Before I came to Washington, I had a better than average understanding of the workings of the United States Customs Service from my tenure in the New York City police department. Our paths crossed on everything from narcotics arrests and money laundering investigations, to the smashing of an international auto theft ring that specialized in stealing luxury sedans off the streets of Manhattan for resale abroad. But it wasn't until I came to the department of treasury, as under secretary for enforcement, that I fully appreciated the vast and complex responsibilities of the customs service, as well as the difficulties and the very real dangers faced by our employees.

The men and women of the Customs Service continue to process trade and passengers in record numbers. In 1998 we processed 19.7 million trade entries. To give you some perspective, in 1994 we processed 12.3 million entries. That's an average annual growth rate of about 12.5%. Four hundred and sixty million passengers moved through our inspection areas last year, 13 million more than 1997.

The statement "processing trade and passengers in records numbers," however, doesn't quite capture just how hard that work can be. Many of you know what I'm talking about through your visits to our border areas. You've seen what it's like for inspectors to work border crossings in the searing heat, doing painstaking, difficult, and dangerous searches. Our agents, marine officers, and pilots also constantly put themselves in harm's way in pursuit of our mission.

The price for our successes in 1998 was the lives of two agents and one pilot. The families of these fallen officers are here in Washington this week to attend a memorial service at the treasury department as part of national police week. As difficult as it was for customs to lose these brave men, our grief is nothing compared to the hardship borne by the spouses, children, and friends of these officers.

Their sacrifices were not in vain. Combined, our agents and inspectors seized a record 1.35 million pounds of illegal narcotics in 1998. That's over a million pounds of drugs that won't find its way into American schools, streets, and communities.

Our people aren't only stopping drugs. We're protecting our nation's children, with our expertise in areas such as child exploitation on the internet. Recently, an alert customs agent assigned to stop this crime saved a 12-year old girl from a cyber pedophile. The suspect had lured the child into a possible face to face meeting through e-mail conversations in a chat-room.

These are real, modern day threats our front line people must contend with. Along with our dedicated core of import specialists, technical personnel, and intelligence analysts, they make a formidable defense against trade fraud, drug smuggling, terrorist activity, and internet crime.

People who work this hard and take such risks on behalf of the American public deserve to be supported by the most ably managed agency possible. So, of course, do the American people.

It was clear to me when I arrived that too much was at stake in the customs service to let problems fester - problems that threatened to compromise the mission of a great agency at a time when the country could least afford it. Instead of informed, consistent and service-wide policy-making emanating from Washington headquarters, I found that inconsistent, often-uninformed decisions were being made out of hundreds of ports across the country. Decision-making on hiring, promotion, and disciplinary issues differed from one region to the next, without headquarters oversight.

All of this conspired to fuel fear among the rank and file that favoritism, real or perceived, dictated who was promoted, or worse, who was protected from disciplinary action. Instead of a robust office of internal affairs to combat corruption, a poorly led, shell of a function existed that was further emasculated by lack of resources and authority.

On top of all this, the frailty of our automated system of handling imports threatened to reduce our processing power dramatically. In its candid and thorough assessment, the GAO said the system could be fixed, but the customs service wasn't up to the task.

Clearly, actions had to be taken.

One of my first undertakings upon being confirmed as commissioner was to develop a priority list of these problem areas. We used this list to develop a document we refer to as action plan 1999. The plan covers all the major areas that we have to be concerned about, from both a law enforcement and a trade perspective. These include integrity, accountability, discipline, training, automation and passenger services, to name a few. These reforms are explained in greater detail in my submitted statement. I'd like briefly to summarize them here.

Reinforcing integrity at U.S. Customs has been and continues to be our top priority. Any organization with powers like those granted to customs must uphold the highest standards of ethics and integrity. Our Internal Affairs Office, the focus of our integrity efforts, has been thoroughly reformed. It has received, and continues to receive, the resources, the personnel, the support and the priority it must have to make our corruption fighting capacity second to none.

To underpin our efforts in internal affairs, we replaced a weak, fractured and inconsistent employee allegation and disciplinary process with a new, integrated system. It includes a computer-tracking program that is designed to stop integrity and disciplinary problems from falling through the cracks.

New, agency-wide, accountability standards will help to solidify our reforms. A new inspection regime has our field operations reporting directly to headquarters, with greater frequency, as opposed to the dislocated process of the past. Management roles have been clearly defined to leave no confusion about who's responsible for getting the job done.

However, integrity cannot be reinforced through discipline and accountability alone. It must be strengthened through training. We've established a new office of training, led by a new assistant commissioner, to bolster training in all respects: both in-service and for new employees. This person has been selected and should be on board soon.

I'd like to say a few words about our passenger services. It has been disturbing, to say the least, for the customs service to be confronted with charges of racism in the conduct of what is admittedly a demeaning process in even the most impartial of circumstances: namely, the personal search for illegal drugs. As long as the national appetite for illegal narcotics is such that traffickers will hide drugs on, or even in, the persons they recruit to smuggle contraband into America, some form of invasive search as a last resort will be required to stop them.

Last year we seized over two and a half tons of illegal narcotics from air passengers. The lengths they will go to are astonishing. In fact, Mr. Chairman, I have here examples of the pellets drug couriers swallow - which they often make from the fingers of rubber gloves.

These two pellets weigh about eighteen grams a piece. A smuggler would typically swallow about sixty of these, or even more. That's roughly 1 kilogram, or 2.2 pounds. Each of these would be filled with heroin worth about $1800 on the streets of New York.

The whole kilogram would be worth about a quarter of a million dollars retail. Now you have a sense of why these people are willing to try anything to get these drugs through.

Drug dealers will exploit anyone they can -- children, even infants. Stopping this threat isn't easy work, but it's something we have to do. I much prefer using the most advanced technology available, like body scanners, to move away from personal searches.

We've already installed some of this equipment at our busiest ports. We need to install more. We have also changed our procedures to make certain a supervisor is engaged in each decision whether or not to proceed with a personal search when alternatives are not available.

And most importantly, we established an independent commission to examine the customs service's record of personal searches to determine whether any racial bias, conscious or otherwise, has been a factor in these searches. We will not tolerate racial bias; not in the name of the war on drugs; not for any reason.

Still, the cartels and others should not mistake our color-blind commitment to the rights of individuals as a flagging in our determination to deny traffickers and their mules' entry into the united states. They will be stopped and brought to justice.

From an operational standpoint, there is no issue more critical to customs' future than automation. It is the heart and soul of our commercial operations, and the key to our relationship with the all important trade community. We're at a critical juncture in our efforts to meet the mandates established by the Customs Modernization Act of 1993.

Before trade automation, all entries looked like this -- this particular entry covers one container of goods destined for a department store. It covers several commodities - sweaters, handbags, and glasswear. Note, this is paperwork for one container.

Before automation, customs officers had to pore over these documents line by line to ensure that the proper amount of duty was paid, and that these goods were not in violation of trade agreements. In this case, that's 624 pages.

Today, less than 1% of entries are received this way. For the most part, we receive them electronically. We can pull up the needed data immediately, meaning less delay. Without automation, we're back to this pile of paper.

If our current overburdened system breaks down, this is what we have to work with. You can imagine the difficulties we'd face. The flow of trade across our borders would be slowed significantly, if not brought to a halt in many places.

Customs can't afford this, and neither can American business. We need a long-term answer to this problem. We need the automated commercial environment, or ace.

We've taken steps to ensure that our systems modernization plans are competent, well-managed, and up-to-date. We've worked closely with the private sector on both the design and the technical specifications for the new automated system. We've restructured our office of information and technology, appointed capable and experienced leaders for this project, and reviewed our cost and accounting methods with an independent consultant. We've also run a series of prototypes for a new automated system that have met with great praise from the private sector. We are adopting the recommendations put forward by the GAO.

Today's hearing offers customs the chance to provide the Congress with perhaps the most comprehensive assessment of our trade modernization efforts to date. We look forward to working with the congress, and this committee, on clearing the substantial hurdles that remain.

Mr. Chairman, members of the committee, many have questioned our ability to institute reforms at an agency that has repeatedly shaken off criticism in the past and settled back into its old ways. Oversight hearings by the house ways and means committee several years ago precipitated a number of reforms in the Customs Service. Over time many of these reforms were dismantled. Since being sworn in just over nine months ago, I instituted many of these and added more.

I believe these changes cut much deeper than before into Customs' management culture. Our new disciplinary system, our new inspection regime, our centralization of reporting lines - these are all initiatives that will become institutionalized, resulting not just in a temporary fix, but in lasting changes in how Customs employees view their roles and responsibilities. These reforms, with the help of the Congress, must be allowed to permeate the organization and take hold.

Somebody said that I would occupy the "hot seat" today. But, in truth, I wouldn't trade places with anyone. As commissioner, I accept the accountability that comes with this job. And I welcome the oversight. This is good government. I am confident that your examination of the service will, in the end, make for a stronger agency, better equipped to do the job, and better understood by this committee, by the congress and by the American people. Ultimately, that is a prescription for success that I believe all of us are searching for.

In closing, I want to thank all the members here for supporting customs over the past year.

Thank you.