The Customs crisis

At the Peace Bridge connecting Canada to the Port of Buffalo, N.Y., commercial

trucks hauling everything from car parts to fresh produce are idling lazily

one after another, waiting their turn to be checked through the Customs

Service office there.

It might be a long wait. The cargo the trucks are hauling are part of

the $8.8 billion in goods that must be processed daily at U.S. border entry

points nationwide by the Automated Commercial System, a 17-year old computer

system that is rapidly — and some say dangerously — nearing its capacity

to handle the information.

When ACS fails or browns out, which happens at least once a month according to shipping officials, the fallout ricochets across America — in goods not getting to their destinations, in import fees not getting paid, in contraband getting smuggled into the country and in criminals not getting caught.

Part of the problem is technology. According to Customs officials, ACS

can no longer handle the increasingly complex codes on entry documents that

account for the contents of shipments. At the same time, the burgeoning

domestic economy and the tide of globalization and are putting a severe

load on the system.

In 1999 alone, the Customs Service processed over 21 million entries

totaling $1.025 trillion in goods through ACS. With imports growing at 8

percent a year, customs officials expect ACS to hit capacity early next

year. Beyond that, customs Commissioner Raymond Kelly has predicted that

trade volume will double by 2005.

So Customs officials are well aware of the dangers of not fixing this

problem. They recognize the damage that might be done if the old technology

remains in place as the workload continues to increase. And yet the problem


Customs, for its part, has a solution. To help meet the challenge, Customs

officials want a to launch new Web-based system known as the Automated Commercial

Environment. In addition to providing more processing capacity, ACE is smarter,

officials claim.

For example, it would allow goods from a single importer to be registered

en masse rather than individually. The system would connect every U.S. port

of entry to Customs via the Internet. The system would also replace a slow

telephone network with a high-speed connection to get data in seconds instead

of minutes.

All these features would help the Customs Service do more than just

book fees faster and more accurately. Proponents of the system say it would

also help strengthen the security of U.S. borders, including helping to

ferret out potential terrorists and narcotics traffickers. "It's not that

the current system is not technical, but it probably could do better and

be faster," said Mark MacVittie, chief inspector at the Port of Buffalo.

"What we need is speed of targeting so we can concentrate our efforts on

noncompliant violators."

Now What?

With so much at stake, what's been the holdup in getting a new system

started? Some say the problem is not the traditional objection — that a

massive upgrade like ACE would cost too much.

In fact, most importers, retailers and members of Congress agree that

the system has to be replaced. Instead, officials believe it might be the

funding strategy used for big systems like ACE, especially if the project

is large and involves infrastructure improvements.

"IT is just like a lot of infrastructure issues," said Alan Balutis,

director of the Advanced Technology Program at the National Institute of

Standards and Technology. "What do you do about aging dams, roads and bridges?

How do you fund the long-term capital investment projects, IT now being

a part of it? The problem is we're not."

For ACE, the Clinton administration has proposed in its 2001 budget

a funding scheme that relies on an increase in user fees to pay for the

new computer system. The administration left the details to be filled in

later, but the proposal has angered venders, brokers and importers who already

pay a user fee that goes into the general treasury, not directly to Customs.

Funding such big projects is a problem recognized by virtually everyone

in the IT world. "We're working within finite budgets and we're trying to

do more and more to modernize the use of technology," said James Flyzik,

chief information officer for the Treasury Department and co-chairman of

the CIO Council. "It is putting a strain on an agency's ability to do these

modernization projects under current budget restraints."

Some programs are easier to sell than others, Flyzik said, because they

directly affect the public. The Internal Revenue Service, for example, is

seeking billions for its modernization program, but it is "easier to move

forward because both Congress and the public know what it will do," he said.

Sales Job Needed

So Customs has to conduct a sales job as much as it has to forage for


"This system literally controls the economic livelihood of this country

with $8 billion going in and out every day. You have to have a comprehensive

system that tracks imports and exports," said Rep. Jim Kolbe (R-Ariz.),

chairman of the House appropriations subcommittee that must find the money

to keep the system humming.

Meanwhile, the cost of goods may go up because of delays. And there

may be spot shortages on the shelves of stores if goods are not delivered

on time, said Jonathan Gold, an official with the International Mass Retail

Association, which represents hundreds of business trying to get Customs

moving faster. For one thing, Christmas goods will begin flowing across

the borders in July and if delayed, may not get to their destinations on

time, he said.

Customs has another headache, too. It must keep ACS patched and operating

while it waits for Congress to decide whether to provide $210 million for

modernization just this year. It will eventually cost $1.2 to 1.8 billion

over four years. That is quite a price tag for a system that was designed

by six men in Treasury's basement cafeteria in 1982, according to Thompson

Anastasi, who was there.

"Some of it is a very old way of thinking," said Anastasi, vice president

for border operations at Tower Group International, a subsidiary of Federal

Express, and one of the largest customs brokers in the United States. "But

first fix the network. Then, when you're stable, build a new one."

ACS runs smoothly in the morning, when only the East Coast is operating,

but when the West Coast goes up, problems begin. When the Christmas imports

begin flowing in, usually in July, the system is overloaded. And that's

when Customs is forced to add new servers to handle more memory.

Its replacement would work differently. It would rely on the Internet,

allowing customs inspectors to call up shipments anywhere in the country

and analyze the import flow, looking for contraband and patterns of problems.

Instead of paying tariffs on every shipment, importers would be able to

file reports each month, cutting costs. And while there would still be a

mainframe, each port would be able to communicate independently with any

other port.

Anne Reed, former CIO at the Agriculture Department and now vice president

of the global industry group at Electronic Data Systems Corp., said Congress

makes the budget process harder than it needs to be. "If there was more

flexibility in the way the funds were allocated, a lot of good would be

done," she said.

And without money specifically earmarked for technology, lawmakers will

have a hard time coming up with the funds necessary to keep the Information

Age rolling. "A lot of government agencies have been cut to the bone over

the last decade," Reed said. "And with the budget process we have, our hands

are tied. Coming up with new money for anything is extremely difficult."

Nevertheless, when Congress wants to cut through budget quicksand, it

does. Two years ago, lawmakers passed a $219 billion highway transportation

law that provided a huge infusion of money to repair and replace aging roads

and bridges across the United States. And like information technology, contractors

can build a road in pieces, but eventually every part has to be completed

to get where you are going.

Customs is not alone in pleading for cold, hard cash in these flush

times. Like hungry children, virtually every government agency wants more

for major infrastructure projects:

n The Internal Revenue Service is seeking $5 billion for a 15-year modernization

project after spending $3 billion on the Tax Systems Modernization program,

which became a symbol for wasteful, mismanaged IT projects.

n The Federal Aviation Administration is asking for more than $4 billion

to make the skies safer by developing new computer systems for air traffic


n The military wants billions of dollars, too, to modernize its forces

and supporting networks. The Navy says it must have $16 billion to create

a worldwide intranet linking Navy and Marine facilities. The Army wants

$70 billion over 14 years to transform itself from a Cold War force into

a light but lethal high-tech organization.

And more money — no one is willing to say just how much — is needed

to secure the government's computer systems, which federal IT managers

have learned are not foolproof after the recent spurt of hacker attacks

on them.

But Congress does not want to throw good money after bad when it comes

to IT, having suffered the sting of misspent dollars. "Money is tight, and

it's a lot of money," said Woody Hall, the chief information officer for

Customs. "There are a lot of good ideas. And we're trying to add one."

On the other hand, the reality is that the system will break down without

the funding. "This is a big, complex system. The only way to get that reliability

up is to replace the old gear with new," Hall said.

Global Economy at Center Stage

With the global economy taking center stage in the list of national

priorities, Congress may not be able to wait much longer. "The center of

the global economy cannot run on obsolete computer systems and a patch-it-when-it-breaks

game plan," said Harris Miller, president of the Information Technology

Association of America. "But that is exactly what is proposed in the current

stalemate over the modernization."

Retired Adm. Willie Williamson, now a vice president for Microsoft Corp.'s

federal office, called it a classic clash of titans — government vs. industry.

With such an enormous investment in legacy systems, it is hard to let go.

"We've got a terrible mismatch between the technology cycle and the

acquisition cycle," he said. "What is happening is that we're measuring

technology in weeks and months and acquisitions almost in decades."

"Is the money there? Absolutely, the money is there," Williamson said

. "Is it there to the degree that meets or could fund every single requirement

of the federal government? Absolutely not."

Meanwhile, back at the border, customs inspectors are trying to keep

the black tarmac from turning into a parking lot for 3,000 trucks a day

racing to their destinations.

"We absolutely need automation," MacVittie said. "I want to free up

the limited number of people I have, get them out of the clerk business

and into the automation business."


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