs on the investigative front in the war on terrorism. To bolster our immediate investigative efforts with respect to anti-terrorist money laundering, northern border security, maritime security at our ports, the investigation of strategic exports, I have allocated funding from the FY '02 supplemental to hire 363 special agents and 80 additional investigative support personnel. Agents will be assigned as needed to these priority areas. In addition, I have designated funding from our '03 budget for the hiring of fifty more special agents to assist with these activities.

Operation Green Quest
In accordance with the President's mandate to identify, disrupt and dismantle terrorist financing networks, the Secretary of the Treasury established Operation Green Quest, a joint investigative team led by U.S. Customs and supported by the IRS, Secret Service, Treasury's Office of Foreign Asset Control (OFAC) and other Treasury Department bureaus, as well as the FBI and the Department of Justice.

Operation Green Quest is based in Washington at Customs Headquarters and is led by a Senior Customs Supervisory Special Agent. The Green Quest team also includes a dedicated staff of field agents based in New York. These agents are highly trained and experienced in anti-money laundering techniques, the result of their extensive work in Operation El Dorado, a longstanding, Customs-led investigation into the laundering of illicit drug proceeds by major narcotics-smuggling organizations. Now, they are turning that expertise to the war on terrorism.

I am pleased to report that so far, actions involving Operation Green Quest have led to the seizure of approximately $4 million in suspected terrorist assets and 11 arrests. Included in this was the disruption of a major middle-eastern money transfer network known as Al-Barrakaat, which had been tied to terrorist groups. But we are by no means resting on these successes. Work to trace sources of terrorist financing is ongoing under Operation Green Quest, and it will continue until, working with our law enforcement colleagues from the Treasury Department, the IRS, and the Department of Justice, we have starved terrorist groups of the funding they need to survive.

Operation Oasis
In addition, Customs began Operation Oasis, a terrorist-related outbound currency initiative, on October 10, 2001. This national operation is directed at identifying, detecting, and halting the illegal exportation of unreported currency to terrorist entities. As of February 26, 2002, Operation Oasis has resulted more than 200 seizures of smuggled bulk cash and monetary instruments, totaling $10.3 million, and 7 arrests related to violations of currency reporting requirements. Most importantly, these seizures have generated dozens of leads that have been passed on to Operation Green Quest agents. Operation Green Quest staff, in turn, have shared investigative leads with frontline inspectors monitoring movements of illegal outbound cash.

Monitoring Of Strategic Exports
We must work diligently to close the avenues for terrorist funding, and we must also deprive terrorist groups of the weapons and strategic materials they need to carry out their activities. The third major area in which we will focus our counter-terrorist efforts is strategic export control. We are working to prevent international terrorist groups from obtaining sensitive U.S. technology, weapons and equipment that could be used in a terrorist attack on America and its people.

Project Shield America
The capstone of this effort is Project Shield America, a Customs-led initiative that also involves the Department of Commerce in working directly with American companies to prevent these types of strategic items from getting out of our country and into the wrong hands.

Since the inception of Project Shield America, Customs agents have visited approximately 1,000 companies in the United States. These companies were selected for visits because they manufacture or sell items that may be sought by terrorists or state sponsors of terrorism. During these visits, Customs agents have shared information about specific products that these firms manufacture or sell that may be sought by terrorists. Customs agents have also passed out information about Project Shield America and encouraged these companies to report attempts to illegally acquire or export such materials. In many areas, Customs agents have coordinated with local FBI, Commerce Department, and Defense Department officials prior to their visits. Commerce Department officials have also accompanied Customs agents on many of their visits to U.S. companies. Operating abroad, several Customs Attaché Offices have begun reaching out to foreign law enforcement counterparts to help raise awareness among businesses in their nations.

Safeguarding the Economy; Improving the Flow of Trade
Building a Better System of Trade
While Customs is providing security at our borders, we do not want to choke off the flow of commerce to achieve security. We must be careful not to sacrifice our openness as a society. America's strength as a nation derives from its open society and its open economy. And these should not be allowed to fall victim to terrorism.

I believe that with the right level of industry partnership and the right combination of resources, we can succeed not only in protecting legitimate trade from being used by terrorists, we can actually build a better, faster, more productive system of trade facilitation for the U.S. economy. And I believe this is an important and worthy goal to strive for - if, from the devastation of "9-11," we can succeed in constructing a system that thwarts the terrorists, and at the same time facilitates and improves the movement of legitimate business and trade, faster and more efficiently than before September 11.

One of my goals when President Bush selected me last May to be Commissioner was to build a strong U.S. Customs Service that listens to the trade community, an agency that considers the needs of business as part of deciding how we do business. And this remains my goal. But this objective must now be viewed against the backdrop of the terrorist threat to our nation. And that threat is continuing and it is real. It is a threat not just to harm and kill American citizens; it is a threat to harm the American economy. Al Qaeda and its associated terrorist organizations are on the run but they are intent on striking back, and on damaging our economy. For that reason, we must not let down our guard.

The Office of Trade Relations
I have been very impressed with the level of communication between Customs and the trade community on these and other major issues. There are very few other federal agencies in which this level of communication exists between government and industry. I want to promote that communication, especially now during these challenging times. That is the main reason I revamped the Office of the Trade Ombudsman at Customs and renamed it the Office of Trade Relations. I wanted there to be a central point through which the trade community could convey issues to me, especially the broad issues of how we do business together, and how we improve the security of our country against the terrorist threat.

That involves more than just the specific complaints of a particular member of the trade community, complaints that the Office of Trade Relations will continue to address. It must also focus on the proposals and solutions to issues impacting the long-term relationship between Customs and the trade, and the security challenges we both face. I also wanted the office to communicate Customs' issues and concerns to the trade community. In short, I wanted and I continue to want more dialogue.

Trade and Security Benefits of the C-TPAT
One of the top priorities of the Office of Trade Relations is to continue developing and adding companies to the Customs Trade Partnership Against Terrorism. The promotion of trade and the protection of our country should go hand-in-hand. Customs cannot succeed in protecting our country without the help and the participation of the business community -- without partnering with the trade.

Our goal under the C-TPAT is nothing less than to work with importers, transporters, brokers and others in the trade community to protect every aspect of the supply chain against the terrorist threat - from the foreign loading dock, to transportation of goods, to the port of entry in the U.S. No one knows those systems better than the companies that oversee them, and what it will take to safeguard those systems against potential terrorist use -- against the concealment of terrorist weapon of mass destruction at some point along the supply chain.

Through the C-TPAT, through our efforts to build a common security framework with our NAFTA partners Canada and Mexico, and through initiatives such as the Container Security Strategy, I believe we can make vast strides not only towards ensuring our defenses against a terrorist threat coming via commercial trade - we can actually build a better system for the processing of international trade. We have an opportunity not only to protect America through these initiatives, but to build a better system for trade facilitation.

Improving Internal Processes
Internally, I have also issued several challenges to Customs departments that play a key role in our relations with the trade community. I have asked these departments to focus on, streamline and improve various processes.

First and foremost, these include our Office of Regulations and Rulings (OR&R), and specifically the time it takes for Customs to issue commercial rulings. I believe the current delays are unacceptable. I want to dramatically shorten the time it takes for Customs to issue commercial rulings, to no more than ninety days. I outlined this as a top priority to OR&R and I expect to see progress very shortly.

I have also challenged our Office of Strategic Trade and our Regulatory Audit Division to move forward with the focused assessment process, which will enhance trade security and compliance. And, I have challenged our Office of Field Operations to dramatically improve uniformity in trade processing. I want to eliminate disparate treatment of goods between different ports of entry in the U.S.

The Automated Commercial Environment(ACE)
Importance of ACE to trade facilitation and Counter-terrorism
Still, Mr. Chairman, no discussion of a successful strategy to protect America and its economy in the 21st century would be complete without consideration of the central importance of new automation to the mission of the U.S. Customs Service.

That system, the Automated Commercial Environment (ACE), is an important project for Customs and an important project for the business community. It is an important project for our country and for the future of global trade. It should, if done properly, reform the way Customs does business with the trade community. It should also greatly assist Customs in the advance collection of information for the targeting of high-risk cargo to better address the terrorist threat. And in doing so, it will help us to expedite the vast majority of low-risk trade.

The successful and timely design, implementation and funding of ACE is a priority of the U.S. Customs Service. It is one of my top priorities as Commissioner. I believe that ACE is so important to our country's security and the future of trade facilitation that I have set a goal that the system be completed within four years, and I have instructed our Office of Information Technology to plan for such a schedule.

Increasing Administration and congressional support for ACE in Customs' recent budget requests has been essential to the development of the new system. As you know, Customs received $130 million for ACE in FY 2001 and $300 million in FY 2002. That funding has allowed us to establish the fundamental design framework for ACE and to begin developing user requirements for the new system, in concert with our prime contractor, the e-Customs partnership led by IBM.

Update on ACE
Since April 2001, Customs, the e-Customs Partnership, the international trade community, and other Federal agencies whose regulations are enforced by Customs have worked to develop requirements for the ACE system. This collaborative effort has:

• Defined the enterprise architecture to support and enhance trade compliance, and set the framework for future integration of Customs enforcement and administrative mission areas.
• Defined "Desired Business Results" and their linkages to Customs Strategic Intents. These set the baseline for development and measurement of the system's performance.
• Provided the foundation for full import-export views of trade flows and web-enabled exchange of commercial data.
• Validated the business benefits of ACE and estimated their value.
• Established a robust technical architecture that will enable Customs to take advantage of new technology, including commercially available software components, in modernizing the commercial, enforcement, and business systems.

As I stated earlier, ACE will not only replace our existing automated system and functionality -- it will transform the way Customs does business. ACE will enable Customs to process and monitor import and export shipments and related trade activity more efficiently through account versus individual transactions. It will enable Customs to release cargo more efficiently by integrating international law enforcement intelligence, commercial intelligence, and data mining results to focus our efforts on high-risk importers and accounts.

In developing ACE requirements and plans, Customs continues to review system requirements, concepts, and technology to take advantage of global customs "best practices," advances in web development, wireless computing, and supply chain technology. Moreover, as the nation reviews its homeland security priorities, Customs will continue to research and analyze emerging national security requirements as they develop for possible integration with ACE.

I want to thank the Congress, and in particular the members of this Subcommittee, for their past support of ACE, and acknowledge the Administration for providing the $313 million contained in Customs' FY 2003 budget request. This level of funding will allow us to keep pace with our four-year time frame for completion and, most importantly, begin to deliver on the first installment of ACE benefits to the trade community.

Sustaining ACS
As Commissioner, I will continue to focus on the sound management and implementation of ACE. However, at the same time, Customs must also take care to maintain its existing system of automation, the Automated Commercial System (ACS), until ACE is fully brought "on-line." Critical ACS "life support" funds from our fiscal year 2002 budget and FY 2003 request have been and will continue to be invested in infrastructure upgrades to improve ACS performance, reliability and availability to both the trade and Customs field users.

As you know, Customs was provided $122 million for ACS "life support" in fiscal years 2001 and 2002. This funding is being used systematically to address the major structural weaknesses in the information technology infrastructure that supports ACS. As a result of this investment, there are no longer ACS brownouts occurring in the data center, user response time has improved, and ACS availability has been expanded. In addition, Customs 15-year-old communications network has been substantially replaced with a modern system.

Customs FY 2003 budget request again includes $122 million in ACS life support. That funding will be used to continue upgrades on data center processing capabilities, network capacity, and the support structure to enable ACS to process increased trade volumes. It will also go towards enhancing an information technology security program that will enhance the system's response to a higher threat level.

Other Core Mission Responsibilities
Drug Interdiction
In accordance with the President's direction, since September 11 the U.S. Customs Service has made the defense against terrorism our highest priority. At the same time, we remain firmly committed to our other, core law enforcement responsibilities, first and foremost the protection of our nation from illegal drugs.

I believe that our counter-terrorism and counter-narcotics missions are not mutually exclusive. One does not necessarily come at the expense of the other.

There is an undeniable nexus between drug trafficking and terrorism. We have seen that in Colombia, where the FARC has channeled funds from its protection of illegal drug manufacturing into its terrorist campaign to disrupt and destabilize Colombia's legitimate government. We have seen it in Afghanistan, where the Taliban harbored the terrorist murderers of September 11 and their leadership, supporting their activities and their own repressive regime through the heroin trade. And, there are indications that Middle Eastern terrorist organizations are engaged in drug trafficking and other crimes in the U.S. to support terrorist activities.

The models and lessons U.S. Customs has developed in our battle against international drug trafficking organizations can and will help us in the fight against international terrorist organizations. This has been evidenced so far in the results achieved by the highly capable field agents of Operation Green Quest, our lead anti-terrorist money laundering investigation. These agents, who are on detail from Operation El Dorado, an extremely successful, Customs-led drug money laundering investigation, have applied their knowledge and experience of drug money laundering techniques effectively in the effort to deny terrorists the financing they need to conduct their operations.

In this and many other respects, Customs' new mission focus to prevent terrorists or the implements of terror from crossing our borders is a natural outgrowth of our interdiction role. The two functions are interrelated, and increased attention to the terrorist threat will likely enhance our drug-fighting capabilities. As we add staffing on our borders, acquire more inspection technology, conduct more questioning of travelers, and carry out more inspections of passengers and goods in response to the terrorist threat, it should come as no surprise that drug seizures will increase as well.

Indeed, it is thanks to its interdiction success that the Customs Service has the knowledge, the experience, and the tools to serve as a critical deterrent to terrorists who would attempt to target America. But it would be a grave mistake for the drug traffickers and other criminals to misinterpret our focus on terrorism as a weakening of resolve on other fronts. If anything, we will make life even more miserable for drug smugglers as we intensify our overall presence along America's borders. Our heightened state of security along America's borders will strengthen, not weaken, our counter-drug mission. So far, the evidence we have seen confirms this.

Soon after implementation of our Level 1 alert, Customs witnessed a dramatic decline in drug seizures. We believe that drug traffickers reacted to the heightened level of security along our land borders by witholding shipments until the Level 1 alert subsided.

That alert did not subside. But the pressure on the smugglers to bring their illicit goods to market became too great to bear. Not only did our drug seizures begin to rise once again a few weeks after September 11 -- they started to increase dramatically from the same period a year earlier. In fact, the overall amount of narcotics seized by Customs in October, the month immediately following the terrorist attacks, was up about 30% from the same month in previous year. Even more impressive, the total quantity of drug seizures for the first quarter of FY 2002 were up dramatically in all major categories compared to the first quarter of FY 2001: marijuana, up 19%; cocaine, up 60%; and heroin, up over 135%. Meanwhile, the total number of drug seizures climbed 17%.

Efforts to strengthen our borders through the deployment of additional manpower and non-intrusive technology equipment are expected to further enhance Customs counterdrug successes. In addition, Customs continues to play a significant role in counterdrug programs such as the Organized Crime Drug Enforcement Task Forces, High Intensity Drug Trafficking Area enforcement teams, and the Special Operations Division of the U.S. Department of Justice.

Furthermore, although intelligence resources and assets have been redirected to border security and counter-terrorist missions, Customs retains a highly active Counterdrug Intelligence Program. The agency's Tactical Intelligence Center is focused entirely on drug intelligence priorities and the processing of national level intelligence. It is also continuing to monitor and report on Eastern Pacific and Caribbean drug transportation movements.

Examples of successes against drug smuggling since September 11, 2001 include:

• September 26, Palm Beach, Florida: As part of an ongoing joint operation, and with the assistance of Customs' air unit, Customs Special Agents and local law enforcement intercepted a suspicious vessel coming from Grand Bahamas and seized 2,210 pounds of marijuana.
• October 23 and 24, Falcon Heights, Texas: Customs Special Agents, working together with the Customs air branch and the Border Patrol, seized 2,644 pounds of marijuana in a 24-hour period as a result of investigative leads regarding smuggling activity along the banks of the Rio Grande.
• November 21, Puerto Rico: Customs air and marine officers, with the assistance of other law enforcement entities, intercepted a 33-foot speed boat several miles offshore that was transporting about 2,000 pounds of cocaine.
• November 28, Nogales, Arizona: Customs agents seized 956 pounds of cocaine after developing information about a home that was being used to facilitate a drug smuggling enterprise.
• October - December 2001, El Paso, West Texas and New Mexico: During the first quarter of FY 2002, Customs Inspectors, Special Agents and Canine Enforcement Officers performing antiterrorism operations seized 86,603 pounds of marijuana, cocaine, and heroin, compared to 47,910 during the same period last year.
• January 2002, New York: Operation Wire Cutter, a major 2½ year drug money laundering investigation, was conducted with the assistance of the Drug Enforcement Administration and Colombian law enforcement. As I noted earlier in my statement, Customs agents based at the World Trade Center in New York continued to pursue this case despite the destruction of their offices in the September 11 terrorist attack. Their efforts resulted in the dismantling of a ring of Colombian money brokers responsible in recent years for laundering an estimated hundreds of millions of dollars in illicit drug proceeds. This investigation was groundbreaking in that, for the first time, Customs and Colombian law enforcement collaborated to trace the entire cycle of the conversion of narcotics proceeds, from cash pick-ups in the U.S. to the laundering of those funds in Colombia.

Despite the dedication of investigative resources to the fight against terrorism, there has been no substantial reduction in the time our special agents have devoted to drug investigations. Before September 11, Customs had 1,475 agents cross-designated by the DEA to conduct narcotics investigations under our Title 21 authority. I have no intention of reducing that number. We will continue to work effectively with the DEA to investigate drug traffickers and we will continue our strong drug interdiction efforts.

Clearly, our Level 1 alert is having the collateral effect of increasing our drug seizures. It is also likely to effect drug smuggling trends in other ways. We are anticipating those trends, and we will react to them quickly. That includes deploying an active Air and Marine presence in the Eastern Pacific and the Caribbean, routes the drug smugglers will turn to as we choke off their access to land border crossings. Although we have redirected our P-3 Advanced Early Warning (AEW) aircraft to homeland security, we continue to fly air assets in support of counterdrug operations in the transit and arrival zones.

As you also know, before September 11 our AEWs flew a substantial portion of their missions in the Source Zone for narcotics. It was because of the tragic shoot-down over Peru of a missionary flight by host country forces last April 20, not September 11, that those flights and all others conducted by U.S. agencies in the Source Zone were suspended. Thus, the events of September 11 have not diverted our AEW assets as much as might otherwise be the case. In addition, we anticipate that the deployment of new P-3 AEWs and crews since the shoot-down incident will help us to balance future demands for our air assets in the source as well as the transit and arrival zones.

Air and Marine Interdiction efforts continue to result in interdiction of drug smugglers in the Bahamas and Northern Mexico, where smuggling activity remains robust. In Mexico, Customs continues to cooperate with the Government of Mexico under Operation Halcon. Operation Halcon is a cooperative initiative that teams Customs and Mexican enforcement personnel aboard Customs aircraft based in Mexico. Since September 11, Operation Halcon has resulted in the seizure of approximately 11,000 kilograms of marijuana and close to 900 kilograms of cocaine.

In order for Customs' Air and Marine Interdiction Division (AMID) to continue to play a strong and effective role in the national counterdrug effort, I believe that modernization of existing assets is essential. In addition, as Commissioner, one of my priorities is to ensure that AMID's mission goals are reviewed and reassessed with frequency and consistency to maximize results.

We are also actively engaged on the personnel front, particularly with respect to retaining a skilled and talented pilot workforce. During the past 2 years, a 10% retention bonus has been in effect for Customs pilots, and a streamlined pilot recruitment and selection process was put in place. Customs also increased the P-3 pilot career ladder to GS-14, and identified non-P-3 Customs pilots eligible to be trained to fly P-3s. We will continue retention pay at the rate of 10% for all pilots through FY 2002, and maintain our efforts to streamline the recruitment, selection, and background investigation clearance processes.

In addition, the Customs Service has made substantial progress in modernizing its marine program. Marine program staffing has increased from 65 Marine Enforcement Officers (MEOs) in November 1999 to 77 MEOs in February 2002. An additional 22 officers who have accepted positions will soon join the agency.

Replacement of aging "open ocean interceptors" is the number one equipment procurement priority of the Marine program and is proceeding well. Eight interceptors have been obtained through the sale and/or exchange of excess vessels. FY 2002 appropriations of $9.3 million will allow for the replacement of the remaining interceptors in the current inventory (with $6.4 million coming from the $35 million allocated for the Western Hemisphere Drug Elimination Act funds, as outlined in the FY 2002 budget). Funds from the sale and exchange of aging "open ocean interceptors" will be used to replace aging utility vessels.

As directed by Congress, the Customs Service continues to consider a wide range of options for basing and deploying its interceptor vessels in the most effective and economical way. In June 2001, the Air and Marine Interdiction Division conducted a performance-based assessment of the Air and Marine program and then developed a redeployment strategy in response to those findings. Approximately ninety-percent of the redeployment is complete. Customs is currently exploring the option of using mobile support vessels to provide for on-station mission support, supplies, maintenance, and personnel needs in support of long-term offshore drug interdiction efforts.

Other Enforcement Priorities
Mr. Chairman, as you know the enforcement mission of the U.S. Customs Service extends well beyond drug interdiction to include: Internet child pornography and cybercrime; forced child and prison labor; violations of Intellectual Property Rights; illegal textile transshipment; tobacco smuggling; international auto theft; and other criminal activities related to our border mission. Customs will continue to actively pursue and fund priorities in each of these areas in FY 2003.

In fact, one of our most well-publicized cases in 2001 involved the dismantling of a despicable ring of child pornographers operating over the Internet from Russia. Under Operation Blue Orchid, Customs agents from our CyberCrimes Center in Fairfax, Virginia and our Moscow attache office worked closely with Russian authorities to identify and arrest both the proprietors of the pornographic site and their customers, many of whom were located in the U.S. That Operation also resulted in the identification of the young victims of the ring and their subsequent rescue from further abuse.

Despite our focus on counter-terrorism, Customs has achieved noteworthy successes in other, critical areas of our enforcement work. To mention just a few, since September 11, Customs has also managed to shut down a major stolen luxury car smuggling ring operating out of New York; dismantle a highly sophisticated internet piracy network known as "Warez" that was stealing and distributing billions of dollars worth of software; and secure the largest seizure ever of pirated computer software, over $100 million dollars worth of fraudulent merchandise.

These successes testify to the diversity of threats Customs must contend with and the skill of our people in protecting America, on all fronts. I realize that with the added strain of September 11, balancing our traditional enforcement priorities with counter-terrorism is a difficult challenge. Yet it is one our employees have proven this agency can meet. Protecting our citizens and our communities from illegal drugs and other criminal threats was a core responsibility of the U.S. Customs Service before September 11. And it remains at the heart of our mission after September 11 as well.

Closing
Mr. Chairman, members of the Subcommittee, I have outlined a broad array of initiatives today that, with your assistance, will help the U.S. Customs Service to protect America from a terrorist threat while fulfilling our traditional trade and enforcement mission. Make no mistake, Customs faces some very great challenges in balancing its established mission priorities with the war on terrorism -- perhaps the greatest challenges in its long history of service to the American people. But I am fully confident that, with the continued support of the President, the Treasury Department, and the Congress, Customs will succeed in meeting the great demands placed upon it, as it has done throughout two centuries of change and challenge in our Nation.

Doing so will require a highly coordinated and concerted effort to integrate Customs' strengths within the national strategy for Homeland Security. That effort is well underway and is producing marked results, as I have testified today. With your support for Customs 2003 budget request, we will continue to build upon the progress made with the help of the 2002 congressional initiatives and the '02 Terrorism Supplemental, and continue our efforts to defend America's health, liberty and prosperity at this momentous time for our Nation.

Thank you again for this opportunity to testify. I would be happy to answer any questions you might have.