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Hearing of the Coast Guard and Maritime Transportation Subcommittee of the House Transportation and Infrastructure Committee (Continued)

Location: Washington, DC

REP. GILCHREST: Thank you, Mr. Chairman.

Admiral, welcome to the subcommittee hearing. As stated by the first panel, made a recommendation that Congress reform itself so that we don't have 45, 32, however many subcommittees dealing with this issue and fragment the kind of information that needs to be consolidated so that we can keep the Coast Guard and the bureaucracy dynamic. I also want to welcome James Sloan, a graduate of Cranford (ph) High School 1964. A neighboring high school, we challenged each other in a whole range of sports. I'm glad to see, after 40 years, we've finally got together again.

MR. JAMES F. SLOAN: Good morning, sir.

REP. GILCHREST: Admiral --

REP. LoBIONDO: You've got to give him a chance to respond, Wayne. You threw something out there.


MR. SLOAN: I'm not foolish enough to say that Congressman Gilchrest won everything.


REP. GILCHREST: It was a great rival, though, Cranford and Rowley (ph). Part of the Garden State, Mr. Chairman.

Admiral, I have three questions. Two parts to the first one. Was the Coast Guard able to communicate during the tragedy of 9/11 with the first responders with state and local officers at the scene on 9/11? The second part to that question is, last Friday, off-duty policemen in Maryland found a member of Hamas videotaping the Chesapeake Bay bridge. God forbid, anything ever happen where a suicide bomber actually was detonated to pick up on the Chesapeake Bay bridge with that kind of catastrophe. Would the Coast Guard be able to, in the Chesapeake Bay, to communicate with the Department of Natural Resources police, with the other various first responders in the region of, let's say, Queen Anne's county and Adirondack County.

ADM. HERETH: Sir, we believe that the Coast Guard could have indeed communicated with first responders in New York on 9/11. That communication capability was probably one of the better systems in the country. We also believe, since 9/11, there has been a tremendous focus on communications development and capability and much has been done in that regard to ensure that all first responders can in effect communicate. In particular, that's one of the reasons and one of the strong things that have been the focus of discussion in the area maritime security committees as they have stood up around the country.

Communication obviously underlies a good, effective and efficient response. And so, we're very concerned that that is on the table on each of the committee's agendas and that they talk and engage on that front in a very robust fashion. There also has been a lot of equipment purchases since 9/11 to continue to foster that development. So you're right on target. That's a very crucial need. It has to be handled properly. But it's being aggressively addressed, sir.

REP. GILCHREST: Thank you very much. The second question, the container security initiative. Have you seen-you spoke about your efforts with the international community working with the International Maritime Organization and so on. Have you seen any problems with the container security initiative in foreign ports, specially where it's my understanding that an agent inspects the containers as they are being loaded? Is that a correct assumption? And are any of those agents that inspect the containers U.S. agents and are there still ports out there where there is not an agent that inspects the containers as they are being loaded?

ADM. HERETH: Yes, sir. That happens all over the world. There are a limited number of agents deployed around the world.

They generally do not inspect the containers as they are being loaded or stuffed. Generally, the practice is to screen containers and look for anomalies and then divvy the boxes, look at the boxes as necessary. Those agents are in fact CBP agents that are deployed around the world.

REP. GILCHREST: What is that?

ADM. HERETH: Customs and Border Protection agents, inspectors.

REP. GILCHREST: So they are Americans? Do we have counterparts or other agents from England or France or Japan or so on?

ADM. HERETH: No, sir, not that I'm aware of --

REP. GILCHREST: This is a unique U.S. initiative?

ADM. HERETH: I believe it is, sir.

REP. GILCHREST: They go to ports where they know the ship that is being loaded is coming to the United States?

ADM. HERETH: Yes, sir. And try to focus on ports where the largest amount of cargo is flowing to the United States. There's-CBP, of course, manages that program principally, Customs manages that program principally and the intention is to pretty much double the program from 20 ports around about now to 40 ports by the end of the year.

REP. GILCHREST: Just a quick follow up, Mr. Chairman.

The idea of container security initiatives with a U.S. agent in various ports around the world, inspecting to the degree that it is humanly possible the kind of goods loaded into that container, is there anything-it's my understanding that-the IMO new security code and security provisions, is there anything in that proposal that deals with people actually to some extent-the way we're doing it now where our security agents are monitoring the containers that are being loaded, is there anything in the new IMO initiative that does that?

ADM. HERETH: Not that specifically requires inspections once a container is stuffed. But there are all sorts of recommendations and guidelines to push up the supply chain and know before a container arrives in your terminal where it's coming from, who it's coming from and establish a relationship with that shipper. So the term trusted shipper is prevalent. That seems to be a focus. But --

REP. GILCHREST: So the private sector would have a great deal of motivation to inspect each container as well, I would hope?

ADM. HERETH: And in fact there's quite a bit of motivation to sign up for a standard set of protocols known as CTPAT, and I'm sure you may have been briefed on that program. Essentially a set of protocols for shipping containers around the world. Most of the shippers in the world in the liner trade have signed on to those contracts or agreements with Customs, again establishing requirements or standards that are followed by companies as they move cargo to the United States.

REP. GILCHREST: I see. Thank you, Admiral.

Thank you, Mr. Chairman.

REP. LOBIONDO: Thank you, Mr. Gilchrest.

Mr. Sloan or Rear Admiral, it's only been since I guess December of '01 the Coast Guard has had a full seat at the intelligence table, so to speak. A lot of the focus of the commission was on intelligence and how it was handled and there's a lot of emphasis that suggests-and I believe that our ability to deflect future terrorist incidents rests on our ability to collect intelligence. Are you satisfied with the Coast Guard's participation at this point, Mr. Sloan or --

MR. SLOAN: Yes, sir, I am. You're absolutely correct. We became the 14th member of the intelligence community in late 2001 and, as you know, there are now 15 members with the information analysis element of DHS as also a member of the intelligence community. Being a member of the intelligence community I think has enhanced the Coast Guard's ability to do many of the things that Admiral Hereth referred to in his opening statement. Not only do we get the expanded authority to collect and retain and disseminate information, but it also helps us in our MDA relationship, most particularly with the Navy.

As you may know, over in Maryland-in Suitland, Maryland, we are co-located with the Office of Naval Intelligence and are doing many of the things that have been discussed here today relative to reaching out as far as we can beyond our shores to pay attention to what's approaching the shore. And the information that we receive, the funding that we can receive, the training that we receive, leveraging all that within the Coast Guard I think has made Coast Guard's membership in the intelligence community a very valuable resource, for the Coast Guard and for the nation.

REP. LOBIONDO: We may need to schedule a classified session for some of this, but we understand that the Coast Guard with a 96 hour notification will review crew manifest, cargo manifest and determine through intelligence sources where there's a vessel of interest. And we are interested in making sure that you have all the tools necessary to be-to push our borders out as far as possible. And I don't know if there are any comments you can make about how that's working or how it could work any better than what it is working now?

MR. SLOAN: You're right, there would be some details of that program, at least what we do with the manifests, that would be suited for perhaps a closed hearing. But I think it's safe to say publicly that it does help us push the borders out significantly. Ninety-six hours a crew manifest would come in and we're able to vet that through a lot of fused information, which could be information that we've received and use appropriately in accordance with the national intelligence requirements, but also fuse it with domestic law enforcement intelligence, whether it's coming from the Customs Service or the FBI and others, and do a pretty thorough vetting of that manifest, the cargo before it arrives in the United States. And it, too, has been a success.

REP. LOBIONDO: So there isn't anything additional you would ask for in the way of tools or authority at this point to further enhance your capabilities?

MR. SLOAN: Well, I think it's safe to say without getting-and having been a former regulator, I'm careful that I don't go down the line of notice of public rulemaking. But I do think that because that applies to vessels that are 300 gross tons and above, I think there would be some effort to try to lower that threshold. I think that would be something that we would be discussing in the future. And I think Admiral Hereth, as maritime safety, could probably talk about that to a greater extent.

ADM. HERETH: Sure. We certainly do and it was mentioned by Mr. DeFazio, our concern about small vessels is certainly there and relevant. The reporting requirements now apply to vessels greater than 300 gross tons. We intend to discuss pushing that down to a much lower threshold and we are evaluating that right now and talking to our partner agencies about how quickly and how much we can lower that threshold. But our intention is to gain, again reflecting back of awareness, gain total awareness of what's going on in the maritime domain and that's going to require some substantive changes. And we're looking at those right now.

And let me just add one thing to what Jim said. The intelligence is the Coast Guard is linked very much to our operations on a day-to- day basis. There is a daily targeting message that comes directly out of our Intelligence Coordination Center in Suitland. It goes to our fusion centers, intel fusion centers which now exist on each coast and then is directly fed to the operational units. And they use that in targeting their boardings and all the operational activity that occurs in ports.

So it's a very tightly wired operation connecting intel and field operations in the Coast Guard. And we think that's exactly where it should be. So we're constantly searching for ways in which to gain better intelligence and have that flow to our operational units and make it actionable so that we can influence and make our operations tailored to the concerns and the threat that's posed.

REP. LoBIONDO: When might we expect to hear a timeline from you about pushing down the threshold.

ADM. HERETH: I would think in the next month or two, sir, we would have that completed. Then we will begin an aggressive push to put that into place.

REP. LoBIONDO: On container security, cargo container security, in your view, is there any technology that we can expect would be deployed on a pilot program at any time soon that would help in this particular area? I know that a lot of ideas have been floated through. But we're not involved in any pilot projects with anything new yet, are we?

ADM. HERETH: Yes, sir. I think there is about $15 million focused on the Operation Safe Commerce pilot programs at three lower ports. And we would expect that the outcome of those tests-of that testing would in fact drive the new standards for containers, relevant to the construction of the container, any container improvements and tracking technologies that might be appropriate. But also some continuing supply chain improvements.

REP. LoBIONDO: What about technologies that we've heard are in R&D stages that would be able to quickly and efficiently, you know, in essence take an MRI of a container?

ADM. HERETH: We are trying to work with the private sector to implement technology improvements that not only foster improvements in efficiency but also in security as quickly as possible. We just signed out a request for implementation of the use of RFID equipment on containers on the west coast with 13 companies about a week ago. Radio frequency identifying equipment will be used on containers now as they approach the gates that will identify drivers before their container gets there and also the business purpose for the container arriving at that facility, allowing the gate checker to be much more efficient in the process. And so we're going to continue to look for ways in which we can foster the use of technology at the same time bolstering security. And so I think that's one good example of how technology and security can go hand in hand and we'll continue to look for options to do things like that in the future.

REP. LoBIONDO: And lastly, the Maritime Transportation Security Act directs the secretary to develop a national maritime transportation security plan for deterring and responding to transportation security incidents. We've heard Secretary Lehman talk about that needing to be a real top priority. What is the status of the development of this plan? Can you tell us?

ADM. HERETH: Yes, sir. We have a dozen or so folks focused on pushing that through the system in a broad interagency way. In fact, there is 12 different agencies that we're working with both inside and outside of DHS to draft that National Maritime Security Plan. The timeline for that is completion by the end of this calendar year. We're on that timeline. It's a big challenge because of the interagency involvement and because some of the national policies are difficult to come to grips with.

But while that is under way, there has been quite a bit of other planning put in place. We've done some strategic planning a couple of years ago. We have the Area Maritime Security Committee doing regional plans. As you know, we've just completed the review on approval of some 13,000 vessel and facility security plans for terminals and vessels all around the country. So lots of planning has been done, including strategic planning and this National Maritime Security Plan will be the capstone document in a family of plans that begins with the local plans for regulated infrastructure which has been covered by the area plan, which is a regional look at security. And then this national plan will give us a capstone national policy view of national security issues. And --

REP. LoBIONDO: On the maritime side?

ADM. HERETH: On the maritime side only, yes sir. And that's-the way we are thinking about that is TSA owns the transportation security plan, all the modes. We are plugging in the maritime mode as one of the modal feeds for that transportation security plan. So it's a connected effort. And, of course, the transportation security plan is one of the 13 sectors that feed into the national infrastructure protection plan.

REP. LoBIONDO: So that will be folded into that overall plan when it becomes --

ADM. HERETH: Yes, sir. So we tried to make sure that that was a very connected and logical extension of our planning efforts.

REP. LoBIONDO: Okay. Admiral Hereth, Mr. Sloan, thank you very much. We'll go into a very brief recess while we go to --

REP. GILCHREST: Excuse. Sorry, Mr. Chairman. If I can-two very brief questions. One is homeland security issues, orange alert, yellow alerts, red alerts, things like that. What is your counterpart for the maritime community in or near a port for certain-do you have levels of alert that you issue? The other question is, we talk about containers. Are there any provisions dealing with bulk cargo, whether it's coal or sugar or things like that?

ADM. HERETH: Yes, sir. Bulk cargo, breakbulk cargo containers, vessels, terminals, everybody in the maritime mode now comes under the MTSA requirements that specify that they must define three levels of security. And we relate those three levels of security, those are pro-forma standards of protective measures.

So when the country is at yellow, we're at a protective level 1, MARSEC level 1, Maritime Security level 1. When the country goes to orange, which signifies an increased threat, we then ratchet up the protective measures in a defined way. And it's defined really according to the owner-operator meeting the regulatory standards which are performance based in a thoroughly flexible way. So it allows people to develop standards that are customized to their particular operation or the nature of their business. So we've tried to make it as cost effective as possible but yet have a defined standard that people go to as the threat bumps up.

REP. GILCHREST: Your security levels are basically the same as what are issued by Homeland Security?

ADM. HERETH: Yes, sir. They match yellow, orange and red for 1, 2 and 3.

REP. GILCHREST: Thank you very much. Mr. Sloan, Admiral, thank you.

Thank you, Mr. Chairman.

REP. LoBIONDO: Okay. We thank you very much and now we'll take a brief recess as we prepare for Dr. Flynn.


REP. LoBIONDO: Dr. Flynn, thank you. You're on the Council on Foreign Relations. We appreciate very much for your being here today. And please proceed.

MR. STEPHEN E. FLYNN: Thank you very much, Mr. Chairman. And Mr. Gilchrest. It's an honor to be with you today. I think our last chance together, congressman, was in Philadelphia, I believe. We were on a panel together.

REP. LoBIONDO: Yes, it was. Yes, it was.

MR. FLYNN: It's a joy to be back here today in front of you to talk about this very, very important issue. What I'd like to try to do is address what I believe are the ongoing shortcomings of our maritime transportation security and speak directly to one of the commission's findings but to expand on them. And I hope to elaborate on your questions afterwards here, maybe on some of the specific measures, some of which you've already discussed before, on things like the container security initiative, how well that's going. I'll speak to that a bit in general terms and my testimony here but also some of these other technologies might be used and what the applications are, issues I've immersed myself in for quite some time. So I look forward to the chance to chat with you about some of these.

Now I think the nation owes an enormous debt of gratitude to the commissioners and the dedicated staff of the 9/11 Commission. Their report should certainly serve as an antidote for anyone in Washington who thinks that we can afford to take a business as usual approach to confronting the threat of catastrophic terrorism. From my perspective, the report makes three central points that are critical for understanding our post-9/11 world. First, that the attacks on New York and Washington were a meticulously planned and executed campaign by a tenacious enemy intent on exploding America's most glaring vulnerability which is our largely unprotected home front.

Second, prior to 9/11, the U.S. government was neither focused nor effectively organized to confront this threat and that neither Democrats nor Republicans are blameless for that unhappy state of affairs. Third, that despite the horror of that day and the passing of nearly three years, there is so much work to be done towards making the critical infrastructure that underpins U.S. power less of a soft target.

I'd be less than candid if I didn't acknowledge that the hearing today strikes within me a bit of a sense of déjà vu. Prior to 9/11, I had the privilege to work with former Senators Gary Hart and Warren Rudman on the U.S. Commission on National Security for the 21st Century. As members of this committee undoubtedly know, that commission would spend three years of study, concluded in their final report, which was published in January 2001, that the greatest national security challenge that would confront the United States in the 21st century would be a catastrophic terrorist attack on U.S. soil and that the U.S. government was simply not organized to deal with that new reality.

In our case, we had a blue ribbon commission, bipartisan, chartered by Congress, much like the 9/11 Commission. I hope that's where the similarities end because in our case, of course, there was a collective yawn in Washington when that report came out. In this case, this hearing certainly would suggest, as other hearings have been held in time normally recess, that Congress is quite interested in stepping up to this problem in responding to the many, I think, excellent recommendations the commission has made. I think it's vital for the nation that we act on these with dispatch.

I'm confident the 9/11 Commission would readily acknowledge from some of my interactions certainly with that staff that, had they had more time, one of the areas they would have spent more of it on would have been the recommendations, fleshing out some of the recommendations for improving transportation security specifically and critical infrastructure protection more generally. This was not the strongest part of the report. But still they performed a very valuable service. I think, by documenting the extent to which, during the decade prior to 9/11, counterterrorism measures as a part of border security were just simply not a national priority. We were largely going through motions.

Secondly, that there remains a serious lack of balance. We talked about the 90 percent resources going into aviation, really passenger aviation and not much left over for anything else. But the risk of harm is great or greater in the maritime and surface transportation modes than the aviation mode, something I would certainly subscribe to. And finally, that TSA still hasn't developed the big picture, a strategic plan by which anybody can assess where we should be going and at what pace and where we should allocate priorities.

Based on my assessment of the state of transportation security, both before and since 9/11, I agree with all these findings. I would add to that list my concern that many of the helpful measures that are being pursued by the administration in the area of maritime transportation security quite simply have not been adequately resourced or staffed to meet the threats of the sector. They are baby steps.

Specifically in my testimony today, I will point to some critical shortcomings, I think, of these major initiatives that deserve the immediate attention of this committee, the Congress as a whole and the White House. I begin by talking of the international ship and port facility code, the ISPS code that went into effect on July 1st. This should knock a new age. We're supposed to have 22,539 vessels that ply the seas and 7,974 port facilities that serve as the on-ramps and off-ramps for any transportation system abiding by new security measures that were adopted back in December 2001.

Congress through the MTSA gave this force of law here in the United States. But the new mandate just simply hasn't come with any resources, adequate resources to meet the threat. Since 9/11, Washington has provided only $516 million toward the $5.6 billion that the Coast Guard estimates the U.S. ports need to make ports minimally secure. And I would suggest that's minimally secured. That's not any high bar. That's basic gates, cameras and basic access control and so forth. So we've got a big shortfall. This year, in fact, has been the very first budget that the administration has authorized any new money for this support and we've got just $15 million in the budget towards this.

Given that our ports are run by state and local authorities, most of whom are in serious budget constraints, I don't see any way, particularly given the other competitive needs on those ports upgrading infrastructure, that they can make up this difference any time soon. So we remain in a situation where the security, mainly on our seaports, is grossly underfunded.

Equally importantly, I suggest Congress has failed to authorize new funding to pay for staffing and training for Coast Guard inspectors to verify that everybody is actually following these new rules. It's something I understand that fell out of the authorization process here quite recently for next year's budget. The result is we have a Maritime Transportation Security Act with a mandate that says the Department of Homeland Security will certify annually that ports and port facilities are complying with the new standards but we forgot to give any money for this actually to be accomplished.

The Coast Guard has largely responded to this by a quick fix. What they essentially have tried to do is put together a quick team or a team of Reserve, primarily junior officers with very limited experience in marine inspections, little to no background in security and set them off on basically fly-by inspections in many of our ports around the world. I am very deeply concerned that this will in fact send just the wrong message, that the international maritime community will size this very quick effort to try to check in on how they're doing as essentially an indication that the United States government is not really serious about maritime security.

I have already heard, from talking to some overseas port players that the result may in fact be highly counterproductive. It will be very difficult for a security officer to go to a port authority and say we need to make new investments in security, if he's able to point to, Oh, we've already had the Coast Guard here and they said we're good to go. So we could actually have a slow-down in investments instead of the opposite. This is a direct result of not making sufficient investment in the oversight of a new requirement and regime.

The Coast Guard is struggling not only with this new mandate but it also of course is operating with a fleet of cutters and aircraft that's been pushed to the breaking point and beyond. We've heard from Admiral Hereth about the number of new hours assigned to the boats and cutters. This is a fleet that's not aging gracefully. It's decades old. The subcommittee needs no reminding that the Coast Guard is only slightly larger than the New York Police Department and yet it bears the burden of being America's first line of defense along 95,000 miles of shoreline and covering over 3 million square miles of water.

It is patrolling a nation's coastal waters in vessels and airplanes that are just operation long beyond their expected service life. The result of this is that the already dangerous job of performing these missions at sea is being compounded by frequent engineering casualties that puts the lives of Coast Guard's men and women in jeopardy. Just a couple of weeks ago, when we had Hurricane Charlie roaring into the southeast, the Coast Guard cutter Gallatin, a large high endurance cutter, 378-foot cutter was ordered to sea to make it safe.

It barely got out of port and then its main engine promptly crashed in an effort to get out. This is not uncommon. Our high endurance cutters which were primarily built in the 1960s are having main engine casualties virtually every patrol, some of them leading to fires, which is obviously not something you want when you're at sea.

It's inexplicable to me that yet, despite the age of the fleet, despite the new demand of homeland security, the enormous task before us, we still haven't gone back and assess the pre-9/11 schedule for how we're going to recapitalize this fleet. We're still on a 20-plus- year schedule. And I don't see any possibility that this fleet will survive the transition for new frames to be out there and this is going to create a particularly delicate time in the three to seven- year frame-out where we're going to have fewer and fewer ships and aircraft able to deploy, new ones on the drawing board not being deployed and America still under threat.

Now another Coast Guard initiative that I would suggest really needs another look at in investments and resources is the Automated Identification System.

Most Americans that I meet are simply flummoxed by the fact that, while we can track-FAA can track airplanes, it turns out we can't track ships. Kind of big things, no we can't. We don't know until they get here who they are, where they've been and so forth. We get advance warning if they give it to us but we don't find out till they get close up.

AIS is a first step but, I would argue, in the wrong direction. Its focus is using course radio frequency technology that only goes out to the horizon about 20 to 30 miles. In a world where we're putting GPS devices in cell phones, I'm not quite sure why we're not raising the bar for tracking ocean carrying ships from original ports to here. The technology is available. Every trans-Pacific ship and Atlantic carrier uses Inmarsat. It's a communication system that communicates with satellite. You can't do that without the satellite knowing precisely where you are. The tools are out there and we can make these investments. And we must.

The problem with AIS is there simply isn't enough response time if a ship comes barreling in and you suddenly identify it as a threat. Add a little momentum to them here. Twenty miles, you can do that in most ships in just over an hour. You can't mobilize a response of that kind and with that limited time. So I worry that the emphasis on AIS is steering us away from basically simply insisting that if you're going to travel in U.S. waters across the Atlantic and Pacific Ocean, you're going to fess up where we are along the way.

Next, I'd like to talk about the Customs and Border Protection Directorate which shares with the Coast Guard the burden of securing the maritime transportation system. CBP is the lead agency for addressing the risk that cargo containers might be used as a poor man's missile. It has undertaken a number of initiatives since the 9/11, some of which have been talked about already today. But I would again, because of the positive resources that have been dedicated to this effort, I would suggest that it leaves American dangerously vulnerable to another attack of catastrophic terrorism.

The container security initiative is the centerpiece of the administration's efforts in this area. It is a well-conceived program involving placing U.S. Customs inspectors overseas at the port of loading to target containers for inspection before they are loading on a ship destined to the United States. There is in fact reciprocity in the program. The only foreign inspectors that I'm aware of who are here in the United States are Canadians. They're in Seattle and they are also in Port Elizabeth. So there is a-in this clause they sign on, it is possible for a foreign customs officer to examine outbound cargo in cooperation with the U.S. government, which I think has been an important part of making it attractive to other nations, given the sovereignty issues involved.

Today, over 24 ports, including all the largest seaports in the world, have signed agreements to participate in CSI. It's miraculous really how quickly these other nations have got on board. That's the good news. The not so good news is that CBP is staffing the CSI program by sending teams of just four to eight inspectors on temporary duty assignments of three to four months' duration because the administration has not sorted its way through giving them overseas billets that allow these folks to stay for more than 12 months.

In Hong Kong, the world's biggest port, there are just eight inspectors on temporary duty. It takes them a while to get acclimated. They have no formal training. They have no language training. We wouldn't think of sending attachés overseas basically by just putting them on a plane and landing, given this kind of job. But that's in fact our approach in this problem.

The next-so the limits in CSI would suggest simply not enough people, not enough time to get acclimatized to the area, so small numbers. They are targeting a tiny percentage. I mean, when I'm talking tiny, I'm talking several a week. When we're talking ports like Singapore and Hong Kong, that are doing a million a month. So it's a step in the right direction but again a baby step.

Next, I want to talk about the Customs-Trade Partnership Against Terrorism which is a companion piece to CSI. Under CTPAT, CBP has reached out to companies and carriers involved in importing goods into the United States and has asked them to assess the vulnerabilities of the supply chain and to put in place measures to address any weaknesses they discover. Companies have joined CTPAT, enhanced the odds that the Customs and Border Protection will review them as low- risk shippers, which translates into their conveyances or shipments not being subjected to routine examinations.

Like CSI, the underlying logic of this program is laudable. Unfortunately again, we probably run into staffing and resources issue. CBP has received over 5,000 applications to join into this program. It doesn't have the staffing to get through them. The last count that I was aware of over a little month ago, they went up through the first 1,000. That's just the beginning step. The problem is they have no means to go back and certify whether anybody is living up to these applications. It's essentially a trust but don't verify program, but please trustworthy. That's essentially what we've got going.

What this means is that the maritime transportation systems remains an extremely soft target for America's enemies to exploit. We've heard from the 9/11 Commission about the extent to which groups like al Qaeda are willing to stake places out, spend the time to plan and in this sector is one which is recognized within the intelligence community as one which they have in their sights. We have learned also from the orange alert here on August 11th to the extent to which they will spend the time and energy staking out critical infrastructure. And yet, we have a system because it's trust but don't verify that I believe creates a real opportunity for terrorists to exploit and to target. That would have enormous consequences for our economy if we don't get our act together quickly.

My sense of worst case scenario today is in fact this one, that we'll have a terrorist incident that will involve a CTPAT participant, loaded in a container that arrives in a port, a loading port that's a member of the container security initiative protocol, gets on a ship that's certified as ISPS compliant, steams the waters, lands in the United States, put on a rail or truck, sent into the interior of the United States and the container goes off with a weapon of mass destruction. When that happens, what we'll have is the discrediting of the entire regime. Every container becomes viewed as high risk. In that context, particularly if it's a multiple attacks, which al Qaeda is often prone to do, as we've seen, we would have shut down to sort it down and then try to develop on the fly a credible mechanism for validating low risk is low risk.

If we have a two-week shut down of U.S. ports, we will collapse the global trade system. That's what we're talking about here. And a notion that we have not been able to find the resources or the energy to focus attention three years after 9/11 to deal with this problem is something that I'm still flabbergasted about. This is my ninth time testifying on the Hill since 9/11. I'm getting to be like a broken record on this score.

I am grateful for the opportunity to repeat the record. But I very much fear, if the investments are not made in the energy and the resources to get a handle on this problem, I'm just giving fodder for the next commission, the next blue ribbon bipartisan commission to sit down and say why is it that we left Americans grossly unprepared in view of the threat that we all were aware was coming. Thank you very much, Mr. Chairman, Mr. Gilchrest. I look forward to your questions.

REP. LoBIONDO: How many of these nine times were before the Appropriations Committee?


MR. FLYNN: Only once.

REP. LoBIONDO: Oh, we've got to get you back there again, specially on deepwater.

Mr. Gilchrest, why don't you start off again?

REP. GILCHREST: Thank you, Mr. Chairman. Well, we have a lot to talk about. With everything that you've mentioned to us-and this is the first time that I've sat at a hearing where you've testified and I'm sure this subcommittee along with Mr. LoBiondo will begin to rattle some cages to put some of this dust get shaken away and the dollars poured down and the priorities set in order to meet our responsibility for the security of the U.S. ports and the United States.

You've mentioned the container security initiative, the Automated Identification System and a number of other things here. We heard the admiral in the previous panel discuss some of those initiatives and its work with, specially with the container security initiative and the agents that travel to foreign ports and the inadequacy of their numbers and apparently, you're telling us, the inadequacy in their training and some apparent lack in seeing that as one of many priorities that need to be put into place.

And I guess we can go through your testimony. But is there, to put in the simplest form, is there a list of recommendations that you have attached with the dollar amounts that you could give to us to sort of speed up this process?

MR. FLYNN: I do have a list of recommendations and I just actually finished the book that came out and spent a lot of time on this. Dollar signs is a little trickier but I can give a feel for what those dollar signs are. The central thrust is that the approach that's been taken, to really view this as a global network issue, is precisely the right one to be taking. You know, one of my core concerns is that we have unfortunately, rather than obliterating the entire distinction between our borders and domestic security and international security, which 9/11 I think should have warranted, we actually have reinforced the line by saying national security is about dealing with threats over there and homeland security is dealing with these issues here. And the maritime is a perfect illustration of where that doesn't work very well.

The ports are simply on-ramps and off-ramps for global transportation systems upon which our economy depends. And if it is strictly homeland security issue, how do you get the rest of the system to behave? But if the foreign policy and defense and national security community don't see this as a priority, because they are focused on traditional national security issues, then you don't get the resources, you don't get the energy being applied through diplomacy and other means to move this out with some speed.

The essential approach that I'm arguing on container security specifically is we need layers. The layers begin with a birth certificate, somebody you can point to to say who loaded that container to say it's legitimate and authorized. That should be a process that we can point to.

REP. GILCHREST: On that point, how would we specifically do that? You know, with all the issues that the IMO deals with, whether it's trying to make a shipper credible because he has to meet certain criteria in order to get-in order to be a part of the international insurance system so that he can go on the high seas, transparency, who owns that ship and so on, how do you actually get an individual or is it necessary to get some human being, some U.S. agent, some agent that we trust on the ground to watch that container being loaded? Is that part of the necessity that we need to undertake?

MR. FLYNN: I believe that, if-we do need some trusted party. I don't think it's U.S. agents or the numbers. We get about 18 million containers out there. So they share numbers. But it's really working with the private sector saying, come up with a system, either in-house that we can-or we rely on third party folks to come in and make sure that you're behaving by these rules.

REP. GILCHREST: How does the U.S. undertake something like that? Do we work through the IMO to deal with that? Do we establish some other entity so that we can work with the private sector or foreign neighbors at their ports? How do we set up a structure to do that?

MR. FLYNN: The MTSA 2002 Act actually provides the mechanism which is one that I've been working through. The good news on this problem is it turns out eight out of every 10 containers that come into the United States of the 7 million that came in last year pass through four major terminal operators all of which are private sector players. There is Hutchison Port Holdings which moves 41 million TEUs last year. Next PSA International, Port of Singapore International, which move 19.5 million. Then you have P&O Ports. They're British based. They moved about 16 and then you have AP Møller ports, a Dane company that moves 13.5 million. And HBH is run by Brit. So two Brits, a Singaporean and a Dane. All these ports-you can't get to the United States largely unless you can across the big oceans relying on a megaport and a good size ship, except for some of the Caribbean operations.

These folks basically are in a position to say, Any box that comes through our terminal will have a birth certificate. It will be a smart box. It's track-able. Its integrity can be measured. We know where it's been. And then we'll scan it and get the image of what's in there and put in a radiation portal.

REP. GILCHREST: Have they said that?

MR. FLYNN: They are actually involved-I'm working with one of them, which is HBH in Hong Kong. I'm going there next week in fact. They have agreed to be engaged in a pilot where they're going to, in the world's busiest terminal, HIT terminal in Hong Kong, where they are going to scan every truck that comes through, both an image and a radiation signature combined with using OCR, optical character recognition technology to see the truck and container through it, and show that you can do this without disrupting the throughput. The cost of this will probably run about $15 per shipment going through this equipment, when you talk about the scale.

The cost of using a Smart Box technology, GPS tracking, a radiological sniffing device as well as something that can tell us if somebody broke in, light and so forth, the total cost of that black box is going to be about $300 to $500 apiece. But amortized over five years, five moves per year, that comes in at about $20 a shipment. A birth certificate process is probably in the order of $10 to $20. Some very scary places, obviously more expensive, depends how frequent you're using. We're talking about $50 per shipment, basically, to go from what I call a dumb box where we know nothing about that presents a very high risk to one that we can some real confidence that is in fact a legitimate good that hasn't been diverted and hasn't been exploited. It wouldn't be a failsafe system. But it would be a long way towards where we need to be.

Putting that into context, the average shipment today for a trans-Pacific voyage is over $3,000 for up to 32 tons of material, which I think makes the postage stamp look a little overpriced. That put in context, when the economy is at its slow point, in spring 2002, those freight rates were down to just about $2,100. I haven't heard WalMart in Chapter 11 and as a result of paying $1,100 more dollars for an actual freight rate. Marine freight rates are very volatile and putting into-but now here's the benefit. This is what MTSA allows for. What the terminal operators think would create the incentive for people to use-to do this would be-what we're calling a green lane, which is based on the easy lane version or easy pass version of essentially throughput.

And really the agreement that I've talked with three of the operators about doing is three things. One is if we pull you out of the queue to get inspected as a random inspection, we'll do you right away. We'll put you at the head of the line. Secondly, if we go to orange alert, the heightened alert, we're not going to mess with you because you've already done this prophylactic stuff upfront. You're using a container we can measure. We're not going to slow you down. Thirdly, if we have to shut down because we had an event, we're trying to sort it out, we'll start with you guys first.

And their conviction is going to them because of the certainty of the supply chain is really where the money is to be made. That paying maybe a $50 per box surcharge looks fair and then the willingness to invest in the technology to actually do the scanning, not U.S. dollars. It's basically the system in place to incentivize this. So I just saw the mark-up of the technology action scenario last week. I was out there along at the port. They're going to be deploying this in Hong Kong in September. We'll see how it works. I will be more a preacher when I see it really work. But the reality is the technologies and things are out there. There is more an issue more of choreography than technology. It's an issue of getting the incentives and the government players to be in alignment.

Now you may ask why doesn't the U.S. government embrace this, why doesn't the administration embrace this since the law authorizes it. Frankly, it's because Customs doesn't have the resources to do a red line. It can't put any friction on the system.

Everybody gets a green lane right now. Everybody comes through and it would take having more inspectors for those who are not complying with the protocols I laid down to create essentially some friction for not doing the good things for this to work. And in the absence of resources for them to actually do that, Commissioner Bonner is legitimately concerned about creating a paper target of saying, Go ahead, make this expense. We promise to treat better but it turns out everybody is getting the same treatment anyways.

And so it comes bound to-when we talk about investments and I think this is a number that should help to frame this issue. We are a nation at war. We have spent since 9/11, as I said in my testimony, just over $500 million on port security since 9/11. In three years, we have spent what we are spending every three days in the war in Iraq. Both of these are elements for any strategy to do with the war on terrorism. We have the political will. We have the resources to take the battle to the enemy. But we haven't demonstrated the will to protect the things that are most valuable to us and the most likely targets by our enemies as we look forward.

REP. GILCHREST: Thank you.

REP. LoBIONDO: Thank you, Mr. Gilchrest.

Dr. Flynn, in your testimony, you laid out a worst case scenario in which terrorists exploit the holes in the procedures to protect our facilities, vessels and cargo. In your view, -- I'm going to ask for three categories-what is the single, the single most important thing? We can almost be overwhelmed by what you're telling us. I think, especially on this committee, we understand and have sort of been preaching off the same sheet you've been. But to get something that's actionable, I don't think we can throw out so broad a net. But maybe we can be more successful, if we can get down to some very single shot specifics.

So what is the single most important additional action that you would take in each of these three categories for screening vessels, for screening cargo and to protect port facilities? If it's possible --

MR. FLYNN: First, on the vessels I think the most important thing is just monitoring the position. So forcing a tracking regime which is from point of origin to arrival in the United States, I think, is the most straightforward thing. Again, virtually every vessel carries Inmarsat technology which would either communicate to the front office, you know, the satellite version of a cell phone call. When you make a call, it knows who you are. Mandating that basically that that information be available to verify you're on the course that you told us you would be on is something that could happen with virtually no huge expense on the industry.

There is some interesting dynamics here about endorsing a particular satellite communication technology. It used to be the Europeans who slowed this whole thing down. Regardless of who the provider is, you just say, Use it. You've got 60 days. Figure it out. That is important because it allows us to verify ships who are doing what they are expected to do. They're not been hijacked. They've been slowed down. They're operating on schedule as predicted.

On screening cargo, I would have to say I was agnostic about this technology for a while because the imaging was not quite great. There was also the issue of slowing down. You had to stop trucks to do it. But the new cargo screening technology, really in 15 seconds, you get an image plus a radiation signature at this very low cost. This technology exists. Deploying it in all the world's major ports is a $500 million price tag. Again, that's three days in Iraq. That's four F-22 fighters. That's taking a system central to our economy and making it more secure. It's not something the U.S. government have to pay every bit of. It would help if developing countries provide it because it's in our interest to do it, to provide assistance to do it.

But that's not a cure-all system. I would be concerned about just relying on a single point approach, which is getting the radiation image, getting stopped. But here's what that would do for you. If you had the image of everything that came through, you can develop software that starts to spot anomalies. Basically, you know what sneakers look like. You know what a shipment of underwear looks like. You know what all the various stuff that's out there. Right now you have a piece of paper. We don't quite really know what it looks like unless you really get nitty-gritty and there's some field agents that do it.

But the technology would be able to scan that and say, Hey, there's something here that doesn't belong here --

REP. LoBIONDO: How close are we to something like that?

MR. FLYNN: It exists. It's been fielded. It's been tested. We can do it. We have done it here at various places here in the U.S.? Again, I pushed-let's try it in the world's busiest place because if you can do it there, you can do it anywhere. And that turns out to be at HIT Terminal in Hong Kong. So we'll see how it goes. But the other thing it allows you to do, you can --

REP. LoBIONDO: Excuse me. Now that-I'm very interested in that system. They're going to Hong Kong-Hong Kong's going to do this on every cargo container?

MR. FLYNN: They're going to do it on every truck coming into the gate and into the terminal. And another modern terminal in Hong Kong is going to do it for something that comes off the barge before it's loaded on a large ship to get the transshipment problem which is a huge vulnerability.

REP. LoBIONDO: And they feel that the throughput is not going to stifle their productivity?

MR. FLYNN: They are going to run it for three months and see how it goes. But right now, this is a 24-hour-the port of Hong Kong is 24 hours, seven days a week, 365 days a year. HIT Terminal can do 10 post Panamax ships simultaneously, three to four gantry cranes per ship, 30 moves per hour per crane. You want to talk about a place that worries about throughput. There is no place where as much is going on. The terminal was built in 1992 for 3.1 million TEUs. Today, it's pushing through 5.5 million on the same footprint.

They move boxes six high. It's an extraordinary bit of systems engineering. But it's also a case where technology lines up. It's so automated a system you can police it. There are very few people on the terminal. Everything has to be precisely where it needs to be or else it would cause basically constipation in the port. So their ability to maintain it is quite high.

So we're going to see. I would be in a position hopefully a month from now to come back and talk and you would be in a position to do this as well. This is not-this is a venture capital operation by one company, SAIC. And in the Port of Hong Kong, private terminal operators have agreed to do it as a proof of concept. So it will be something I think is worth your pursuing, asking how the results went, to see if it worked. If it doesn't work, then we know we've got to go back to the drawing board. But the sense here is that, as I've seen it, it looks quite promising.

The last thing I want to point about it is it's not just the images, so you can basically help the Customs eye-because you can develop some software. But one of the real issues we have is if we shut down the system, how do we restore it? How do we restore public confidence? How do we get container ships back moving again? There's on-every day there's 15 days of containers out there at sea. And if we haven't vetted them properly and people have panicked, the mayor of LA doesn't want a ship coming in because something just happened on Port Elizabeth, we want to be able to point to something why we can let that ship come in.

What you would be able to do is replay the tape of every container on there, our Customs official could look at it and then basically say, the reason why, Mr. Mayor, you can-we feel comfortable letting the ship in is because we just, with our team, scrutinized every container on it. We sent the Coast Guard out to check the vessel. We can bring that ship in. We don't have to shut down the trade system to sort this thing out.

So it's a powerful tool. And the last part is it does allow you to give foreign Customs officials-you can delegate this to them because inspector A is going to have a tape that can be back here in the U.S. And so if they wave something through because of the issue of corruption and you can immediately identify they shouldn't have, it creates an honesty system that allows you to delegate to not just overseas Customs agents but potentially private players as well, because you can have your governmental oversight remotely to spot check and keep it, and that allows you to get at the volumes.

So I think it's a powerful tool. And along with what-you should also be asking about what the results of Operation Safe Commerce are. These are for the tracking devices, the smart boxes, how they work, what are their false alarm rates, those kinds of things. But the technology is available. It's a question of how do we harness it, what do agencies do when they get the information, what are the protocols if we find there's a problem. There's much more issues of structure of government and resources that it has to deal with this than there really is of tools that are out there. Really the heavy lift is processed more than it is that the tools are there.

REP. LoBIONDO: Do you have any additional recommendations for how we're handling intelligence in this area?

MR. FLYNN: Well, really I want to very much echo the 9/11 Commission's message about reaching out to the private sector. This has been a particularly difficult issue in the maritime arena because so much of the maritime industry is actually owned by foreign companies. You know, there is no major container line in the United States outside of Matson Line that does Jones Act kind of activity. American Presidential Line is now owned by the Singaporeans. Sea-Land is now owned by Mærsk AP Møller. So when you're talking about secured-ness, you can't talk about it by just reaching out to domestic players.

The U.S. government has a very difficult time figuring out how to sit down with international counterparts. But what's the-what the incentive is for the foreign terminal operator to get involved in this conversation. And specifically I've worked with John Meredith, who's the group managing director of Hutchison Port Holdings. His incentive for dealing with this is a fear that the only tool in America's tool bag is a kill switch if something goes wrong. He has 35 ports in the world. He moves 41 million containers each year. We throw a kill switch, his entire operation implodes. So he wants to provide a market case for wanting to help the U.S. government to solve this problem so his whole enterprise doesn't implode.

So there are, in fact, I think-so one of the things I would say is you really need to reach out to this community. And they have eyes and ears. And they have opportunities as well that it would make available for our people to go to their facilities and learn more about how they work and how they operate. Another very critical area I would say is the challenge that Customs and Coast Guard is facing, an it's a problem across the board with critical infrastructure protection. There's very little resident expertise inside the U.S. government about how these sectors and networks work. I had very little as a Coast Guard officer until I get sort of out of the operational side of it and get more in the academic side and the work they've been doing since. You get a little piece of the elephant but you don't see the big picture.

And one of the things that these-I have found private sector very willing to do is to host people coming in and learning about their industry. Customs has got the job of policing supply chains. There are very few Customs officers who understand supply chains. You know, it is, I think, a central issue that was completely overlooked in creating the Department of Homeland Security. We've taken what was once a very simple task, the issue of looking at a passport for an immigration official in your face, or the issue of saying widget one each and now you've got 12 of them.

Now all of a sudden we're asking our frontline agents to basically be multi-tasked across the issues of Immigration, Food and Agriculture, and Customs' Once Face at the Border, to be able to be comfortable dealing with international counterparts, to work within an complex industry and supply chains and so forth here, to use new technologies, and we're doing it on the backs of GS-9s, you know, with an OJT training basis for which these agencies operate on.

You know, at any given time, 30 percent of the Naval Officer Corps is in training and education. We've recognized it's a sophisticated environment. They need to learn to be at the top of their game. We have none of that capability for the frontline men and women who are doing so much of the stuff. And so these are real big issues, but it comes back to I think something we really-it's a challenge, and I don't know how this committee takes it on here, but it's one they I've most tried to raise.

It's that any given day, how much are we willing to spend on what we call national security and the tools that we provide for that versus what we're now saying homeland security is. Homeland security is a part of national security. And we need to rethink whether another dollar for missile defense may be better spent a dollar going to speed up the Coast Guard's Deepwater Program, or better spent going to the Port of LA and Long Beach so it can actually have a vulnerability plan done. But we have nowhere in this town to have that conversation, because the oversight for national security dollars is stovepiped in OMB and the congressional oversight all the way through. And so we get this quirkiness.

Critical infrastructure protection. We're talking about maritime being this today. In the budget identified this year there is $14.1 billion that OMB says is going to critical infrastructure protection. Seven point six billion of that is to protect U.S. military bases. Tom Ridge gets $2.9 billion for everything else.

Now, I know when I attack the United States overseas: the USS Cole and Embassy, that's America. But if I'm here, what am I going to target? The Port of San Diego or the Port of LA-Long Beach? But we have this quirky system now where this Port Elizabeth or Port of Long Beach is just the property tax owners of the country of those-or city of those areas that are responsible for the security of those ports. Now, I think there's a real equity issue there that we need to debate about. And given its vital importance for our very way of life and that we know terrorists are targeting this infrastructure. We have to rethink about where we're setting priorities, I think, by looking at the whole picture, not just the slice we call homeland security.

REP. LoBIONDO: Dr. Flynn, I thank you very much. We very much appreciate your thoughts and we're going to do our best to try to keep the heat turned up here.

MR. FLYNN: Great. I commend the committee for all it has done.

REP. LoBIONDO: Thank you very much.

With that, the committee will stand adjourned.

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