FROM THE OFFICE OF PUBLIC AFFAIRS

Thank you Mr. Chairman, Senator Moynihan, and members of the Committee. It is an honor for me to be here today in support of the United States Customs Service and Customs efforts to carry out its intricate, dual responsibilities of facilitating international trade and pursuing aggressive enforcement of the law.

With me today is Raymond W. Kelly, Commissioner of the U.S. Customs Service, and Nancy S. Killefer, the Assistant Secretary for Management and Chief Financial Officer of the Department of the Treasury. I ask the Chairman consent that my written statement be entered in full into the official record of these proceedings.

As each year passes, the world becomes a more complex and a more dangerous place. The danger to law enforcement personnel is brought home to all of us this week as we mark Police Week and honor those who have sacrificed their lives in service to our Nation. Customs vital place within this law enforcement community and in the service it provides to the country makes this an important hearing. We thank the Committee for its continuing interest in, and support for the U.S. Customs Service.

This is a unique moment in Customs long and proud history. It faces daunting challenges based upon a mission that, on the one hand, requires the facilitation of legitimate commerce and travel while, on the other, requires the greatest vigilance in countering attempts to smuggle narcotics and other contraband into our country.

For our nation on the whole, the falling of trade and other barriers has had the positive effect of increasing the flow of legitimate goods and honest travelers across borders. It also, however, has created more demands on Customs, which constantly must guard against drug traffickers who might seek to hide their illicit products in ostensibly legitimate cargo. For Customs, this has meant a heightening of the challenges it faces as either the first welcome to the honest traveler or the first line of defense against the dishonest.

Customs is meeting these trade and enforcement challenges in large part through the dedication and professionalism of its people. It also, however, is moving into a better position to respond to challenges because of its willingness to adopt changes that will make an already strong agency that much stronger.

One of its most powerful agents of change is its Commissioner. Through his entire professional career and, most notably for purposes of this hearing, as Under Secretary for Enforcement and Commissioner of Customs, Raymond Kelly has had a unique capability of evaluating an organization, reinforcing those elements proven to be constructive, and overhauling those in need of repair. His ability to make change work for an organization has always led to a more productive workforce, more accountable management, and better service to the public.

In the case of Customs, the Commissioner is pursuing his agenda for change through development of a detailed action plan that he actually began developing while serving as Under Secretary. The action plan includes tangible goals for improvements in the organization structure, management, and operations.

My remarks today will focus mainly on the Department role, particularly that of the Office of Enforcement, in providing support to Commissioner Kelly and Customs as they pursue the action plan and perform Customsmission in an environment of constrained budgets and increasing demand for services.

Our support of Customs and its mission comes in a variety of forms, two of which are policy guidance and operational oversight. By enhancing both, we help ensure that Customs performs its mission as safely, professionally, and effectively as possible.

The Office of Enforcement is actively involved in the development of Customs-related programs such as Operations Hardline, Gateway, and Brass Ring, as well as the Border Coordination Initiative. These programs will better ensure that Customs has the tools it needs and deserves to combat narcotics trafficking.

In addition, Enforcement works with Customs in the development and maintenance of vital public-private partnerships to enhance trade, revenue collection, and industry compliance, most notably through the Commercial Operations Advisory Committee (COAC). This advisory committee was established several years ago at the initiative of this Committee. It provides Treasury, and the Customs Service, with the perspectives and advice of the private sector groups affected by Customs operations. Over the years, COAC has been highly influential on issues such as development of an automated export reporting system, and streamlining of Customs procedures.

Committee members also have assisted us in organizing efforts within the trade community to keep drugs out of commercial shipments. Committee members were leaders in creating the Business Anti-Smuggling Coalition and the Border Carrier Initiative, both of which have effectively involved members of the international trade community in self-policing efforts.

Additionally, Customs has sought to leverage private sector resources to assist us in meeting our goals. For example, at the Federal Express hub in Memphis, Tennessee, Customs is able to use on-site resources to assist in clearing packages entering and leaving the United States.

Our support of Customs extends to the international arena, where we work to obtain cooperation of other governments on issues vital to Customs, including counter-narcotics cooperation and the harmonization of Customs procedures. We also are creating a single International Trade Data System for the collection, use, and dissemination of information on international trade. One of our most important efforts is working with Customs to modernize its existing automated commercial system through the development of a new Automated Commercial Environment (ACE), which will be critical to meeting trade processing needs of the future.

We also provide policy guidance to Customs and all of the Treasury bureaus on operational issues. Policies created through such guidance include the Use of Force Policy, Guidelines for Sensitive Undercover Operations, and General Guidelines on the Use of Cooperating Individuals and Confidential Informants. Consistent policies allow the various law enforcement agencies to work more effectively and safely together on task forces.

In addition, to strengthen policy coordination among Customs, other bureaus, and the Department, such mechanisms as the Treasury Enforcement Council, the Treasury Terrorism Advisory Group, and the Financial Crime Steering Committee and Working Group have been established at the Departmental level. The Office of Enforcement also promotes coordination with other agencies through representation of Customs and other bureaus at interagency meetings involving Justice, the National Security Council, ONDCP, and the Department of State.

To further enhance day-to-day operational oversight, we created the Office of Professional Responsibility (OPR) within the Office of Enforcement. OPR is structured to have a Senior Oversight Advisor responsible for direct oversight of each enforcement bureau and office. In addition, OPR will have advisors who deal exclusively with crosscutting issues, such as internal affairs, inspection, training, and EEO.

While relatively recent in origin, OPR already has focused a great deal on the Customs Service in an effort to support and improve the agency pursuit of its mission. Immediately upon creation of OPR, it was tasked with performing a top-to-bottom, year-long review of the Customs Office of Internal Affairs and its processes. The report was released to the Congress in February 1999. The recommendations in OPR report, most of which have already been implemented by Commissioner Kelly, will help dramatically improve Customs internal affairs capability.

Through OPR and the constant attention of senior policy makers, the Office of Enforcement will ensure that the type of focus brought to the Internal Affairs review will continue as Customs seeks to improve all of its operations.

Treasury is committed to using the strategic planning process to accomplish our goals and guide budget formulation and resource allocation. The Secretary, Deputy Secretary and the Under Secretary for Enforcement were personally involved in the development of Treasury FY 1997-2002 Strategic Plan.

Working closely with the Office of Management and Treasury law enforcement bureaus, the Office of Enforcement evaluated the missions and unique characteristics of the bureaus and formulated broad policy goals for the Department law enforcement mission. These policy goals were discussed with enforcement bureau heads in two planning off-sites chaired by the Secretary in June 1997. Based on the Secretary guidance, Enforcement established priorities for Customs at that time to: 1) prevent drugs from entering the country; and 2) ensure the highest percentage of compliance to tariff and trade laws. Customs, as well as the other bureaus, then developed strategic plans which were reviewed, refined, and approved by the Department.

The strategic plans provide direction for the budget formulation process and lay the foundation for performance planning. Beginning in FY 1997, Treasury defined performance goals for each budget activity and integrated into our budget justification the proposed performance plan for the budget year, and the final performance plan for the current year. Thus, budget justification documents request resources under each budget activity and are linked to their respective performance goals and supporting performance measures.

In addition, Enforcement is also working to coordinate law enforcement measures with other agencies. During 1998, the Offices of Enforcement and Management jointly created the Law Enforcement Performance Measures Working Group to formalize the intra-agency coordination of law enforcement measures. While there is much to be done in this area, Customs worked with the Department of Agriculture and the Immigration and Naturalization Service to develop the interagency goal of clearing international air passengers in 30 minutes or less, while improving enforcement and regulatory processing.

As the Committee is aware, the performance measurement process throughout the government is continuing to evolve. However, we are making a concerted effort to measure and assess bureau performance in a proactive manner that is linked to resource allocation. Equally important, we are striving to assure the presentation of key measures that reflect program results rather than the traditional output oriented or workload measures. We share the Committee goal of ensuring that we have the right measures and incorporating them in our budget process.

As the performance measurement system evolves, we continue to assess how accurately the measures in question reflect organizational effectiveness. Currently, the measures judge success only as meeting a precise numeric goal, without reference to how close a bureau comes to achieving that goal.

Thus, in FY 1998, Treasury law enforcement achieved approximately 63 percent of its 115 performance targets. For its part, the Customs Service met approximately 46 percent of its 48 performance targets for FY 1998. If one includes those measures where the Treasury law enforcement bureaus performance was at least 90 percent, 83 percent of the measures were met, and for Customs in particular, their performance was at 79 percent. We are reviewing these results to determine how we can work with Customs to improve its overall performance. As part of this review, we are looking to determine whether the measures set were appropriate and that the measures accurately reflect program results. To this end, Enforcement has worked with Customs to refine its targets for FY 2000. As this process continues, we expect to make further improvements in future presentations.

As the amount and quality of performance data grows more robust, Treasury will continue to formulate its budget proposals based on concerns about gaps in performance. In many cases, demand-driven workload may be challenging the capacity to achieve acceptable results. Despite a tremendous increase in its responsibilities, Customs is making the best possible effort to achieve its goals. Automation is critical to Customs ability to enhance its efficiency and continue to meet its goals. That is the principal reason the ACE initiative is so vital. Other cases may also justify resource enhancements for sensible investments in technology that improve productivity while also improving quality (e.g., non-intrusive inspection equipment for ports and border crossings). We are committed to working closely with the Committee in making these assessments.

In summary, the Treasury Department is proud and I am personally proud of the contributions that the U.S. Customs Service has made and continues to make to this Nation. Treasury and Customs have defined goals and objectives to ensure excellence in protecting our borders, defeating financial crimes, and facilitating international commerce and passenger service. Increasingly realistic strategies and goals, effective law enforcement and compliance, and a commitment to work in partnership with the regulated commercial community toward modernization, will enable Customs to make great strides in meeting current challenges and to begin preparations for the daunting challenges facing us in the 21^st century.