Secretary Chertoff: Well, thank you, Ralph. And I want to return the compliment and say that you have an outstanding, very experienced commissioner of Customs and Border Patrol, and also a new deputy commissioner. Congratulations, Jay.

I appreciate the opportunity to be here with you, and the important service that this committee provides to this department and to the country, in fact, over the last 20 years, I think, you've been active.

Obviously, you provide an important sounding board to us to give us some real-world expertise and perspective on what is often a difficult balance between security and trade. Of course, the security requirements and challenges have changed over 20 years, as has the demand of the global trading environment. So this is not a static circumstance; it's a dynamic one in which we have to continue to talk to each other about how to strike this balance.

Of all the challenges that we face, of course, in protecting the country from dangerous people and dangerous things, there is no greater challenge than making sure that we continue the flow of trade and commerce on an international basis, even as we continue to take reasonable steps to elevate our level of protection.

We know that the international supply chain is designed to be as quick and as seamless and as far reaching as possible. And that is in some tension with the requirement of security, which is basically built upon the concept of monitoring, inspecting and, if necessary, preventing entry of something or someone that would be very dangerous.

So we have to reconcile facilitation and security. And I believe we can do that. In fact, I believe that if we do it properly, we wind up enhancing both of them.

Now, as I've looked at the wide-ranging responsibilities of the Department of Homeland Security, I've often described our strategic objectives as being five, and one of those is keeping dangerous cargo from entering the country. And that's particularly true with the kind of dangerous cargo that could be used to constitute a weapon of mass destruction: a nuclear bomb, a radiological or dirty bomb, or something else that is a material that cannot be easily acquired in the United States, some kind of a weapon that would have to be brought in from overseas.

Of course, there are some larger issues as well we see, even with respect to the need to keep dangerous imports out of the country.

We have a similar set of challenges, in terms ofentifying dangerous cargo and making sure we can stop it without interfering with the overwhelming benign effect of the flow of trade.

So let me talk a little bit about how we want to -- what kind of layered approach we want to take to this issue of security, recognizing that we're dealing with a series of somewhat distinct but related challenges: How do we keep bad things from entering the country? How do we keep people from using bad things to attack us at our ports from the water side? And how do we use our resources to prevent a land side attack on the ports? Of course, an attack on the ports would not only be a direct assault upon lives and property, but would have a very, very serious impact upon our continuity of trade and our whole global regime of commerce.

So our approach is to look at all of these distinct but related threats, and take a layered enforcement and security process, which is designed to reduce risk but not to eliminate risk.

Now, I actually could eliminate the risk to the ports. If I shut them, there will not be any risk, but there won't be any ports. And I noticed there's some laughs, but I can tell you, I've sat in groups and heard people argue, for example, that you ought to have 100 percent physical inspection of every container that comes into the country. Sometimes I am -- when I'm in a little bit of, I guess, a devilish mood, I think, well, I ought to perhaps take some member of Congress up on the offer to do that in her or her home port and see how long it is before the longshoremen are out picketing and complaining about it.

Obviously we're not going to go for total guarantees against risk, because that's not possible with any system that's a vibrant and organic system. So we do want to take a layered risk-managed approach, and we do it using a number of different initiatives: the Secure Freight Initiative, which includes the overseas scanning program and Security Filing, 10+2; the Customs Trade Partnership Against Terrorism, as well as the future role of recognition of Authorized Economic Operators in potential mutual recognition systems; and the Container Security Initiative, which puts as many of our officers overseas as we possibly can to engage in screening and, where necessary, inspection in foreign ports.

What connects all these programs in common is the focus on gathering information and data relating to containers as they transit the global supply chain. We use information as a substitute for the brute force of 100 percent physical inspection, because the more information we have on a container, the less likely it is for us to have to waste a physical inspection, and that way, of course, we can reduce cost and delays.

So some of the programs, like Security Filing and CTPAT, are aimed at gathering information from the trade side of the supply chain, manifesting entry data about cargo and data from the logistics processes of the carriers and forwarders. This gives us greater visibility into container movements and stowage on board vessels.

Other programs are designed to be more automatic. For example, Secure Freight phase one, where the potential use of container security devices are ways of using mechanical or scanning devices to simply automatically and routinely detect either dangerous material in a container or a dangerous intrusion into a container which might have compromised the contents of the container.

At the end of the day, we want to combine all of these systems to allow us to receive, process and act upon commercial information in a timely way so that we can target, in a very specific fashion, the suspect shipments without requiring us to materially slow up the supply chain or cause our ports of entry to become clogged up.

Because of the emphasis on information that is at the heart of our layered strategy, getting this information earlier and more comprehensively is obviously very important. And the 10+2 initiative, or the Security Filing, as it's officially known, is a good example of this.

As you know, the notice of proposed rulemaking on 10+2 is currently under review at DHS, and we'll soon be sending it over to the Office of Management and Budget to complete the clearance process.

This 10+2 initiative is going to give us earlier and more targeted risk-assessment capability, and I want to thank you for the valuable time and effort you put into giving us feedback.

Our discussions with you and the recommendations you provided in February on the SAFE Port Act mandate to provide more advanced information on shipments into the U.S. were very helpful to us in developing the proposed rule.

I want to make sure we continue to move forward to get this thing done as quickly as possible, taking into account all the Comments made by people who are involved in the trade.

I also look forward to your assistance as we implement the new reporting procedures. We're going to phase the reporting procedures in over time so we don't disrupt the flow of trade, but I would like to see us begin implementing it this year.

In the future, we want to continue to look for ways to increasingly collect helpful information on containers to increase visibility throughout the supply chain, and thereby reduce risk without increasing physical inspections. We're envisioning, as the next step in this process, piloting, on a voluntary basis, a system that would provide expanded global access to trade information. I know you have a lot of -- and I'm interested in hearing about this concept of an information clearinghouse that would collect data on shipments, on purchases, on purchasers, which we could then use to further refine our intelligence-based targeting. Customs and Border Patrol has been working very hard on a solicitation of proposals, and we're hoping in the very near future to be able to put something out.

Now, that's the prevention side of the whole issue of the supply chain. But I also know you're concerned about what is the response if something gets through our defenses, notwithstanding our best efforts. And I had the opportunity to talk about this when I was out in Los Angeles a few weeks ago, as we discussed our strategy with respect to resumption of trade.

We recently released an interim strategy to enhance international supply chain security, which was required by the SAFE Port Act. This is not a detailed plan, but is the overarching framework for resumption of trade, building on a number of existing national strategies and plans, and bringing together numerous programs and tactical operational procedures that are being developed by the appropriate department components and agencies.

This interim strategy is the first step. We're looking to assimilate the Comments that we receive, and we're going to continue to refine it, as well as our overarching National Response Framework. The concept here, again, is to find a way, as efficiently as possible, to unify our response to an incident in a port so that we can get the port up and running again; make alternative arrangements while the port was down; consider how we prioritize the flow of maritime traffic, based upon what else is happening in the environment; and execute on this as quickly as possible.

Obviously, in order to do this, the strategy and the planning will continue to require very specific work with those people who are engaged in the trade themselves, both the importers and the shippers and the port operators.

And finally, we also appreciate your feedback on the CTPAT program. We know you're going to be issuing a report in the coming weeks on that program, and we're looking forward to receiving it.

With respect to the Container Security Initiative, we're scheduled to be up and running by October 1 in 58 ports, with over 85 percent of the trade coming into the United States now being handled with this overseas initiative.

And I'm delighted to say that we've deployed our thousandth radiation portal monitor so that by the end of this year, almost 100 percent of seaborne cargo entering the United States is going to be coming through radiation portal monitors. And that is the kind of automated scanning which I think is a critical layer in our defense against people smuggling in dangerous nuclear materials.

We're also working on the next-generation ASP technology that will further enhance and refine our ability to detect and characterize radioactive material so that we can more quickly separate the kitty litter from the dirty bomb, which means less delay as you move through the trade cycle.

In this respect, let me say I am -- I asked and I actually directed that we get an independent panel together to give me advice on the certification of this next-generation system so that I would be able to make my certification with expert opinion on the workability and the science behind this ASP system. I think it's important; in fact, I've been asked about it by Congress, like why I'm not prepared to rely on GAO's opinion. And my answer is this: If Congress is going to mandate that I certify, I'm going to look to scientists and experts that I trust to give me the background I need to do that certification. So I'm looking forward to getting that underway.

All of these are important areas of focus for us. I think if you look at where we've come since September 11th, when we had zero radiation portal monitors, and only a much more elementary system of intelligence-based screening, there's been a huge advance forward in dealing with these issues. And we've been able to do that because we've been able to work with the trade and with this committee and others to get a real-world view of what works and what doesn't work.

Let me conclude, though, by saying this: Our focus on risk management and security has to be driven not only by what's fashionable in the media or what Congress is asking about, but on our informed, well-advised judgment about the totality of risks. So even as there's been a lot of discussion about container security, I want you to know that we've been very focused on other threats to ports, other than those coming from containers; threats of the kind that we saw in the attack on the U.S.S. Cole or the French tanker Limburg. That's why we're working with the Coast Guard and Customs and Border Patrol to develop some plans with respect to the possibility of small boats coming into ports with nuclear materials or dangerous materials as a complement to what we're doing with the large containers.

Our watchword here is, all threats, all hazards, dealt with comprehensively, 24-7, and with your help, we're well on the way to achieving that objective.

Mr. Basham: If I could suggest that we maybe quickly go around the room and have the members introduce themselves.

Mr. Basham: As you can see, the trade is well represented here, and we're just incredibly pleased with the relationship and the partnership that we have here. And we depend upon this group a great deal on many different fronts. As opposed to your visit to Artesia with the Border Patrol the other day, when you got no Questions, this group is not shy. So I will ask those of you who may have Questions of the Secretary to weigh in.

Question: I'd like to thank you for coming here. It's a demonstration of the department's appreciation of the fact that the folks in this room really do have something to offer; in fact, they're all experts in this room.

So this morning we got a brief report on the strategic plan that's been developed that COAC had been asked to Comment on. And we did Comment on it. And the first Comment that was universally endorsed was that, in the event of an incident and post an incident, there be a clear command-and-control structure. And that, it was felt -- and Chris, I'm sure, will elaborate on this -- that that would -- that command-and-control structure would supersede state and local authority. I understand you're from New Jersey, which I am, and you know -- although it recently has been, I believe, decided that New York and New Jersey are still arguing over who owns Bedloe's Island. So to the extent that there is an incident, the worst thing we can imagine is that there be some lack of clarity over who's in charge. And we really urge you to consider that as a critical issue.

The other thing is that, in the event of an incident involving a major port -- Los Angeles, Long Beach, New York, Chicago O'Hare -- we don't see that as a state issue. There's very little cargo that remains in Newark. It all goes on into the mid-section of the country or beyond. So that's not a state issue, as we see it. We see that as clearly a federal issue, and it needs federal control and command. And we think, incidentally -- not that we're patronizing -- but that the best people to do that are in CBP, because they have the information, they know who the shippers are, they know who the folks who are not the usual shippers are.

So, again, we urge you to consider the concern that we have. As I mentioned this morning, Pfizer and the global logistics group, we're responsible for getting product where it's needed so people have their medicine every day that they want it. And we need to know what the federal plan is if tomorrow on CNN we hear that the port of Chicago O'Hare has gone down, we need to know, well,