Statement of Timothy Farrell, Deputy Executive Director, Port of Tacoma, Tacoma, Washington

Testimony Before the House Committee on Ways and Means

Hearing on Creation of Homeland Security Department

June 26, 2002

Good afternoon, Chairman Thomas and members of the committee.  My name is Tim Farrell and I am here today representing the Port of Tacoma.  As the Port’s Deputy Executive Director, balancing security with the efficient flow of cargo across our docks is one of my paramount responsibilities and concerns.  Though ports have always devoted resources to safety and the protection of cargo, the industry now shares an especially keen sense of responsibility with Congress and other governmental entities in these challenging days since September 11^th, 2001. 

Before I begin my formal remarks, let me first put my comments into context by describing some of the Port’s key attributes.  The Port of Tacoma moved more than 1.3 million containers across its docks in 2001 and, when combined with the Port of Seattle, represents the nation’s 3^rd largest intermodal gateway.  Each year, the Port of Tacoma handles more than 15 million tons of cargo, amounting to more than $20 billion in international trade.  Seventy percent of these international containers – holding products ranging from shoes to machinery – are transferred from ships to trains and are headed for markets in the Midwest and East Coast.  Additionally, the Port of Tacoma handles an additional $3 billion worth of trade as the Gateway to Alaska, with more than 75 percent of all consumer goods bound for Alaska transported through Tacoma on the CSX and TOTE ships. 

Another important distinction Tacoma has is serving as one of the U.S. Department of Transportation Maritime Administration’s 13 national “strategic ports” – a designation based on the load-out capabilities the Port of Tacoma provides to Fort Lewis.  With nearly 102,000 jobs in Washington State related to activities at the Port of Tacoma, the Port serves as a major economic engine for the Pacific Northwest.

The Port of Tacoma appreciates the opportunity today to share its perspectives on the proposal to incorporate the U.S. Customs Service into a new Department of Homeland Security.  The U.S. trade policies are built on democratic principles of free and fair trade, and competition.  The U.S. Customs Service capably faces the daunting responsibility of safeguarding this free flow of trade and has embraced the elevated challenge of allowing trade to continue to be free and fair in a heightened security environment.  Ports also recognize the trade landscape has been forever altered, and that we must find new ways to continue doing business while integrating enhanced security.  The Port of Tacoma is engaged in several initiatives on this front, including development of a “Operation Safe Commerce” model program called SMART (Secure Maritime Asian Routes for Trade) that would ultimately track containers from the point of origin and through the United States. 

Though the need for including U.S. Customs in the proposed Homeland Security Department is logical, Congress should not let this enhanced focus on security compromise the traditional responsibilities of U.S. Customs.  It is imperative that Customs’ activities such as: tracking merchandise entering the country, air and sea surveillance and interdiction, and fighting drug smuggling continue to receive ample priority and funding.  In my brief time with you this afternoon, I would like to convey three primary messages:

• U.S. Customs is an integral link in our nation’s economic chain of commerce.  Ensuring the secure, legal and expedited movement of goods into and out of our country is essential to our economic vitality.

•  As U.S. Customs integrates new security standards into its traditional cargo inspection and tracking methods through ports across the country, care must be taken to keep procedures uniform and proportional from one port to another. 

• Continued cooperation and coordination with Canadian Customs, in establishing comparable security protocols, is essential in averting the risk of cargo diversion out of U.S. ports. 

Now, let me expand upon these points.  As a port in the Pacific Northwest, we are especially aware of the vital role U.S. Customs has always played in protecting our country’s land and sea borders.  We consider Customs to be a primary partner in safeguarding the flow of trade through our port and we work closely with our local agency officials.  It must be recognized, though, that not only does Customs have the power to ensure that cargo is legal and safe, it also has a direct impact on a port’s ability to be competitive.  In these challenging times for the world’s economy, steamship lines are placing even greater emphasis on doing business with ports that can accommodate their need to move goods quickly onto and off of ships.  If a port cannot provide efficient service, our customers (steamship lines and shippers), may decide to call elsewhere.  In the case of ports along the Canadian border, this may mean jobs that would have resulted from ships calling at the ports of Seattle, Boston or New York/New Jersey, may instead end up going to workers in Vancouver, B.C., Montreal or Halifax.

These competitive and security realities require all ports to focus on ensuring each step in the economic trade chain is operating efficiently.  For example, what we have long heard from our customers – but even more pronounced since September 11^th – is that the procedures U.S. Customs is employing in Tacoma are more time-consuming and costly than at other West Coast ports.  There have been numerous instances where steamship lines report cargo to and from Eastern Asia is inspected at a much higher proportion in Tacoma than at other West Coast ports.

Another recent concern expressed by our customers is whether Customs is requiring a standard percentage for “devan” to be consistently carried out at all ports.  (The term devan refers to the physical unloading process of the container’s contents for inspection.)  If U.S. Customs officials devan 100% of a container at one port and only 25% per container at another port, this would result in dramatic differences in efficiency and the cost of moving cargo through ports.  For the shipper, this means lost revenue and time associated with having the cargo wait a day or more on the docks for the inspection, since a 25% devan typically takes 30-60 minutes and a full devan can commonly require six or more hours.  The shipper also bears the direct expenses associated with labor’s additional handling of this cargo which can range per container from $287 for a 25% devan up to $673 for a complete devan.  By way of comparison, it is like an airline passenger missing a flight because their luggage was searched and then receiving a bill afterwards for the service. 

We are working with Congresswoman Jennifer Dunn and other members of our congressional delegation to gather data from U.S. Customs quantifying these assertions of disproportionate inspections and non-uniform methods.  I share these examples with you in order to illustrate Custom’s influence on the efficient handling of cargo through all ports.  The fine points of policy making in Customs, such as employing consistent inspection methods, must not be lost in the much bigger and important mission of Homeland Security. 

Coordinating consistent inspection and security protocols with Canada must also be a priority.  Given our proximity to the Port of Vancouver, B.C., the ports of Tacoma and Seattle have long been sensitive to the threat of cargo diversion.  Onerous policies like the Harbor Maintenance Tax, which add extra charges to containers bound for U.S. ports, create an incentive for steamship lines to offload their cargo in Canada.  Congress must be vigilant in making sure that cargoes face the same level of scrutiny in Canada, as they would face if those goods were shipped directly into our country.  Should the perception develop that it is easier to move goods into the U.S. through Canada, not only would our nation’s ports be disadvantaged, but our country would face a greater security risk.  We recognize the efforts that U.S. Customs has taken thus far to work with Canadian Customs on programs such as Smart Boarder and the innovative CSI (Container Security Initiative) and the C-TPAT (Customs Trade Partnership Against Terrorism) effort.   

As Congress explores the inclusion of the U.S. Customs Service into a Department of Homeland Security, we believe it is critical to not lose sight of the importance of this agency’s traditional mission.  We look forward to working with the Congress, Customs and other critical U.S. agencies in integrating the enhanced requirements for security in concert with maintaining our nation’s efficient flow of trade.  On behalf of the Port of Tacoma, thank you for this opportunity to share these issues before this Committee.