SPEAKERS CONTENTS INSERTS Tables
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47–769 CC
1998
BUDGET AUTHORIZATIONS FOR FISCAL YEARS 1998 AND 1999 FOR THE U.S. CUSTOMS SERVICE, THE U.S. INTERNATIONAL TRADE COMMISSION, AND THE OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
HEARING
before the
SUBCOMMITTEE ON TRADE
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
MARCH 11, 1997
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Serial 105–16
Printed for the use of the Committee on Ways and Means
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois
BILL THOMAS, California
E. CLAY SHAW, Jr., Florida
NANCY L. JOHNSON, Connecticut
JIM BUNNING, Kentucky
AMO HOUGHTON, New York
WALLY HERGER, California
JIM McCRERY, Louisiana
DAVE CAMP, Michigan
JIM RAMSTAD, Minnesota
JIM NUSSLE, Iowa
SAM JOHNSON, Texas
JENNIFER DUNN, Washington
MAC COLLINS, Georgia
ROB PORTMAN, Ohio
PHILIP S. ENGLISH, Pennsylvania
JOHN ENSIGN, Nevada
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JON CHRISTENSEN, Nebraska
WES WATKINS, Oklahoma
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
ENNY HULSHOF, Missouri
CHARLES B. RANGEL, New York
FORTNEY PETE STARK, California
ROBERT T. MATSUI, California
BARBARA B. KENNELLY, Connecticut
WILLIAM J. COYNE, Pennsylvania
SANDER M. LEVIN, Michigan
BENJAMIN L. CARDIN, Maryland
JIM McDERMOTT, Washington
GERALD D. KLECZKA, Wisconsin
JOHN LEWIS, Georgia
RICHARD E. NEAL, Massachusetts
MICHAEL R. McNULTY, New York
WILLIAM J. JEFFERSON, Louisiana
JOHN S. TANNER, Tennessee
XAVIER BECERRA, California
KAREN L. THURMAN, Florida
A.L. Singleton, Chief of Staff
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Janice Mays, Minority Chief Counsel
Subcommittee on Trade
PHILIP M. CRANE, Illinois, Chairman
BILL THOMAS, California
E. CLAY SHAW, Jr., Florida
AMO HOUGHTON, New York
DAVE CAMP, Michigan
JIM RAMSTAD, Minnesota
JENNIFER DUNN, Washington
WALLY HERGER, California
JIM NUSSLE, Iowa
ROBERT T. MATSUI, California
CHARLES B. RANGEL, New York
RICHARD E. NEAL, Massachusetts
JIM McDERMOTT, Washington
MICHAEL R. McNULTY, New York
WILLIAM J. JEFFERSON, Louisiana
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined. The electronic version of the hearing record does not include materials which were not submitted in an electronic format. These materials are kept on file in the official Committee records.
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C O N T E N T S
Advisory of February 13, 1997, announcing the hearing
WITNESSES
Office of the U.S. Trade Representative, Hon. Jeffrey M. Lang, Deputy U.S. Trade Representative
U.S. Customs Service, Hon. George J. Weise, Commissioner
U.S. International Trade Commission, Hon. Marcia E. Miller, Chairman
U.S. General Accounting Office, Norman J. Rabkin, Director, Administration of Justice Issues, General Government Division; accompanied by Walter Raheb, Los Angeles Field Office
U.S. General Accounting Office, JayEtta Z. Hecker, Associate Director, International Relations and Trade Issues, National Security and International Affairs Division
Industry Functional Advisory Committee on Customs Matters, and International Business-Government Counsellors, Inc., James B. Clawson
National Customs Brokers and Forwarders Association of America, Inc., Harold G. Brauner
National Treasury Employees Union, Robert M. Tobias
SUBMISSIONS FOR THE RECORD
Border Trade Alliance, Phoenix, AZ, statement
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Collier, Shannon, Rill & Scott, PLLC, statement
BUDGET AUTHORIZATIONS FOR FISCAL YEARS 1998 AND 1999 FOR THE U.S. CUSTOMS SERVICE, THE U.S. INTERNATIONAL TRADE COMMISSION, AND THE OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
TUESDAY, MARCH 11, 1997
House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:05 a.m., in room 1100 Longworth House Office Building, Hon. Philip M. Crane (Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON TRADE
CONTACT: (202) 225-6649
FOR IMMEDIATE RELEASE
February 13, 1997
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No. TR–2
Crane Announces Hearing on Budget
Authorizations for Fiscal Years 1998 and
1999 for the U.S. Customs Service, the
U.S. International Trade Commission, and the
Office of the United States Trade Representative
Congressman Philip M. Crane (R–IL), Chairman, Subcommittee on Trade of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on the President's fiscal year 1998 budget proposals for the U.S. Customs Service, the U.S. International Trade Commission (ITC), and the Office of the United States Trade Representative (USTR). The hearing will take place on Tuesday, March 11, 1997, in the main committee hearing room, 1100 Longworth House Office Building, beginning at 10:00 a.m.
In view of the limited time available to hear witnesses, oral testimony at this hearing will be heard from invited witnesses only. Witnesses will included representatives from Customs, ITC and USTR. Testimony will also be received from the U.S. General Accounting Office, and from representatives from business and industry. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.
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BACKGROUND:
On February 6, 1997, President Clinton submitted his fiscal year 1998 budget to the Congress. The submitted budget included proposals for Customs, ITC and USTR.
FOCUS OF THE HEARING:
The hearing will focus on budget authorizations for fiscal years 1998 and 1999 for the aforementioned trade-related agencies.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit a written statement for the printed record of the hearing should submit at least six (6) copies of their statement and a 3.5-inch diskette in WordPerfect or ASCII format, with their address and date of hearing noted, by the close of business, Tuesday, March 25, 1997, to A.L. Singleton, Chief of Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. If those filing written statements wish to have their statements distributed to the press and interested public at the hearing, they may deliver 200 additional copies for this purpose to the Subcommittee on Trade office, room 1104 Longworth House Office Building, at least one hour before the hearing begins.
FORMATTING REQUIREMENTS:
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Each statement presented for printing to the Committee by a witness, any written statement or exhibit submitted for the printed record or any written comments in response to a request for written comments must conform to the guidelines listed below. Any statement or exhibit not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.
1. All statements and any accompanying exhibits for printing must be typed in single space on legal-size paper and may not exceed a total of 10 pages including attachments. At the same time written statements are submitted to the Committee, witnesses are now requested to submit their statements on a 3.5-inch diskette in WordPerfect or ASCII format.
2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a statement for the record of a public hearing, or submitting written comments in response to a published request for comments by the Committee, must include on his statement or submission a list of all clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the name, full address, a telephone number where the witness or the designated representative may be reached and a topical outline or summary of the comments and recommendations in the full statement. This supplemental sheet will not be included in the printed record.
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The above restrictions and limitations apply only to material being submitted for printing. Statements and exhibits or supplementary material submitted solely for distribution to the Members, the press and the public during the course of a public hearing may be submitted in other forms.
Note: All Committee advisories and news releases are available on the World Wide Web at 'HTTP://WWW.HOUSE.GOV/WAYS_MEANS/'.
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Chairman CRANE. Welcome to the Trade Subcommittee's hearing on budget authorizations for fiscal years 1998 and 1999 for the U.S. Customs Service, International Trade Commission, and the U.S. Trade Representative.
The Office of the U.S. Trade Representative, USTR, is responsible for developing, coordinating, and advising the President on U.S. trade policy. USTR experts and consultants conduct our international trade negotiations, including our affairs relating to the World Trade Organization, WTO. We should be impressed by the breadth and detail of the negotiations undertaken by the professional staff at USTR whose dedication to free trade negotiations transcends changes in administration.
It is fitting that this Subcommittee should also review the budget of the Customs Service for the agency's history as closely intertwined with that of the Committee on Ways and Means.
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At the time the Committee and the U.S. Customs Service were created by the first Congress in 1789, Customs revenues were the sole source of revenue for our Nation. Today, we rely on Customs to guard our borders, interdict illegal narcotics, and enforce over 700 trade laws.
However, as testimony by the General Accounting Office, GAO, and members of the trade community will show, Customs must be more responsive to the trade community by reducing the regulatory burden on the American economy. Customs should also be weary of using the regulations to amplify or limit congressional intent. The best way to reduce these regulatory burdens is for Customs to automate its processes.
In overhauling the regulations and its automated systems, Customs must contemplate a larger role for industry than it has previously thought possible. In the area of Customs enforcement, we must acknowledge that protecting our families from the threat of drugs means more than policing the border. Customs must make drug-smuggling unprofitable by dedicating more of its resources to antimoney-laundering investigations, and we should support Customs initiatives to break the drugs-to-dollar chain.
We also will receive testimony today from GAO and the National Treasury Employees Union, NTEU, who will discuss the status of the partnership agreement governing labor-management relations at Customs.
I am concerned that 3 years into this relationship, Customs and the NTEU have not completed any comprehensive evaluation of the partnership agreement which can be shared with this Subcommittee.
I am also concerned that the partnership agreement may lead to inefficient staffing of inspectors and possibly corruption along the border.
Customs is not a worker-owned enterprise, and the partnership agreement should not mean comanagement for inspectors.
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Last, we will receive testimony from the International Trade Commission, ITC. The ITC has a unique role within the Federal Government as an independent nonpartisan quasi-judicial agency. The ITC conducts trade investigations, provides Congress with technical assistance in developing trade policy, maintains the harmonized tariff schedule, and offers technical advice to businesses seeking remedies under the trade laws.
The ITC and this Subcommittee have always enjoyed a close and supportive relationship with the Commission.
I now recognize our distinguished Ranking Member, Mr. Matsui, for any statement he would like to make.
Mr. MATSUI. Thank you very much, Mr. Chairman. I congratulate you on holding this hearing today on the budget authorizations for the major trade agencies within the jurisdiction of our Committee.
A timely Committee and hopefully early House and Senate actions on the authorizations will provide necessary guidance for the appropriations process.
While Congress and the administration seek to balance the budget, we also need to ensure that the Customs Service, USTR, and the International Trade Commission have sufficient resources to carry out their statutory functions and the essential programs and activities which Congress and the private sector expect them to perform.
These hearings also provide an opportunity for the Subcommittee to oversee and review the activities and programs of these key trade agencies.
I look forward to the testimony. In particular, I welcome the Commissioner of Customs, George Weise, and USTR Deputy Lang back to the Subcommittee, and Marcia Miller in her first appearance as the ITC Chairman before this Subcommittee.
Again, thank you, Mr. Chairman.
Chairman CRANE. Today, we will hear from a number of distinguished witnesses, and in the interest of time, I ask that you keep your oral testimony to 5 minutes. We will include longer written statements in the record.
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Our first witness will be our good friend, George Weise, Commissioner of Customs. I was proud to be the primary sponsor of the Customs Modernization Act, which provided the legal framework within which Commissioner Weise is streamlining Customs processes and preparing the agency for the next century.
Commissioner Weise, welcome back to the Committee.
STATEMENT OF HON. GEORGE J. WEISE, COMMISSIONER, U.S. CUSTOMS SERVICE; ACCOMPANIED BY SAM BANKS, DEPUTY COMMISSIONER, U.S. CUSTOMS SERVICE
Mr. WEISE. Thank you very much, Mr. Chairman. It may be a trite phrase, but we often say it is great to be here. In this case, having spent 9 years with this Committee and this group, it is a real pleasure to be back where I spent so much time helping to formulate with you some of the policies that I have now been responsible for implementing.
I want to introduce to my right, Sam Banks, who is the Deputy Commissioner of U.S. Customs, a person who I couldn't get along without, and I have some of the executive staff behind me.
I very much appreciate the opportunity to have my full statement submitted for the record, and I will be very brief, if I can, in summarizing some of the key points.
I think it is important that we reflect back today on what we have been able to accomplish in the U.S. Customs Service with the great support of this Subcommittee and the Committee on Ways and Means. I want to make it absolutely clear how grateful I am and how it is impossible for us to have come as far as we have without your help, and I think we are moving in the right direction. We have come a long way, and I would like to just summarize some of the areas where we have made some progress and talk about where we need to continue our efforts because we have a long, long way to go in order to complete this process.
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Before getting into that, I would like to also make it clear on the public record because, you know, so often, when you become a Commissioner of Customs, people attempt to label you and judge you before you get into the position as to whether you are going to be a facilitator or an enforcement person, and that happens regardless of what we have to say about it.
I was labeled as a facilitator because of my long experience with this Committee and the trade policy arena. The one thing I want to make absolutely clear is that, I took this position with a clear mission of trying to be as balanced as I possibly could. One of the things that became absolutely clear to me very early in my process, Customs has a tremendously diverse mission, and numerous responsibilities we enforce. It is almost a trite phrase, over 400 laws for 40 different agencies, but as far as I am concerned, there is no responsibility that we have that exceeds the importance of our responsibility of keeping drugs off our streets and away from our children. This is something that we have tried very hard to do, and I think we have been successful in the course of the last 4 years.
We have major operations, Operations Hard Line and Gateway, which have met with great success. In the past year, for example, we have seized over 1 million pounds of narcotics, which is a record for the Customs Service. It is probably a record that, on the one hand, you can be proud of. On the other hand, it is an indication of how serious the problem is and how much is left to be done. So I wanted to make that absolutely clear.
But in the commercial arena as well, I think we have come perhaps even further than could have been expected. We are, as you mentioned, the oldest organization in all of the Federal Government, and I would venture to guess that if you put up the last 4 years in terms of the changes that we have embarked upon and compare that to any 4-year period in the history of the U.S. Customs Service, there wouldn't be any comparison whatsoever.
Take a look back, just briefly, where we were 4 years ago. We were facing the prospect of trade continuing to grow at astronomical levels. Budgets were getting tighter and tighter. We had a commitment that ultimately was reached between the administration and the Congress that we were going to balance the fiscal deficit in a 7-year period. It became clear to us that we weren't going to be seeing additional resources in great numbers coming our way.
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We had, in effect, a lot of distrust in the Congress about the U.S. Customs Service. We had a provision that wasn't in a Ways and Means provision bill, but in an annual appropriation bill, there was a provision that forbade the Customs Service from even looking at whether or not we could streamline our organization and consolidate our offices. That was the level of distrust that existed in the Congress because the fear was that if they gave us the flexibility to study our reorganization or study an organization, the changes that we would make would be irresponsible and perhaps adversely impact certain Members' districts over others.
We were facing a number of archaic laws and regulations. We were burdened with paper requirements. We had an automated system that was well over a decade old and was in substantial need of revamping, and the other thing that was really a problem that I wasn't as aware of until I got down there, our own financial house was in chaos.
We had under the Chief Financial Officers Act an attempt in 1993 to audit our books, and our books were in such bad shape that they said, ''We can't audit your books. We gave you what is called a complete disclaimer. Your books are in such bad shape, we can't audit them,'' and I will tell you, Mr. Chairman, that I was called in to meet with the Secretary of the Treasury, along with the Commissioner of the IRS, because they had a similar report by the GAO under the Chief Financial Officers Act. I was told in no uncertain terms, ''You will make this better,'' and I promised the Secretary that within a 4-year period, we will get a clean audit from the Chief Financial Officers Act.
Yesterday morning we met with our examiners from the Treasury Inspector General's Office. As of last year, we had come to the next-to-the-last step of getting a clean audit. We had a qualified opinion.
Yesterday, I was informed that we have a complete unqualified clean audit of our financial records, and that is something that I am very, very proud of.
The last thing in terms of what we were facing 4 years ago was labor-management unrest. Frankly, we had very poor relations with our union, as you have made reference to, and I know that there will be witnesses from the General Accounting Office later to talk about our partnership that we formed with the NTEU. Your points are very, very valid. We are not looking to have our management, and our labor unions comanage our organizations. I don't believe that is what is being achieved, but I think we have come a long, long way in creating some of those partnerships.
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Since that situation we were facing 4 years ago, today, we not only have had the ability to reorganize, but we have fully implemented a complete reorganization where we have reduced the size of our headquarters operation. We have eliminated the regions and districts. We put more frontline troops into the field.
We have taken a fresh look at every single process that the Customs Service is involved in and reexamined it and tried to improve it. We are working to move away from a transaction-by-transaction basis to an account-based system, and we are able to do this because of the leadership of this Committee.
You gave us the tools to do it when you passed the Customs Modernization Act, and we have taken it a long, long way.
The concept of partnership, is part of our reorganization blueprint, which is looking at not only our structure, but the way we do business. We call it People, Processes, and Partnership, and we are working very closely through that concept of partnership with the business community.
For the first time in the history of the Customs Service, we actually can measure the level of compliance. For many, many years, we worked on the basis of intuition. We thought certain importers, perhaps, were highly compliant, others not so compliant, others were very bad, but we have been able to put in place in the last 4 years a system that measures the level of compliance. We have demonstrated over the course of the last year that we have been able to work with the business community through the concept of informed compliance, helping to educate them on what is expected of them, what the law says, what the regulations are, and what their expectations should be. As a result, we have been able to increase the overall level of compliance by 2 percent, from 80 to 82 percent.
That shows we still have room for improvement. But, the one thing that I think ought to be noted as well, even though we only have an 82-percent compliance rate, we have a 99-percent revenue collection rate. That means we have a revenue gap of only 1 percent that we have been able to measure and document.
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So, of all the revenues that are due the Customs Service, we are collecting 99 percent of what is due us. We still have room for improvement. We have got to get that 82-percent compliance rate up, and we have got to get that 99-percent rate of duty payment up. We are going to do it. We are working very hard to do it.
We are also working on a number of improvements in our automated systems. As I said, they are very archaic. Through the tools that you have given us and the Customs Modernization Act, we are looking to completely revamp our automated collection system. It is called an automated collection environment. We are looking at an automated export system, a national account basis, and all of these things are taking much longer than I personally would have liked. One of the reasons that they are taking longer is that when I sat in the chair of the people behind you for 9 years, one of the biggest complaints I heard from the business community was that Customs has a long history of moving too swiftly to implement systems before they laid the foundation for those systems and that they haven't worked to closely coordinate with the business community's automated system, so that they have compatibility.
We are perhaps taking a little longer than many would like because of two reasons. One, we aren't making that mistake again. We are working closely with the business community to make sure we are getting their input, to make sure that our systems are going to be compatible with theirs, but also, we are in the midst of completely changing the whole fundamental process. The current system, ACS, was a manual system that we put on a computer, we are trying to have this new system designed and the automation of it designed concurrently so that they fit more closely together. We are making good progress on this.
As I said, Mr. Chairman, earlier, we have come a long, long way. There is no question in my mind that we have a long way to go, and with the continuing support of this Committee, I am confident that we are moving in the right direction.
We continue to be open to ideas and to constructive suggestions. We work closely with Members of this Committee and with your staff. We welcome the opportunity for the General Accounting Office to come in and take a look at our programs.
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I can tell you that I have looked at the report on the NTEU partnership. There are some constructive points in there that we are going to take very seriously, we are going to pay close attention to, and we are always looking to work in cooperation with this Committee and this Congress.
I am proud of the accomplishments that the people of the Customs Service have achieved over the course of the last 4 years. I am committed to continuing to work with you and to move this organization forward.
Mr. Chairman, I could either talk a little bit about the budget, but since you have the budget request before you, I can still discuss the budget at this point, or turn it over to you for questions and answers.
[The prepared statement follows:]
Statement of Hon. George J. Weise, Commissioner, U.S. Customs Service
Mr. Chairman and Members of the Committee, it is a pleasure to be here today to discuss the activities of the Customs Service and to present our authorization request. Once again, I am looking forward to working with this Committee and am confident that Customs will continue to enjoy the same high level of support it has received in the past. Accompanying me today are members of Customs executive management team.
Our resource requests, our priorities, and our commitment all, of course, are derived from our mission which is to ensure that goods and people entering and leaving this country conform to all applicable laws. In FY 1998, while challenges facing Customs will continue to grow in complexity and scope, our greatest operational priority will continue to be drug interdiction and the dismantling of drug smuggling organizations. In FY 1996, Customs cocaine seizures increased approximately 15 percent from the previous year, heroin seizures increased approximately 29 percent and marijuana and hashish seizures increased approximately 23 percent. Overall, Customs seized approximately one million pounds of narcotics—more than all other Federal law enforcement agencies combined. This is a new milestone for the agency.
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As you are aware, however, the job is not finished. Illegal narcotics and other contraband continue to find their way into the United States. To meet the drug challenge and our projected workload, we are proposing a budget of $1.7 billion for FY 1998 which includes funding for anti-smuggling operations, land border automation, laboratory upgrades, personnel relocation and vehicle replacement. These resource increases, which I will discuss in more detail later in this statement, will contribute to refining our core processes and strategies.
Workload
The U.S. Customs Service is accountable for the screening of all commercial movement of cargo across our borders. Last year, the Customs Service collected about $22 billion in revenue for the United States in the form of duties, taxes, and fees. The Customs Service applied hundreds of laws and regulations concerning tariff and trade to over 16 million entry summaries which involved nearly $800 billion of trade. Additionally, Customs performs the initial checks, processes, and enforcement functions for over 40 federal agencies. Customs performs these tasks by covering over 7,000 miles of land border and servicing over 300 ports of entry.
Customs will have to address increasing workload requirements as the number of passengers and conveyances crossing our land borders or entering through our airports and seaports grows. In FY 1997, it is estimated that there will be 372 million land border passenger arrivals, 71 million air passenger arrivals, and 8 million sea passenger arrivals. Customs also estimates that 125 million vehicles, 713,000 aircraft, and 110,000 vessels will enter our ports. As trade and traffic increase, Customs must remain ever vigilant against drug smuggling attempts.
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Processes and Strategies
The Customs Service reorganized in FY 1995 with the principles outlined in their report, ''People, Processes and Partnerships: A Report on the 21st Century.'' This effort, which was recognized by the General Accounting Office (GAO) as a model in their guide ''Effectively Implementing the Government Performance and Results Act,'' provided the framework for Customs to develop the processes and strategies it will need to adapt to the changing demands of its mission.
Customs has three core operational processes: Trade Compliance, Passenger Processing, and Outbound. The goal of the Trade Compliance process is to maximize compliance with Customs trade laws while decreasing the cycle time for releasing legitimate cargo in an environment in which our workload is expected to triple. Customs expects to achieve this through a balance of informed compliance and targeted enforcement that will allow us to focus resources on violators of import laws and regulations. The goal of Passenger Processing is to ensure compliance with Federal laws and regulations by targeting, identifying, and examining high-risk travelers, while expediting low-risk travelers. The Outbound Process is responsible for the enforcement of laws concerning the export of undeclared currency, the illegal export of stolen vehicles, munitions, dual use materials with military applications, and precursor materials. Outbound is also charged with the high profile responsibility to enforce embargoes against countries sanctioned for supporting terrorism. Other responsibilities of Outbound include the maintenance of the Office of Defense Trade Control (ODTC) munitions license program, and the collection of outbound trade statistics and harbor maintenance fees on exports. Inherent in Customs processes are the Narcotics and Money Laundering strategies which deal with those who willfully violate the law.
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Customs Narcotics Strategy
Customs goal is to prevent the smuggling of narcotics into the U.S. by creating an effective interdiction, intelligence, and investigation capability which also helps to disrupt and dismantle smuggling organizations. Proactively, Customs developed four objectives as part of its overall narcotics strategy. The purpose of these objectives is to provide to Customs enforcement officers the tools and systems they need to improve their ability to interdict narcotics. Through the various initiatives and programs which I will highlight, it is clear that Customs is making progress in its efforts to combat the illegal flow of drugs.
Customs first objective is the development, collection, analysis and dissemination of actionable intelligence throughout all levels of federal, state, and local narcotics enforcement agencies. Customs has been at the forefront in developing more useful intelligence, especially as it relates to the Southwest Border.
A second objective of our narcotics strategy is the development and dissemination of information to trade and carrier communities to prevent the use of cargo containers and conveyances by smuggling organizations. One program which is helping Customs meet this objective is the Business Anti-Smuggling Coalition (BASC). In March 1996, BASC, a business-led, Customs-supported alliance, was created to eliminate the use of legitimate business shipments by narcotics traffickers to smuggle illicit drugs. BASC is currently being prototyped at the ports of San Diego, Miami, and Laredo. The Border Trade Alliance, Mattel and 32 other companies in San Diego, as well as Sara Lee and other businesses in Miami, have been working with Customs in developing the program. Mattel, setting an example for others, has already developed a comprehensive anti-drug program that has been incorporated into its daily business practices. BASC was recognized in the Vice President's report to the President on the National Performance Review as a shining example of how government and industry can work together.
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Two other programs which Customs has employed are the Carrier Initiative Program and the Land Border Carrier Initiative Program which enhance the movement of legitimate cargo while bolstering Customs enforcement posture. These programs encourage air, sea, and land border carriers to improve their security practices to prevent narcotics from getting onboard their conveyances. Participation in both programs is encouraging. As of January 1997, 105 air carriers, 2,870 sea carriers, and 800 land border carriers have agreed to participate. Over the last two fiscal years, participants in the Carrier Initiative Program have provided Customs with information that led to seizures totaling 18,437 pounds of narcotics, as well as initiating their own foreign interceptions totaling 59,181 pounds of narcotics.
Customs third narcotics strategy objective is the development and introduction of technologies to identify smuggled narcotics and to force smuggling organizations to resort to higher risk methods. Customs recognizes that technology plays a significant role in our ability to remain effective while thwarting smuggling efforts between some of the ports by aircraft and boats. Customs employs a wide range of technological tools to protect our borders.
This year, we look forward to further enhancing the effectiveness and quality of support provided by our Air Program through a variety of initiatives. By the end of FY 1997, Customs will have integrated seven maritime search and surveillance-configured C-12 aircraft into our fleet. These aircraft will be deployed to our Aviation Branches in Puerto Rico, Miami, and San Diego.
Consistent with direction set forth in our FY 1997 appropriations, Customs assumed the air support requirements of the Bureau of Alcohol, Tobacco, and Firearms. Three new Customs Air Units have been established in Sacramento, California; Cincinnati, Ohio; and Kansas City, Missouri; to ensure our support is comprehensive and timely. Also this year, funding was made available to retrofit two Navy P-3 aircraft to Airborne Early Warning (AEW) configuration for incorporation into our fleet, during FY 1999.
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New and emerging land border technologies, such as truck x-ray systems and License Plate Readers (LPRs), coupled with skilled inspectors and National Guard personnel, provide effective enforcement systems for identifying and isolating the smuggler or contraband, while expediting the flow of legitimate trade and travelers. The LPRs will enable our inspectors to accomplish their work without being distracted by entering license plate numbers into our automated law enforcement system. The first truck x-ray system continues to be successful at Otay Mesa, California. This prototype has contributed to the seizure of 17,765 pounds of drugs, most of which were concealed in false compartments and other hiding places in the vehicles, not in the cargo.
In support of examination technology, Customs has developed the Automated Targeting System (ATS). ATS is an expert, rule-based system with artificial intelligence principles. Commercial transactions will be run against approximately 300 rules developed by field personnel, inspectors, and analysts in order to separate high-risk shipments from legitimate ones.
Customs involvement in various multi-agency operations has helped us maximize our narcotics interdiction results and meet the fourth objective of our narcotics strategy—the implementation of various proactive, reactive, and multi-agency covert and overt narcotics investigative programs. As a natural evolutionary by-product of Operation HARD LINE, Customs is increasing its investigative emphasis in staging and distribution cities such as Los Angeles, Houston, Miami, Chicago, and New York. These efforts will do even more to disrupt the highly complex and sophisticated smuggling organizations that challenge our borders. These investigative efforts will also add to our body of knowledge, allowing Customs to interdict more at the border based on prior information. This full circle approach is what we call the ''Investigative Bridge'' and it seeks to go beyond border interdiction and capitalize on the intelligence and information developed through investigations of smuggling organizations. This information then feeds our border interdiction efforts resulting in additional seizures and the cycle begins again.
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Two other effective vehicles for accomplishing this fourth objective are the High Intensity Drug Trafficking Areas (HIDTA) sponsored by ONDCP and the Organized Crime Drug Enforcement Task Force (OCDETF) sponsored by the Department of Justice. The HIDTA program identifies those geographic areas in the U.S. that are responsible for the majority of importation and/or distribution of much of the Nation's drug supply. OCDETF investigations also target major narcotics organizations. Frequently, these investigations link organization cells that span across the entire United States as well as source and transit countries.
Operation HARD LINE
Over the course of several months during 1994, our Nation's Southwest Border ports of entry experienced a dramatic escalation of violence associated with narcotics smuggling attempts. Drug traffickers known as ''port runners'' were recklessly crashing narcotics-laden vehicles through Customs checkpoints along the entire land border with Mexico. These incidents of port running were often successful, and always posed great danger to border officers and innocent civilians. In February 1995, Customs began Operation HARD LINE in an attempt to permanently harden our ports of entry against border violence and to deny smugglers the use of commercial cargo as a means of introducing narcotics into the United States.
Since the inception of Operation HARD LINE, we have fortified our port infrastructure, expanded our investigative activities, and enhanced our intelligence gathering and analysis efforts. As a result, our personnel are safer, better equipped, and in greater number at the ports of entry along the Southwest Border. Additionally, the highest threat areas have benefitted from the acquisition of sophisticated detection technologies.
HARD LINE has proven to be successful thus far. Port running is down over 56 percent from 1994 levels. In FY 1996, narcotics seizures on the Southwest Border increased 29 percent by total number of incidents (6,956 seizures) and 24 percent by total weight (545,922 pounds of marijuana, 33,308 pounds of cocaine, and 459 pounds of heroin) when compared to FY 1995 totals. The total weight of narcotics seized in commercial cargo on the U.S.-Mexico border in FY 1996 increased 153 percent (56 seizures totaling 39,741 pounds) over FY 1995.
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Operation GATEWAY
The Caribbean area, specifically Puerto Rico and the U.S. Virgin Islands, has emerged as a vital strategic location for the introduction and transshipment of narcotics into the U.S. and Europe. The Puerto Rico area, according to Customs intelligence reports, has the highest rate of non-commercial maritime and airdrop smuggling activity of any Customs area.
On March 1, 1996, Customs initiated Operation GATEWAY. The mission of Operation GATEWAY is to achieve a complete and unified securing of Puerto Rico, the U.S. Virgin Islands, and their surrounding waters and airspace from narcotic smugglers. It is a cooperative plan that commits a sizable investment of funds, personnel, and equipment by Customs, with support from the Government of Puerto Rico. It is part of Customs overall plan to secure the Southern Tier of the U.S., from San Juan to San Diego.
Since the initiation of Operation GATEWAY, Customs narcotic enforcement activities in Puerto Rico have increased dramatically. In comparing March 1 through the end of December 1996, to the same nine months in 1995, cocaine seizures have risen 44 percent. Reflecting our enforcement initiatives, we have increased the number of examinations of full inbound containers by 143 percent.
Challenges for Customs
While Customs has experienced much success in its drug interdiction efforts, challenges will continue to surface. As long as drug smugglers are flexible, greedy, and have almost unlimited resources to draw upon, we must be prepared to meet all challenges.
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Money Laundering
Although drug interdiction remains our highest priority, it is by no means the only challenge facing Customs at our borders. Customs also focuses on the most significant international criminal organizations whose corrupt influence impacts global trade, economic and financial systems. Our efforts are not limited to drug-related money laundering but the financial proceeds of all crime.
Customs has implemented an aggressive strategy to combat money laundering. Customs money laundering investigations yielded $258 million in currency seizures in FY 1996. Customs also made the largest cash seizure to date at the U.S. border—$15 million in Miami, Florida.
Through our strategy, we will continue to enhance our asset identification and forfeiture capabilities with advanced training and the use of more sophisticated computer software for analytical purposes. Customs will also continue to develop information through interaction and training with foreign law enforcement personnel, prosecutors, judges, and legislators through domestic and international anti-money laundering awareness seminars. Finally, Customs will proceed to develop information on international money laundering organizations by participating in long-term advisor programs and cross-border reporting and information exchange programs pertaining to the movement of monetary instruments. Again, the focus will be on detecting the movement of all illicit proceeds, not just narcotic proceeds.
In addition, Customs is currently working with the Financial Crimes Enforcement Network on a regulatory initiative to make foreign bank drafts reportable. This would curtail a frequently used money laundering technique and help investigators trace criminal proceeds that have been reinvested or repatriated back to the U.S.
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Border Corruption
Customs knows all too well that the agency is vulnerable to the threat of corruption by the very nature of its work. Customs is dealing with an enemy that has vast resources at its disposal-organized drug cartels.
Fortunately, Customs has been able to effectively counteract criminal threats by two means: first, the vast majority of dedicated Customs employees will not and cannot be corrupted, and second, through the commitment of the Office of Internal Affairs (IA) to effectively pursue all allegations of corruption in a timely, professional and responsible manner.
Incidents of corruption are isolated situations and represent a very small percentage of Customs employees—approximately 0.3%. But Customs will never be complacent about the threat of corruption. The Office of Internal Affairs assesses all allegations that are received and conducts investigations based on analysis and the content of the allegation. The Customs Service is proud of its ability to detect and ferret out corruption within its ranks, yet in balance, a number of high profile investigations and special projects have consistently shown that widespread corruption does not exist in Customs.
In one significant investigation on the Southwest border, both Customs IA and the Treasury Inspector General found the reported corruption allegations to be unsubstantiated. In breaking new ground, the Customs Service requested the Federal Bureau of Investigation, as an independent entity, to conduct an objective outside investigation of existing information, reports and intelligence regarding alleged Customs corruption in the San Diego area of Southern California. The Customs Service provided complete support throughout the 17-month investigation. On August 22, 1996, the U.S. Attorney formally cleared Customs officials of allegations that they collaborated with drug traffickers at the Mexican border. A public announcement was made at the end of the investigation because of continuing media reporting of widespread corruption in Customs. The result of the FBI investigation revealed there was no basis for criminal prosecution.
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The Office of Internal Affairs training staff prepared an integrity/ethics course for approximately 60 train-the-trainer personnel. These 60 employees then provided the ethics course to approximately 5,800 Customs employees along the Southwest border, South Florida, and Puerto Rico.
The Office of Internal Affairs is continuously reevaluating security controls, has initiated proactive integrity programs, and conducts operational investigations to minimize risks and to decisively deal with corruption issues. IA is further in the process of data base enhancements which will allow for more precise trend analysis, and adoption of an early assessment system to detect potential corruption indicators. Joint office integrity initiatives also include: the proper recruitment and selection of highly qualified individuals as Customs officers; full field investigative screening; rigorous training which includes integrity training and agency expectations of stringent standards of conduct, supported by a clearly defined table of offenses and penalties; and in-service ethics/integrity/ bribery awareness training.
We understand the American people expect all of its public officials and law enforcement personnel to have integrity and be deserving of their complete trust and confidence. Customs will continue to do everything it can to assure that this trust and confidence are not shaken. The Customs Service places the highest value on integrity, and no amount of corruption, when detected, is tolerated.
Internal Conspiracies
Customs has recently been confronted with an emerging smuggling threat relating to ''internal conspiracy'' organizations who attempt to circumvent Customs targeting and examination processes by removing narcotics from cargo containers prior to inspection. There are virtually thousands of individuals, employed by the carriers, ports, freight forwarders, and contractors, who obtain certain information as to how, why, where, and when Customs examines cargo. These people are also knowledgeable about all the associated documentation, from entry through liquidation. They are the resident experts at all ports of entry and, if corrupt, are extremely valuable to any smuggling organization.
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Smugglers, working through an internal conspiracy, are able to modify their mode of operation each and every day depending upon what they see Customs doing. These criminals tailor their methods and techniques port-by-port. The cost to business and industry is in the hundreds of millions of dollars; the cost to the American people is even greater.
There have been several recent Customs investigations whereby personnel who are working for airlines, steamship companies or seaport terminals have used their position and unrestricted access in ports of entry to engage in drug smuggling activities and/or conspiracies. When they successfully apply their knowledge in furtherance of criminal activity, i.e., drug smuggling, our border security and control is most vulnerable. In these types of conspiracies, the drug or other contraband is removed prior to our border searches. Customs is currently involved in several major initiatives focused on internal conspiracies in various areas of the country.
Meeting the Demands of Increased Trade
In order to face the challenges of growing trade and reaching higher levels of compliance, Customs has undertaken innovative efforts in automation, outreach programs, and planning. These efforts are described below:
Information Technology
Information technology has become a critical enabler for Customs in serving the public and addressing the international trade and enforcement issues facing our Nation. Some notable initiatives implemented over the past year include the Automated Targeting System (ATS) pilot in Newark, the Trend Analysis Prototype (TAP) interface pilot in Savannah, Los Angeles and Seattle, and the Remote Entry Filing prototype. In addition, drawback claims can now be submitted electronically using the Automated Broker Interface (ABI). Other initiatives include the expansion of the Advance Passenger Information System (APIS) and the acquisition of non-intrusive Truck X-Ray Systems and Automated License Plate Reader Systems for installation at southern tier ports of entry.
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As successful as the Automated Commercial System (ACS) has been over the years, it is just not robust enough to serve the processing needs of an increasingly complex trade environment. As a result, Customs has been working to replace the older system with a new, more sophisticated system called the Automated Commercial Environment (ACE).
The hallmark of ACE is that it moves from a transaction-based approach to an account-based system founded on compliance measurement and predicated on reengineered ways of doing business. Companies cooperating with Customs achieve mutually beneficial outcomes including raised compliance, trade providing minimal data at time of release, and ability to make payments on a periodic basis. As compliance increases, the cost to Customs and to trade will decrease. The benefits of this approach will include uniform treatment, shorter processing time, more efficient information collection and dissemination, and greater opportunities to fulfill our enforcement mission. A full scale implementation plan for the roll out of ACE in its entirety is due in November of this year.
Trade Outreach Efforts
Since passage of the Customs Modernization Act in December 1993, the Customs Service has engaged in extensive efforts to consult with the trade on how to improve Customs trade processes. All proposals to implement the Modernization Act are first put on the Customs Electronic Bulletin Board for informal comment. When needed, public meetings are held to explain proposals and solicit comments and suggestions. All of this routinely occurs before the formal Notice of Proposed Rulemaking is published in the Federal Register. The early consideration of trade concerns has resulted in better formal proposals. Drawback and record keeping are just two examples in which trade concerns resulted in vastly different formal proposals than originally contemplated. In addition, Customs has engaged in a major effort to improve the trade's compliance with Customs laws and regulations. These informed compliance efforts have included public meetings and seminars at the port and national levels, informed compliance publications on a variety of valuation and classification topics, videos on the textile rules of origin and compliance and a very informative Internet World Wide Web site and Electronic Bulletin Board. Our Website has been visited by over 5000 users in a single day. The Textile Origin video has been purchased by over 300 members of the trade. Over 250 copies of the Compliance video have been requested.
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Trade Enforcement Plan (TEP)
Since December 1993, all trade-related activities of Customs have been driven by the Customs Modernization Act, which mandated shared responsibility between Customs and the importing community for achieving maximum compliance with U.S. trade laws and regulations. Each year, Customs prepares a Trade Enforcement Plan (TEP), which describes the role Customs will play in furthering the goal of maximum compliance. To create this plan, Customs assesses the principal threats to compliance with U.S. trade laws, develops a coordinated approach to confront those high impact national threats, and defines targeted areas, strategies, priorities, and intra-agency responsibilities and time lines for accomplishing these goals.
Customs most recent TEP builds on compliance measurement results and some compliance assessment results, which forms an integrated compliance system to assess the principle threats to compliance. This analysis aids Customs focus on high-priority or ''Primary Focus'' industries (PFIs) and issues that have a significant economic impact on the Nation.
In FY 1996, the compliance rate for overall importation increased from 80 percent to 82 percent. Duty collections on imports remained in excess of 99 percent. Of particular note is that higher value importations had a significant increase in compliance, to a rate of over 86 percent. The cooperative effort with the importing community and domestic industry to address compliance issues can be credited with the improved performance of major importers.
Primary Focus Industries (PFIs)
PFIs are commodity areas that will attract significant attention from Customs in every regard. By establishing a national focus on these product sectors, they will receive the level of attention which they warrant. Eight PFI's were determined by use of a number of factors, including strategic importance, international trade agreements concerns, quotas, duty, public health and safety, Intellectual Property Rights (IPR), and Gross Domestic Product/economic impact. The eight PFIs are: Advanced Information Displays (e.g., cathode ray tubes, flat panel displays); Agriculture; Automobiles and Automobile Parts; Critical Components (e.g., fasteners, bearings); Production Equipment; Steel Mill Products; Telecommunications; and Textiles.
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Priority Commercial Issues
Because not all important trade issues confronting Customs can be identified by industry sectors, additional specific and cross-cutting trade priorities were identified. Many of these were derived from earlier versions of annual Trade Enforcement Strategies, and others have been identified by various customers. The 12 priority issues are: Anti-Dumping and Countervailing Duty; Classification; Trade Statistics; Country of Origin Marking; Embargoes and Sanctions; Intellectual Property Rights; Trade Agreements; Public Health and Safety (pending other government agency participation); Transshipment; Quota Evasion; Revenue; and Valuation.
Clearly, many of these are cross-cutting over a range of products or source countries. Others link closely with the priority industries—textiles with quotas and transshipment, for instance. A few issues such as embargoes and convict labor are country-specific.
A new priority area, Revenue, has been added for the 1997 TEP. Concerns over the gap between revenues due and revenues collected, and our new ability to use compliance measurement to project a measurement of that gap, have enabled us to identify the scope of the issue and develop a Revenue Gap Subplan to address it.
North American Free Trade Agreement (NAFTA)
The NAFTA trade enforcement Sub-Plan will form the basis for Customs efforts in assuring the highest level of compliance possible for NAFTA transactions in the coming year. The specific goals of this initiative are the development of a national plan for NAFTA compliance for U.S. Customs; avoidance of using NAFTA enforcement as an unintended non-tariff barrier; the effective use of the experience and knowledge of all Customs Officers; and the integration of Customs NAFTA efforts into a single effective process. Components of the 1996–97 NAFTA Sub-Plan include audit; compliance measurement; informed compliance; interventions and investigations; port-initiated verifications; and the Strategic Trade Centers.
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Additionally, Customs ports have local initiatives for verifying the NAFTA claims for companies and commodities not selected nationally. Informed Compliance for NAFTA is being achieved through information dissemination by the Dallas NAFTA Center, video broadcasting, and port outreach.
Changes In COBRA User Fees
The NAFTA Implementation Act includes a provision to restore the Air and Sea passenger processing fee to $5.00 per entry, a reduction of $1.50 per entry, and again exempt passengers arriving from Canada, Mexico, and certain Caribbean Nations. These changes will take effect in FY 1998. Customs estimates that the fee reduction and the restored exemptions will result in a $187 million decrease in collections from this fee.
FY 1998 Budget Request
Customs proposed appropriation for FY 1998 totals $1,690,602,000 and 17,193 Full Time Equivalent (FTE) positions and reflects our highest budget priority for FY 1998—ensuring adequate funding for effective operation of our programs within a constrained budget environment. Customs ability to perform its enforcement functions and collect revenue depends on a well-equipped, reliable infrastructure. The resources identified below are necessary to meet the broad and diverse mission requirements of the Customs Service and accept the realities of a growing workload.
Initiatives
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• Our Anti-Smuggling Initiative will provide the necessary resources for Customs to counter the increasing threat of narcotics smuggling in cargo shipments through South Florida and other high-risk ports of entry. The $23.4 million ($8.4 million and 119 FTE in Salaries and Expenses and $15 million from the Violent Crime Reduction Trust Fund) requested will provide us with the human and technological resources vitally necessary to continue the successes seen in Operation HARD LINE on the Southwest Border and Operation GATEWAY in Puerto Rico, the U.S. Virgin Islands, and the Caribbean.
• The Land Border Passenger Automation Initiative of $11.5 million requested for FY 1998 is a joint undertaking between Customs and the Immigration and Naturalization Service to provide both agencies with the technological tools to increase inspector effectiveness and safety, and expand the use of automated data capturing for query against enforcement databases. It will also provide valuable intelligence to federal law enforcement agencies on the movement of vehicles across our borders, and provide expanded service at low-risk ports through remote processing, offering the potential for a redirection of resources to higher risk activities.
• This year's budget request also includes $5.5 million for a hangar to house the two new P-3 aircraft in Corpus Christi, Texas. We are also requesting $2.5 million to fund 27 additional FTE for the aircrew and related support personnel that will be needed to support these new aircraft.
• To assist in the apprehension of individuals involved with the removal of unreported currency, weapons of mass destruction, and precursor chemicals, Customs requests $1.1 million from the Violent Crime Reduction Trust Fund to construct canopies for detailed inspection of suspect outbound vehicles at selected crossings. This enhancement will also provide our inspectors with some measure of safety from traffic flow while they concentrate on this important effort.
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• Our Operational Support Initiative is comprised of three components: Laboratory Modernization, Vehicle Replacement, and Agent Relocation. We are requesting an additional $5.7 million to enable Customs to upgrade its laboratories with state-of-the-art analytical instrumentation based on contemporary scientific approaches, required to adequately support the Customs mission; to develop analytical methods for the determination of country of origin of agricultural, petroleum, and textile products; and to maintain a continuous and intensive laboratory research program. Customs must successfully meet the new examination requirements of expanded international trade (textile transhipment, trade and narcotic enforcement, criminal investigations, forensic work, anti-dumping violations and compliance measurements). Laboratories, with modern, sophisticated analytical instrumentation, are especially important for protecting our Nation's trade interests. Additional resources requested for Operational Support will also benefit our enforcement activities by replacing severely worn-out vehicles. By FY 1998, approximately 83 percent of Customs vehicles will be eligible for replacement in accordance with General Services Administration replacement criteria. Without adequate funding, our vehicles will be potentially unsafe, inefficient, and very costly to maintain. We are requesting $10 million for this portion of the initiative.
Lastly, the Operational Support Initiative includes funding for agent relocation. This funding is requested to allow Customs to relocate agents to high-threat areas as criminal activities dictate. Customs is currently only able to fund relocations at the expense of other priorities and has not been able to implement a comprehensive relocation program like other enforcement agencies. If this continues, Customs ability to respond to changing threats will be hindered, the morale and effectiveness of our agents will likely deteriorate, and the public's and Congress' perception of Customs ability to perform its mission will likely be damaged. Funding for this portion of the initiative, $4 million, is requested from the Violent Crime Reduction Trust Fund.
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This concludes my statement for the record. Thank you again for this opportunity to appear before the Committee. You have provided tremendous support to the Customs Service in the past and I look forward to a very productive future working with you and your staff.
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Chairman CRANE. All right, George. First of all, I want to congratulate you and your staff for the clean audit you folks just received. Keep up the good work.
I have concerns about Customs ability to develop and coordinate this mosaic of potential and perhaps irreconcilable computerized projects and systems, and in light of the colossal failure of the IRS tax modernization system, how will Customs ensure that problems resulting from past deficiencies in the automated systems design processes are not repeated?
Mr. WEISE. Well, Mr. Chairman, we are very much aware of the problems that the Internal Revenue Service, IRS, has had, and we are doing everything we can to try to avoid some of those same problems.
One of the things that we are doing now is we have outside consultants that are coming in and taking a look at everything that we have been doing, including taking a look at our overall architecture, that is, how the whole thing fits together. They are going to complete that analysis by June of this year, and based on the input that we have been receiving from these outside consultants, I don't feel that we are making the same kinds of mistakes that were made by the Internal Revenue Service.
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Certainly, we can do a better job of coordinating many of these automation initiatives, and I think that we are moving in the right direction.
We have recently put Ed Kwas, who is with me today, in as the Assistant Commissioner for that position. Ed Kwas has demonstrated over many years with the Customs Service his ability to pull things together and to deliver a finished product, one that makes sense. I am very confident that under his leadership we are going to be able to achieve that, but we are very cognizant of mistakes that others have made, and we are going to work very closely with the General Accounting Office, with this Committee, and with these outside consultants to make sure that we don't make those same mistakes. So I am optimistic and very confident that we are going to make these systems work and work well.
Chairman CRANE. Good to hear.
We understand that due to cost constraints in its agreements with the National Treasury Employees Union that Customs is limited in its ability to reallocate inspectors to meet the shifting drug threat. Is this correct, and if so, what impact have these limitations had on Customs drug enforcement efforts along the Southwest border?
Mr. WEISE. Well, I don't think it is correct, Mr. Chairman. The partnership itself is basically a change in our relationship and the way we are working with one another.
I think the fundamental rights of members of the NTEU existed prior to partnership, and certainly, an employee, an inspector, or a canine enforcement officer is brought on with a different expectation than a criminal investigator who signs an agreement right up front that you can and may be moved for the good of the Service.
Most of the inspectors and canine enforcement officers did not sign a similar commitment that they will move at the whim of the organization. So there are differences in the way they are treated.
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I will tell you, as far as the partnership is concerned, there is a lot that we can talk about. My fundamental philosophy is that if we are going to maximize our performance as an organization, we need to have the constructive input at every level of our organization, and having started my career at a very low level in the Customs Service, one of the things that frustrated me is that no one ever asked for my input. They asked me about my particular job I was doing, but never asked me about the processes I was working on.
One of the things that we are attempting to achieve through this partnership is having constructive input from our workers to help us have the input necessary to make the best decisions possible for the organization. Does that mean that they get to vote on the decisions and share in decisionmaking? No. It is not comanagement. The managers continue to have the responsibility to make the final decisions that impact us as an organization, but having that input is something that I continue to believe is the right thing to do.
Is our partnership perfect? It is far from it. We are learning as we go. This is a completely new experience, trying to deal with an official partnership, but we are making strides, and I am very much looking forward to continuing to work with the General Accounting Office, looking at the report, looking at the ideas that they have suggested.
Certainly, we need to have measurements. How do you measure the success of the partnership? That is something in everything we do. Under the Government Performance Results Act or GPRA, we are going to try to find a basis to measure our success.
If you just look at intangibles, you can see that there have been some successes in the partnership. If you look at the number of grievances being filed and things like that, those are going down.
I will tell you that we took 6 months, from beginning to end, to prepare our reorganization plan blueprint. It took us almost another 12 months to get the approvals of the Department of Treasury, but within 18 months, we had it fully implemented. My recollection from the old days is, whenever Customs would start a new initiative that they didn't do in partnership, we would have the Customs testimony before us, and then we would have the NTEU testimony coming later, and they would tell us why everything Customs was doing was wrong, and we as a Congress would be concerned about moving forward.
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That partnership has already delivered something very tangible in allowing us to move our organization forward. It can be better. It will be better. We are working to improve it, and that is all I can say on that. I believe the partnership is the right direction for us to take.
Chairman CRANE. Well, we are impressed with your performance, George, and just keep up the good work.
Mr. Matsui.
Mr. MATSUI. Thank you, Mr. Chairman.
Commissioner Weise, you have been Commissioner now for 4 years. In terms of the issue of drug interdiction, particularly with Mexico, how would you describe your working relationship with Mexican officials, and how would you describe their level of cooperation?
Mr. WEISE. Mr. Matsui, I will have to put a caveat on that. I will give you my own personal experience, but obviously, the Customs Service is the organization responsible at the ports of entry, at the border.
I don't have the same degree of involvement, as other organizations, like the Drug Enforcement Administration, for example, that has a number of people in Mexico, or the State Department that works directly with the Mexican authorities.
I will tell you about my limited realm of experience. We work very closely with our counterparts from the Mexican Customs Administration, and we meet several times a year as part of an aftermath of the North American Free Trade Agreement, NAFTA, with Mexican and Canadian Customs Administrations. Some of the issues concerning the tremendous increase in violence at the border had us very, very concerned several years ago. We asked our Mexican counterparts to help us in this regard because frequently instances would occur where Mexican citizens would come across, create some havoc on our side of the border, and then quickly run back and then not see anything happen to them.
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They did put together some teams—they are called beta teams—to help address that particular problem, and that is something that was very, very constructive with us.
Also, in terms of our air program, we have a program in place where we work with the Mexican authorities. We have two citations on the ground in Mexico where we work to train the Mexican pilots, and that has been a positive and constructive interaction that we have had with the Mexican authorities.
The one issue that I think has concerned us—and this is not something that really developed in the last 4 years, but it goes back to 1990 or 1991, where Customs in the past had the ability to have confidential informants within a 26-kilometer radius on the Mexican side of the border. That was tremendously helpful for us to have intelligence that we could use to really target shipments that were coming across and help us catch those goods and seize those drugs before they cross the border.
In 1990 or 1991, there was a change in that practice and policy that forbade us to do that without very close interaction with Mexican authorities. We have been working through the State Department and through DEA and others to try to get that position turned around, and thus far, we have not been able to get it turned around, but in general, my own experience is—and in the sphere in which I operate—the cooperation has been generally good.
Mr. MATSUI. The last question is related to the transfer of Hong Kong to China on July 1 of this year, obviously, the issue of transshipments, particularly of textiles and other products as well, will perhaps be much more difficult to deal with, although I guess we are not quite sure yet.
Are you beginning the process of preparing for that at this time, and what are you doing that is obviously not of a confidential nature?
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Mr. WEISE. Well, Congressman Matsui, I can state on the public record that we have had a long history of trying to work very closely with the Government of Hong Kong in terms of dealing with the transshipment problem.
This year has been a particularly busy year for us where we have had an opportunity to work very closely with the authorities of Hong Kong Customs. They have been very concerned, even before the Chinese takeover, about their sovereignty and about allowing U.S. Customs officers on soil in Hong Kong going into plants because we have had this kind of arrangement with other countries. They have been very adverse to giving us free reign to go into Hong Kong manufacturing facilities to confirm that products are actually being produced there.
We have worked with the Hong Kong Customs authorities over the course of the last year or so. They have allowed our people to go in and observe the Hong Kong Customs authorities looking at these plants, and what we have seen from that is that they have a better understanding of the magnitude of the problem than they had in the beginning.
I think in the initial stages of our interaction with them, they were in denial saying that we have already policed ourselves very well, there is not a serious transshipment problem in Hong Kong, and I think what they have learned from this experience is that, indeed, there is a serious transshipment problem of textiles through Hong Kong. We are working to create a mechanism where we can work closely with them and feel confident that their systems will work.
Now, what is going to happen when that transfer takes place with China? That still is an uncertainty for us as well, and we are trying to work closely with both the Hong Kong Government as well as the Government of China to make sure that there isn't anything that undermines our ability to enforce our laws.
Mr. MATSUI. Do you think that you will have something in place in your negotiations with the Hong Kong authorities by July 1?
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I think, obviously, it takes two to negotiate and two to come up with an agreement. On the other hand, if, in fact, we don't have this issue at least somewhat close to resolution, this could create problems and a backlash, among other backlashes that may occur in terms of the transfer.
Mr. WEISE. Well, we are working on two, Congressman Matsui. We are working with the Chinese Government directly, and we do have an office in Beijing as well, and we are working with the Hong Kong Government. We are working to try to coordinate that when this transition takes place, there will be nothing that will undermine the arrangements that are already in place.
Up until now, we have seen no indication that any of these arrangements will be undone by that transition taking place, but obviously, we are going to be working very, very hard and very closely with both authorities and with USTR and others to ensure that we are comfortable that nothing has taken place that undermines our ability to enforce U.S. laws.
Mr. MATSUI. As the Chairman indicated, I also want to thank you and your fine staff for the work you have been doing over the last years, and we really enjoy working with you, and we obviously will continue to do so.
Mr. WEISE. Thank you. Thank you very much, Congressman Matsui.
Chairman CRANE. Mr. Thomas.
Mr. THOMAS. Thank you very much, Mr. Chairman.
Hi, George. As you know, I wear another hat sometimes. It is Chairman of House Oversight, and in the 104th Congress, we initiated a first-ever audit of the House of Representatives. So I share with you the movement from a qualified to a clean audit. You are a little bit ahead of us, and people don't realize how difficult it is when you haven't had the standards that you are now trying to meet. So I applaud you in that regard.
I have submitted a number of written questions, as you might guess, based upon our long experience together. They focus on agriculture and some of the concerns given all of the various tariff classifications and what is and is not going on in the way in which Customs is approving products and how other countries are doing it as well.
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I would ask you for a minute or so, since both the gentlemen from—Mr. Matsui is from California, as am I. We have seen, as we expected, an increase in the commercial traffic across the border, and California is one of the key States that has felt it.
Just set aside the question of illegal for a moment. Everybody moves directly to that. How are we in terms of our projections on the increased traffic? How are we managing it? Where are we going with our projections, and how are we going to plan on managing the projected growth? Because my assumption is, it is, in fact, projected growth.
Mr. WEISE. Well, Congressman Thomas, in terms of the U.S. Customs Service, there is no bigger challenge that we face than the Southwest border, one, because of the sheer increase in volume of trade that you have alluded to because of NAFTA, currency devaluation, and a whole host of reasons, but also, the combination of that with the threat that is continuing to be alleged that up to 70 percent of the cocaine entering the United States is crossing that border.
I can tell you that over the period of the last 4 years, which have been rather austere times for the Customs Service, our budget in terms of salaries and expenses has grown from maybe $1.3 billion to $1.5 billion, in that timeframe. The consequence of that has really been an erosion of our base resources of roughly $100 million.
That being said, the only place where we have been significantly increasing staff has been the Southwest border. We have been taking positions as they become vacant from other locations across the country, making sure that they are reinvested on the Southwest border, but that isn't going to solve the problem alone.
We know that technology has to be part of the solution, and we are looking at a number of things. Otah Mesa, California, as I am sure you are aware, we have experiments with a prototype of a full container x-ray machine that is much akin to a car wash. The entire truck can drive through it. It doesn't have the capacity or sufficient power to look through the merchandise which is in the boxes and in the trucks. It does, however, have the capacity to see the cavities, the compartments in the front or the rear or the ceiling or the floor, and the tire wells. We have had tremendous success with that technology.
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We are moving to implement that technology along that border with 11 more of those x rays over a period of the next several years.
We are also, as I am sure you are aware, experimenting with a commuter lane. We are working very closely with the Immigration and Naturalization Service. We have a great deal of concern about whether we can have a commuter lane that works properly that doesn't undermine our enforcement effectiveness. But again, we use technology with a combination of things, like license plate readers and other devices where we do a prescreening of the individuals before they are eligible, and there is a photographic match that comes up on the computer screen to show that the individuals who we have prescreened are the individuals that are in that vehicle, and that vehicle has been cleared, and all sorts of technology like that. We are moving to use that as well.
So it is a combination of a number of things that we are using, resources and technology, to try to meet that tremendous demand that we are going to be facing in the years to come, Congressman Thomas.
Mr. THOMAS. Are you optimistic?
Mr. WEISE. I am guardedly optimistic, shall we say, because I really do feel that we as an organization have squeezed almost as much as we can out of the existing resources, and one of the things that has been frustrating to some of the people in Customs is our budget has gone from—again, I am talking salaries and expenses—over the same 4-year period as our budget went from $1.3 to $1.5 billion, the Immigration and Naturalization Service, our sister organization, and border patrol, have gone from about $1.3 to $3.1 billion. They virtually double us.
As they put more border patrol people between the ports of entry, that puts additional pressure or additional stress at the ports of entry, and I think at some point in the not-too-distant future, we are going to be reaching the point where without a significant increase of staffing, we are going to be in trouble.
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Thank you.
Mr. THOMAS. Thank you, Mr. Chairman.
Chairman CRANE. Mr. Jefferson.
Mr. JEFFERSON. Thank you, Mr. Chairman.
I suppose we are all focusing on just about the same general subject, at least in part, and that is the issue of narcotics trafficking.
I am from Louisiana, and we have experienced a tremendous explosion of drug activity, crime-related drug activity now, in our State and particularly in my city, and it is more than how many tons were intercepted at the border and how good the effort is.
The fact of it is, we have more of the stuff on our streets than we ever had before, more crime related to it than ever before, and the community is far less safe than it has ever been.
I don't know. It obviously doesn't all rest with Customs. There are other agencies that are involved. You just mentioned one of them, but with respect to your agency, if you had your way and you could propose the kind of cooperation that you want to get from the Mexican Government today for your agency to do a better job, what would those things be?
Mr. WEISE. Well, again, I will use the same caveat that I used before, and I am in a bit of a limited sphere, and I think that you ought to ask that same question of other witnesses, State Department, and DEA because there are other issues, extradition of criminals and things of that nature that are very important to the U.S. Government, but from the U.S. Customs perspective——
Mr. JEFFERSON. That is why I wanted to just limit it to your agency.
Mr. WEISE. Right, right.
Mr. JEFFERSON. I understand others have to——
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Mr. WEISE. From the U.S. Customs perspective, there is no issue that would help us more than the issue that I alluded to before. Having the ability to go back to the old way where we could within the 26-kilometer radius inside the Mexican border be able to work confidential informants and be able to get information, where we could pay for the information as we do confidential informants on this side of the border to help us get the information as early as possible.
The difficulty we face, when you have 8.5 million trucks crossing that border every year, it is very, very difficult to determine which are the right trucks to really examine.
Having the ability to have those informants working in Mexico would give us that capacity to really——
Mr. JEFFERSON. Well, what would prevent you from doing that now, from getting this agreement?
Mr. WEISE. At this point, it was an actual change as far as the U.S. Embassy was concerned. The U.S. ambassador to Mexico, in the aftermath of the Camarena killing and the kidnapping of one of the alleged perpetrators, there was some friction that took place between the United States and Mexico; the U.S. ambassador, the one that preceded the existing ambassador, in effect, ceased that policy.
We have the support of Ambassador Jones to try to change that policy back, but right now, we are trying to get the acquiescence of the Mexican authorities to allow that policy to be reinstated.
There are discussions that are taking place, that I am not directly privy to, but I understand that it is an issue that is on the agenda and it has been discussed at very senior levels. General McCaffrey has discussed it, and the State Department, DEA, and others. But thus far, we have not gotten that——
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Mr. JEFFERSON. You are saying our officials changed that to begin with, and now we are trying to get the Mexican Government to agree to have it reinstated.
Mr. WEISE. We are working on Mexican soil. We have to be cognizant of their sovereignty. So there is a very delicate issue that needs to be worked through.
Mr. JEFFERSON. The request that you make in your budget for the salaries and expense accounts for several issues, including agent relocation to high-threat drug zones and antismuggling initiatives, can you elaborate on how these programs are going to help reduce the flow of illegal drugs into bordering States?
Mr. WEISE. Once again, the Customs responsibility is to basically stop the flow at the border. There are a number of other organizations; the Drug Enforcement Administration, that is concerned about stopping it at its source, as well as getting it once it gets into the country, but what we are attempting to do is get the combination that we need of people and technology in place so that if it gets through all the other systems, that we make sure it doesn't get by us at the ports of entry.
As I mentioned before, with the sheer volume of trade that we are dealing with coming across that Mexican border, we need more people. We need more x-ray equipment. We need a combination of the two to make sure that we are doing everything we can to minimize the risk that the goods are going to be——
Mr. JEFFERSON. Are you saying the emphasis will be placed on increasing favors? Mexico has increased the opportunity for contraband to come into our country.
Mr. WEISE. I wouldn't necessarily say it increased the opportunity. It certainly makes our job a little more challenging because we are looking at more trucks, but frankly, as I understand the economics of this—and I am a lawyer and not an economist—that much of the increase in trade that has taken place up until now has been more related to the currency devaluation than it has been to NAFTA. So it is not any direct policy of increasing trade, but the point is, we don't see any more smuggling taking place because of increased trade. It just means the risk is spread over a wider range of possibilities. It means that we have to work a little smarter. We have to work with the business community, for example, to identify legitimate trade from the higher risk trade, and one of the things that we have done in that regard is work through an initiative. The acronym is called BASC, but it is the Business Anti-Smuggling Coalition, asking the legitimate business community to take upon more responsibility to ensure that they are not inadvertently being used by drug smugglers, doing background criminal checks on the people that are loading their merchandise, having a secure environment where their merchandise is being loaded.
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What we often see in Customs is that unbeknownst to legitimate trade on either side of the transaction are smugglers in between who put the drugs on the back of the truck, take it off before it gets delivered to the ultimate consignee. That is something we can address by getting the legitimate business community to take more steps to minimize the risk of that, and we are seeing some initiative on their part as well.
Mr. JEFFERSON. You have answered the question earlier, Mr. Thomas' question dealing with this issue, and you mentioned technology as a major emphasis. Does your budget call for more support, more help in that area?
Mr. WEISE. Well, in the budget, we are going to be investing more in terms of that x-ray equipment that we talked about.
We are working very closely with the Department of Defense and looking at new technology that we are not really ready to make a commitment to because it has not developed to the point where it really resolves our issues. However, we do have some dollars in our budget to allow us to continue this process of the x-ray technology that we have already experimented with, and we are also trying to invest dollars that we currently have in research and development, along with the Department of Defense, to find the new technology that will help us more in the future.
Mr. JEFFERSON. I am trying to figure out how we measure the success you are having against what the threat is now. Let's say you have seized 1 million tons of illegal drugs. If the drug traffic hasn't increased from whatever period you are measuring against, then perhaps that is
informative to us.
If the drug trafficking, however, has increased tremendously and you are just catching a smaller percentage of it that is coming in, even though it amounts to 1 million tons, it still doesn't represent any real progress. Which one of these are we to read into this million-ton figure here?
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Are we getting more coming across and we are just kind of catching a part of it? Our overall percentage outcome isn't any better, or is it better?
Mr. WEISE. I am as frustrated as you are as to how difficult it is to measure what success is in this arena because there is no question that drug smugglers are very savvy businesspeople and they write off losses. They expect to have a certain percentage of their merchandise seized, and they will produce more to try to offset that.
We estimate based on the volume—we are told—we are not the ones that calculate this, but based on the volume that is produced, we are seizing roughly 20 percent that is coming into the United States.
Do I think that is a good enough figure? Absolutely not. It does disrupt to a certain extent. It may drive up some of the cost. It may cause them to change their approaches, but my sense is that we can never solve this problem through interdiction alone. Interdiction has to be an important piece of the solution, but being a free society, of the ingenuity of the smugglers and the vast spaces through which they can smuggle, we have got to have a whole combination of things to address the problem.
We have got to be working in cooperation with other law enforcement organizations, like the border patrol, which is largely responsible for the area between the ports of entry. We are responsible at the ports of entry. We have got to be working with the Drug Enforcement Administration, but we also need to be working on the demand side of this. There has got to be a comprehensive approach, and we are going to continue to try to do better.
We are looking to try to find more effective measures of what success is. Seizures in and of themselves, I think, are very unsatisfactory because, ultimately, if we in the Customs Service are able to harden the ports of entry to make it virtually impossible to smuggle through a port of entry, our seizure numbers are going to go way down. Based on the traditional measure of success, people are going to say you are failing at Customs at a time when perhaps you are achieving your greatest success, but what may happen, as we succeed at the ports of entry with seizures going down, the seizures may be taking place in a different location, crossing between the ports of entry. So it has to be a comprehensive solution to a very difficult problem.
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Mr. JEFFERSON. Mr. Chairman, I suppose I will suspend.
Chairman CRANE. Mr. Nussle.
Mr. NUSSLE. Thank you, Mr. Chairman.
I just have a question concerning, first of all—what is the Customs strategic trade center, and what does it do?
Mr. WEISE. The Customs strategic trade centers were created out of our new reorganization. There are five strategic trade centers placed around the country, and basically, what we have attempted to do through the Office of Strategic Trade, which is headquartered in Washington with these five centers around the country, is for the first time in our history really take a strategic focus on commercial trade problems.
Historically, before we had anything called a strategic trade center, we would look at individual transactions, and they would be all over the country, documents they would be looking at. What this is doing is trying to take a step back from that and really try to focus in the longer term, in the future, pulling together resources from what we call import specialists, all around the country, criminal investigators, other disciplines, and intelligence officers. Each of those strategic trade centers has a different focus in terms of geographic area, types of issues, whether they look at textiles or steel, looking at our core industries that we have decided are our priority areas that, from a national policy perspective, really need to be focused on. We then really try to do a more effective job of coming up with approaches that can be implemented at the ports of entry throughout the country. It allows us to do better strategic analysis, better intelligence gathering, and get better tactical intelligence to our operational people so that we can be more effective in carrying out our commercial enforcement responsibilities.
Mr. NUSSLE. One of the things that I understand that it does, is it investigates agricultural commodities. Is that a correct understanding?
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Mr. WEISE. The term ''investigates'' is not an appropriate one. What it does is gather information and set strategies for investigating agricultural products, but the actual investigations are carried out by other organizations.
We have an Office of Investigations, with our criminal investigators and intelligence officers and others, and we have import specialists and inspectors in other disciplines.
The Office of Strategic Trade creates the approach, the strategy, but it is carried out by other operational units.
Mr. NUSSLE. How do you determine—on what criteria or basis do you determine that a commodity needs to be investigated?
Mr. WEISE. Well, if you are talking about the Office of Strategic Trade, they are looking at overriding, cross-cutting major issues. Textile transshipment is an example. The Office of Strategic Trade in New York is a data center trying to gather as much information as we can on the generic problem of textile transshipment, focusing on countries like Hong Kong, Macau, China, where a lot of this is taking place. We gather much intelligence and information that then can be translated to individuals who are going to be looking at actual transactions.
If you are looking at how you decide when you investigate just an individual case, the Office of Strategic Trade is not likely to be directly involved in that, and a whole host of factors go into that.
We have an import specialist who has some commodity expertise on the product with which he is dealing. He should know the company he is dealing with. He has a good idea of the products he deals with. If he sees something that looks a little amiss, like the value of the merchandise seems out of sorts with what his experience has been, he may ask some additional questions, or if he really has information that he may get from some source, based on looking at the transaction, he can turn it over to a criminal investigator to actually investigate that.
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Our Office of Investigations gets tips, just like with any other criminal matter. They have informants. They have people that say maybe as a competitor of a company, I know this company is dual-invoicing, to try to get away with paying less duty. If you look into it, you will find something. So there is a whole host of reasons why we would decide to investigate an individual case.
Mr. NUSSLE. How does that rise to the level of a million-dollar investigation, and what criteria goes into making that determination between one importation and another?
Mr. WEISE. Well, in a case with garlic, I can tell you in terms of the outcome. In that case, two importers actually pled guilty to having tried to circumvent the law with regard to that. So it was a good outcome.
I think that as far as what we had there, it was a dumping order on the part of the Commerce Department that imposed a very significant duty, a duty in the amount of 376 percent, which is obviously almost a prohibitive duty, one would think, which would create an incentive to try to circumvent paying that duty.
The dumping order applied to garlic from China. So if you suddenly see shipments from China declining and shipments of garlic from adjoining countries increasing, what you really want to do is investigate that.
In this particular case, I am also told that the domestic garlic industry, who is often more familiar with what is going on in their business than we are, they also were very helpful in helping to point out this problem.
Mr. NUSSLE. Do you know how much money is spent by the Customs Service on money-laundering activities and antimoney-laundering activities?
Mr. WEISE. Let me see if I have it.
I would like to ask if I could respond for the record for that.
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Mr. NUSSLE. Sure.
[The following was subsequently received:]
Customs spent approximately $42 million from the Salaries and Expenses appropriation on its money-laundering enforcement strategy in FY 1996, and anticipates about the same level of spending in FY 1997 and FY 1998.
—————
Mr. WEISE. Certainly, it is a significant issue for us.
Mr. NUSSLE. You don't have a ball park or anything?
One of our concerns is we would obviously like to see—maybe I am just not sensitive to garlic importation, but looking at the prioritization of the many things you have to deal with, it is just, I guess, a question that arises. You were able to tell me right away about garlic, and money laundering seems to me to be—maybe that is—
Mr. WEISE. I will guarantee you we spend an awful lot more on money laundering than we do on garlic. I can say that unequivocally for the record. I just don't have it at my fingertips the amount that we are spending on money laundering. It is one of the most significant activities we have in our Office of Investigation. It is very complementary of our antismuggling initiatives, and I think that you will find when I do respond for the record, you will see that it is a significant investment of our capital in that area.
One of the challenges we face in the Customs Service is that we share responsibility on a number of important law enforcement issues, such as money laundering, such as narcotics, but when it comes to commercial fraud, we are the only game in town. If we don't investigate it, it just won't get investigated, and we have a responsibility to a domestic industry.
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I can tell you, as far as the domestic garlic industry is concerned, this was a very big issue to them and to the livelihood of the workers in those plants. So it was an important issue to them, and we try our best to try to be balanced in our approach and not have one area of responsibility suffer because we are spending some effort on other areas as well. It is a difficult balancing act.
Mr. NUSSLE. That is part of the reason why I asked because I note from, again, what I am told, your budget allocation for the Office of Investigations seems to be decreased every year in stopping drugs, worrying about commodities such as garlic, money laundering, whatever it is. With the budget in that particular area being decreased by the administration, year after year, that is one of those areas that then raises some concern with Members, and that is the reason I bring it up, just to find out how you balance because there is obviously lots of priorities, many priorities that you have to deal with.
Mr. WEISE. It is always a challenge, and we try to do the best we can to balance those.
One thing I would point out to the Committee, and I know based on your obvious interest, Mr. Nussle, was that the actual authorization bill that is before this Committee actually puts a ceiling on the dollars that we can expend for the noncommercial area and puts a floor on what we should spend for the commercial area. So that, again, shows there has been an interest expressed on the part of this Committee to ensure that we don't go too far in the other direction to the enforcement arena.
So we are often criticized for the way we spend our dollars, whether it should have been more of this or more of that, but we are constantly striving to try to make what we think is the right allocation of our resources. It will never satisfy everyone, but I think we are doing a good job at it.
Mr. NUSSLE. Well, you have satisfied me with an answer, and that is what I was looking for, not to be critical, but to increase my awareness of what kinds of things you are doing.
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I am sure my time has run out, and I will yield back to the Chairman. Thank you.
Chairman CRANE. Well, we want to express appreciation to you, George. You are doing a great job. Congratulations, and we look forward to continuing to work with you and this Committee, and with that, we will let you depart.
Mr. WEISE. Thank you very much, Mr. Chairman. It is always a pleasure to be here.
Chairman CRANE. Our next witness will be Deputy USTR Jeff Lang.
Ambassador Lang, I would like to personally thank you and your staff, again, for concluding the basic telecommunications agreement, which will open markets abroad and greatly benefit U.S. businesses and consumers.
Your written statement will be a part of the record, and if you could confine your oral testimony to 5 minutes, we would appreciate it.
STATEMENT OF HON. JEFFREY M. LANG, DEPUTY U.S. TRADE REPRESENTATIVE, OFFICE OF THE U.S. TRADE REPRESENTATIVE
Mr. LANG. Thank you, Mr. Chairman.
Let me just briefly say a couple of things about the authorization request and then about some of the program implications of that, and then I will submit to questions.
The Administration is seeking a 2-year authorization for the Office of USTR which would cover fiscal years 1998 and 1999. We are just seeking a straightforward extension of the existing budgetary authorities. The amount for fiscal year 1998 would be $22,092,000, and for fiscal year 1999, it is such sums as may be necessary.
We proposed to continue in fiscal year 1998 the two specific limitations that have been in our budget for some years. One is a representational ceiling of $98,000, and the other is the carryover authority of $2,500,000.
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If you look at the mission of USTR, it really is quite daunting. We develop and coordinate U.S. international trade commodity and trade-related direct investment policy, of course. We articulate that trade policy for the administration. We consult both with the Congress and the private sector.
We coordinate the interagency policy on trade negotiations, and we lead the negotiations in most cases, and we run enforcement operations.
The Committee has obviously been critical in both establishing all of these functions for us and giving us the support we need to carry them out.
In the 50 months since January 1993, something more than 200 trade agreements have been entered into. You mentioned the telecommunications agreement. There is the International Trade Administration, ITA, recently. The Uruguay round is only one of those agreements.
These are pretty substantial accomplishments for any organization, but we have 164 full-time equivalents at USTR with $2.25 trillion of trade. So we think of ourselves as being pretty productive in carrying out our statutory mission.
Our funding request is 3 percent above the fiscal year 1997 appropriation level and 1.6 percent, or about $350,000, above the fiscal year 1997 program operating level, that is, the obligations level, and I just wanted to point out the three areas of higher expenses.
One is $762,000 for employee salary benefits and other similiar costs. That is to meet both the 1997 and 1998 pay raises. It also will fund our authorized ceiling of 164 full-time equivalents, FTEs, and we have some higher payments to the Civil Service Retirement Fund.
The second element is $192,000 for inflation-driven cost, mostly in travel, some in telecommunications, supplies and equipment, and there are some other services we receive that are sensitive to inflation, and $25,000 is for higher State Department charges for diplomatic telecommunication services at our Geneva office.
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There are some offsets against that. We will complete the rewiring of the Winder Building. That was $560,000, and it is a nonrecurring expense, and we are saving about $50,000 in the improving exchange rate for our Geneva expenses, and we are lowering our transportation expenses significantly.
I would like to say that, in that regard, I looked into the use of our frequent flyer miles. We are paying for about 8 percent of our travel with frequent flyer miles. So we are trying to be as efficient as possible in using the money that you are giving us.
I don't know if there is much more to say about the 1999 request, except that the carryover limits and the representational amounts are upper limits. We usually don't spend all of that amount, but it is important to have the flexibility because we don't know where these international meetings will take place, and we can't predict with precision exactly when these negotiations will heat up.
Now, there is a great deal in my testimony about our program priorities, and the Committee is fully aware of them. So I won't go into them in detail, but just let me mention a couple of things which I think are important going into this period we are entering.
One is, a lot of these agreements require a great deal of followup. If you take the telecommunications agreement you mentioned, we are going to have to devote just about as much resources to making sure that agreement is implemented in accordance with its terms as we did in negotiating the thing in the first place.
We have 70 countries who are going to be implementing some obligations that have no precedent at all in the WTO. The same will be true of ITAs. Agriculture is a continuing monitoring and enforcement problem of tremendous dimension for us, and in addition to that, we need to be preparing both in the short term and in the long term to be in a leadership position in these negotiations because, without that leadership, our competitors will divert those negotiations into directions that are not in our interest.
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The short-term agenda, of course, is things like financial services, the rule of origin organization, and other immediate priorities, but if you look out for the 2 years that this budget addressees, fiscal year 1998 and fiscal year 1999, you are coming into the era of the built-in agenda of the WTO when we are going to have to deal with the preparation for important negotiations, like services, agriculture safeguards, and I can't emphasize enough the importance of the preparation of those kinds of negotiations. That doesn't even mention all the work that will be necessary in Asia-Pacific Economic Cooperation Forum, APEC, in the free trade agreement, FTA, in the Trans-Atlantic Initiative, in the Bilateral Investment Treaty negotiations, in intellectual property rights or IPR enforcement, and bringing online the obligations of developing countries, which begin in the year 2000, but obviously, there has to be an enormous buildup to get those developing countries to the point where they actually put those obligations into effect on time.
So there is an enormous budget implication for all of this. It is obviously a very challenging workload. We are looking forward to it. I can assure the Chairman and the Members of the Subcommittee that we are ready to accept the challenges.
USTR is a small agency, but it is efficient. It has a dedicated staff. They work tirelessly in the interest of the country, and I have the greatest respect for them, and I hope that we can continue the traditions that have been established by them and our predecessors in the future with your help.
Thank you, Mr. Chairman.
[The prepared statement follows:]
Statement by Hon. Jeffrey M. Lang Deputy, U.S. Trade Representative, Office of the U.S. Trade Representative
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I welcome this opportunity to appear before the Subcommittee today to present the budget authorization request for the Office of the United States Trade Representative.
The Subcommittee has consistently supported USTR's mission to open markets, to expand trade throughout the world, and to enforce trade laws and agreements. We look forward to your continued support in the years ahead.
Two-Year Authorization Request
The Administration seeks a two-year authorization for the Office of the United States Trade Representative, covering FY 1998 and FY 1999. We are seeking a straightforward extension of existing budgetary authorities under the Trade Act of 1974. For FY 1998, the requested authorization level is $22,092,000 and for FY 1999 it is ''such sums as may be necessary.''
The authorization request also proposes to continue in both FY 1998 and FY 1999 the legislative authority allowing USTR to carry over up to $2,500,000 of its annual appropriation from one fiscal year to the next. Further, we seek to continue the $98,000 annual spending limit for representation expenses for each year.
FY 1998 Request Level
The Office of the United States Trade Representative has an enormous mission. That mission is to develop and coordinate U.S. international trade, commodity and trade-related direct investment policy, to articulate trade policy for the Administration, to lead negotiations with other countries and organizations on these matters and to enforce trade agreements.
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With the support of this Committee and the Congress, USTR has been very successful in carrying out this mission. In the fifty months since January 1993, more than 200 trade agreements have been concluded, with the Uruguay Round and the North America Free Trade Agreement representing only two of the 200. We have also enforced our trade agreements with renewed vigor, filing 21 new enforcement cases in 1996 alone, which is more than the combined total filed in the previous five years.
These accomplishments are substantial for any organization, but are particularly impressive for an agency with 164 Full Time Equivalent staff and a budget of barely 22 million dollars. These results are made possible by an extraordinarily industrious and dedicated USTR staff, who tackle their jobs with enthusiasm and competence. In carrying out our statutory mission, we also draw on program and trade experts detailed to USTR from other Federal agencies, and we use students and volunteer interns.
For FY 1998, the budget request proposes a 164 Full Time Equivalent staff and $22,092,000 in new budget authority. This represents the same number of staff as authorized in FY 1997, and an increase of $643,000 above the FY 1997 appropriation.
Our funding request for FY 1998 is 3 percent above the FY 1997 appropriation level and 1.6 percent, or $347,000, above the FY 1997 program operating level, which is also referred to as the level of budgetary ''obligations.''
The $347,000 rise in obligations is a net increase that results from offsetting factors. First, there are three areas where we will have higher expenses in FY 1998:
• $762,000 for employee salary and benefit costs, including amounts needed to finance the costs of the January 1997 and January 1998 pay raises, to fully fund USTR's authorized staffing ceiling of 164 FTEs, and to meet higher USTR payments to the Civil Service Retirement Fund, consistent with the Administration's proposal to put that retirement system on a sounder financial footing; and
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• $192,000 in inflation-driven cost increases for travel, telecommunication, supplies, equipment, and other services that are sensitive to inflation; and