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Customs Service Drug Interdiction: Internal Control Weaknesses and Other Concerns With Low-Risk Cargo Entry Programs (Letter Report, 07/31/98, GAO/GGD-98-175).

Pursuant to a congressional request, GAO reviewed the Custom Service's
drug-enforcement operations along the Southwest border of the United
States, focusing on: (1) Customs' low-risk, cargo entry programs in use
at three ports on the Southwest border--Otay Mesa, CA; Laredo, TX; and
Nogales, AZ; (2) the results of GAO's evaluation of internal controls
over the Line Release Program; and (3) the processes used to assess the
risk of narcotics smuggling in other cargo entry programs.

GAO noted that: (1) to balance the objectives of facilitating trade
through ports and interdicting illegal drugs being smuggled into the
United States, Customs has initiated and encouraged its ports to use
several programs to identify and separate low-risk shipments from those
with apparently higher smuggling risk; (2) the Line Release Program was
designed to expedite cargo shipments that Customs determined to be
repetitive, high volume, and low risk for narcotics smuggling; (3) in
1996, Customs implemented the Carrier Initiative Program; this program
required that the Line Release shipments across the Southwest border be
transported by Customs-approved carriers and driven by Customs-approved
drivers; (4) after the Carrier Initiative Program was implemented, the
number of Southwest border Line Release shipments dropped significantly;
(5) GAO identified internal control weaknesses in one or more of the
processes used at each of the three ports it visited to screen Line
Release applicants for entry into the program; (6) these weaknesses
included: (a) lack of specific criteria for determining applicant
eligibility at two of the three ports; (b) incomplete documentation of
the screening and review of applicants at two of the three ports; and
(c) lack of documentation of supervisory review and approval of
decisions; (7) in May 1998, Customs representatives from northern and
southern land-border cargo ports approved draft Line Release volume and
compliance eligibility criteria for program applicants and draft
recertification standards for program participants; (8) the Three Tier
Targeting Program--a method of targeting high-risk shipments for
narcotics inspection--was being used at the three Southwest border ports
that GAO visited; (9) according to officials at the three ports GAO
reviewed, the Three Tier program had two operational problems that
contributed to their loss of confidence in the program's ability to
distinguish high- from low-risk shipments; (10) one new targeting
method--the Automated Targeting System--is being pilot tested at Laredo;
(11) used in conjunction with the Prefile Program, this system is
designed to enable port officials to identify and direct inspectional
attention to high-risk shipments; (12) the Automated Targeting System,
which automatically assesses shipment entry information for known
smuggling indicators, is designed to enable inspectors to target
high-risk shipments more efficiently; and (13) Customs is in the process
of evaluating the Automated Targeting System for expansion to other
land-border cargo ports.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-98-175
     TITLE:  Customs Service Drug Interdiction: Internal Control 
             Weaknesses and Other Concerns With Low-Risk Cargo Entry
             Programs
      DATE:  07/31/98
   SUBJECT:  Customs administration
             Narcotics
             Smuggling
             Drug trafficking
             International trade
             Inspection
             Law enforcement
             Internal controls
             Freight transportation operations
             Trucking operations
IDENTIFIER:  Customs Service Line Release System
             Otay Mesa (CA)
             Laredo (TX)
             Nogales (AZ)
             Customs Service Three Tier Targeting Program
             Customs Service Carrier Initiative Program
             Customs Service Automated Targeting System
             Customs Service Prefile Program
             
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Cover
================================================================ COVER


Report to the Honorable
Dianne Feinstein, U.S.  Senate

July 1998

CUSTOMS SERVICE DRUG INTERDICTION
- INTERNAL CONTROL WEAKNESSES AND
OTHER CONCERNS WITH LOW-RISK CARGO
ENTRY PROGRAMS

GAO/GGD-98-175

Low-Risk Cargo Entry Programs

(264442)


Abbreviations
=============================================================== ABBREV


Letter
=============================================================== LETTER


B-279229

July 31, 1998

The Honorable Dianne Feinstein
United States Senate

Dear Senator Feinstein: 

The Customs Service faces a major challenge in effectively carrying
out its drug interdiction and trade enforcement missions while
facilitating the flow of persons and cargo into the United States. 
To assist in performing these seemingly contradictory activities,
Customs recognized that because of the high volume of imported cargo
entering the country, processes were needed to identify low-risk
cargo and facilitate its movement so that inspectors could focus on
shipments that were potentially higher risk for narcotics smuggling. 
Toward this end, Customs developed several low-risk, cargo entry
programs designed to process certain cargo expeditiously and at the
same time target, for additional scrutiny, those shipments considered
to be high risk for drug smuggling. 

In response to your request that we review Customs' drug-enforcement
operations along the Southwest border of the United States, this
report describes Customs' low-risk, cargo entry programs in use at
three ports on the Southwest border and discusses the results of our
evaluation of the internal controls over the Line Release Program and
processes used to assess the risk of narcotics smuggling in other
cargo entry programs.  In developing information for this report, we
(1) interviewed key officials and reviewed program documents at
Customs' headquarters and at three Customs Management Centers located
along the Southwest border and (2) visited three cargo ports of
entry--Otay Mesa, CA; Laredo, TX; and Nogales, AZ.  At each port we
visited, we interviewed key officials, reviewed program documents,
and observed cargo entry processes--including inspection and
enforcement activities--used by the ports to detect illegal drugs. 
Our objectives, scope, and methodology are discussed in more detail
in appendix I.  Appendix II describes the three ports we visited. 

We requested comments on a draft of this report from the Secretary of
the Treasury or his designee.  The Under Secretary (Enforcement)
provided written comments, which are discussed near the end of this
letter and reprinted in appendix III.  We performed our work between
November 1997 and May 1998 in accordance with generally accepted
government auditing standards. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

To balance the objectives of facilitating trade through ports and
interdicting illegal drugs being smuggled into the United States,
Customs has initiated and encouraged its ports to use several
programs to identify and separate "low-risk" shipments from those
with apparently higher smuggling risk.  One such program is the Line
Release Program, designed to expedite cargo shipments that Customs
determined to be repetitive, high volume, and low risk for narcotics
smuggling.  Beginning on the Northern border in 1986 and expanded to
most ports along the Southwest border by 1989, this program requires
importers, brokers (companies who process the paperwork required to
import merchandise) and manufacturers to apply for the program and to
be screened by Customs to ensure that they have no past history of
narcotics smuggling and that their prior shipments have been in
compliance with trade laws and Customs' commercial importing
regulations.  In 1996, Customs implemented the Carrier Initiative
Program; this program required that Line Release shipments across the
Southwest border be transported by Customs-approved carriers--trucks
and trucking companies--and driven by Customs-approved drivers. 
After the Carrier Initiative Program was implemented, the number of
Southwest border Line Release shipments dropped significantly. 

We identified internal control weaknesses in one or more of the
processes used at each of the three ports we visited to screen Line
Release applicants for entry into the program.  These weaknesses
included (1) lack of specific criteria for determining applicant
eligibility at two of the three ports, (2) incomplete documentation
of the screening and review of applicants at two of the three ports,
and (3) lack of documentation of supervisory review and approval of
decisions.  We also noted that the ports were not able to locate some
of the application files and background checklists that served as
support for approving applications.  Further, although one port had
implemented a recertification process based on volume of shipments,
the other two ports did not require program participants to be
recertified.  In May 1998, Customs representatives from northern and
southern land-border cargo ports approved draft Line Release volume
and compliance eligibility criteria for program applicants and draft
recertification standards for program participants; Customs expects
to finalize and issue these standards by the end of fiscal year 1998. 

The Three Tier Targeting Program--a method of targeting high-risk
shipments for narcotics inspection--was being used at the three
Southwest border ports that we visited.  Customs published draft
guidance, which was never finalized, to help ports classify cargo
shipments into three tiers, from little risk to significant risk for
narcotics smuggling.  Customs officials were unable to explain why
the guidance had never been finalized. 

According to officials at the three ports we reviewed, the Three Tier
Targeting Program had two operational problems that contributed to
their loss of confidence in the program's ability to distinguish
high- from low-risk shipments:  (1) there was little information
available in any database for researching foreign manufacturers; and
(2) local officials doubted the reliability of the designations,
citing some examples of narcotics seizures from shipments designated
as "low-risk," and the lack of a significant number of seizures from
shipments designated as "high-risk." In addition, they said that the
research necessary to assign and recertify tier designations was very
time consuming given the questionable reliability of the
designations. 

One new targeting method--the Automated Targeting System--is being
pilot tested at Laredo.  Used in conjunction with the Prefile
Program, this system is designed to enable port officials to identify
and direct inspectional attention to high-risk shipments.  Under the
Prefile Program, port analysts are to receive entry information on an
expected shipment at least 4 hours before the shipment arrives at the
port.  Receiving this information in advance should enable ports to
research Customs and other databases for information on the
manufacturer, importer, and broker; this research, which is to
include a review of companies' trade compliance history and a
criminal record check, can help inspectors determine whether the
shipment is high risk for narcotics smuggling.  The Automated
Targeting System, which automatically assesses shipment entry
information for known smuggling indicators, is designed to enable
inspectors to target high-risk shipments more efficiently.  However,
the Prefile Program, used in conjunction with the Automated Targeting
System, does not require companies to use carriers approved under the
Carrier Initiative Program.  This is a significant disadvantage
because past seizures have indicated that most illegal drugs are
smuggled in the conveyance, not in the cargo.  Also, Customs is in
the process of evaluating the Automated Targeting System, as tested
at Laredo, for expansion to other land-border cargo ports. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The Office of National Drug Control Policy has reported\1 that
international drug trafficking organizations have become
sophisticated, multibillion-dollar industries that quickly adapt to
new U.S.  drug control efforts.  According to Customs' Strategic
Plan:  Fiscal Years 1997 - 2002, drug smugglers have moved from (1)
using small planes and fast boats to smuggle drugs into the
Southeastern United States in the early 1980s, to (2) using
commercial cargo and international carriers in the mid- to
late-1980s, and (3) exploiting the Southwest border in the 1990s. 

In addition to collecting revenue from international trade, the
mission of the Customs Service is to enforce customs and related
laws.  It also processes persons, carriers, cargo, and mail into and
out of the United States.  One of Customs' major goals is to prevent
the smuggling of drugs into the country by creating an effective drug
interdiction, intelligence, and investigation capability that
disrupts and dismantles smuggling organizations. 

Customs performs its mission with a workforce of about 19,000
personnel at its headquarters in Washington, D.C., and at 20 Customs
Management Centers, 20 investigative offices, and 301 ports of entry
around the country.  Of the 301 ports, 24 are located along the
Southwest border and--through 39 crossing points (such as
bridges)--handle both passengers and commercial cargo entering the
United States.  At the end of fiscal year 1997, Customs had deployed
about 28 percent of its inspectors and about 62 percent of its canine
enforcement officers at ports along the Southwest border. 

The Commissioner of Customs has designated drug enforcement to be
Customs' highest priority.  As 1 of more than 50 federal agencies
involved in the national drug control effort, Customs is responsible
for stopping the flow of illegal drugs through the nation's ports of
entry.  Customs' inspectional, investigative, intelligence, canine,
marine, and air interdiction assets combine with the efforts of other
agencies to reduce the supply of narcotics coming into the country. 
In addition to routine (primary) inspections to search passengers,
cargo, and conveyances (including cars, buses, trucks, aircraft, and
vessels), Customs' drug interdiction efforts include (1) preprimary
and postprimary inspections; (2) a more thorough, intensive
inspection (secondary) of suspicious shipments or those automatically
selected by Customs' computer system; (3) canine enforcement
inspections; (4) inspections using X-ray machines for cargo and
trucks; and (5) inspections of randomly selected groups of vehicles
using canines and other inspection tools. 


--------------------
\1 Report to Congress, Volume 1, United States and Mexico Counterdrug
Cooperation, Enhanced Multilateral Drug Control Cooperation, and
Enhanced Truck Inspections, Executive Office of the President, Office
of National Drug Control Policy, Sept.  1997. 


   INTERNAL CONTROL WEAKNESSES AND
   OTHER ISSUES RAISE CONCERNS
   ABOUT THE LINE RELEASE PROGRAM
------------------------------------------------------------ Letter :3

Line Release is one of two programs the Customs Service is using at
its land-border cargo ports to segregate low-risk shipments from
other shipments.  The Line Release Program was established on the
assumption that port officials would know enough about the
companies--the brokers, importers, and manufacturers--that
participated in the program to assume that they would be unlikely to
smuggle drugs.  Our review indicated that the internal controls over
the Line Release Program at three ports were lax and that port
officials could not be reasonably assured that companies approved as
low risk under this program should have been designated as such and
afforded the benefits that go with it. 


      DESCRIPTION OF THE LINE
      RELEASE PROGRAM
---------------------------------------------------------- Letter :3.1

The theory behind the Line Release Program is that companies that
routinely import goods through a port and are generally in compliance
with trade laws and Customs regulations pose significantly less risk
for drug smuggling than other companies.  Customs believes that if
ports could identify and designate certain companies as low risk for
drug smuggling, inspectors would have more assurance that these
companies' shipments may pose a lower risk than those of other
companies.  Truck drivers transporting shipments for companies
approved under the Line Release Program are not required to stop
inside the port at the dock to process paperwork; this procedure
expedites their entry processing, frees dock space for trucks that
are required to stop, and allows inspectors to focus their attention
on higher-risk shipments.\2

The Line Release Program was first implemented in 1986 on the
Northern border and was designed to expedite the release and tracking
of high-volume, low-risk shipments by prescreening manufacturers,
brokers, and importers to ensure that they did not present a threat
of drug smuggling.  In 1987, Customs began implementing the Line
Release Program at cargo ports along the Southwest border; by the end
of 1989, most of the major Southwest border cargo ports had fully
implemented the program. 

Customs' regulations for the Line Release Program, which became
effective in 1992, are published in the Code of Federal
Regulations.\3 Customs port directors are responsible for screening,
reviewing, and approving Line Release applicants.  Program applicants
are required to complete and submit an application to the port
director for review and approval. 

In 1993, Customs issued guidance\4 on the administration and use of
the Line Release Program.  According to Customs, this guidance
combined all the Line Release policies and procedures issued since
the program's inception.  The guidance instructed port directors to
establish their own procedures for screening, reviewing, and
approving applications; and it suggested that specific port
personnel, such as import specialists, review the applications.  The
guidance did not specify what criteria ports should consider in
approving applicants or what the reviews should entail, although it
did state that the purpose of the reviews would be to conduct risk
analyses of applicants to determine if they qualified for Line
Release.  The guidance did not require port officials to maintain any
specific documentation on the review and approval process. 

In August 1997, Customs developed national Draft Line Release Quality
Standards that, among other things, established volume and compliance
eligibility criteria for program applicants and recertification
standards for program participants.  The volume criterion proposes
that applicants should have had "at least 50 shipments .  .  . 
within the previous 12 months prior to the filing of the
application." The compliance criterion proposes that the applicants
should have had "at least five Customs intensive examinations with no
discrepant findings, or more than five Customs examinations with no
more than a 10 percent discrepancy rate." The recertification
standards propose that Line Release participants be reviewed at least
annually to ensure they have had 50 shipments within the preceding 12
months.  Biennially, participants are to be reviewed to ensure they
have met a minimum compliance rate of 90 percent.  In May 1998,
Customs convened a Line Release Conference in San Diego, CA, during
which representatives from northern and southern land-border cargo
ports discussed, among other things, the above eligibility criteria
and recertification standards, and agreed to finalize and issue the
Line Release Quality Standards at the end of fiscal year 1998. 

Each of the three ports we reviewed had developed a two-part process
for screening, reviewing, and approving Line Release applicants,
although the eligibility criteria and review procedures differed
somewhat among the ports.  Part one of each port's process involved
screening applicants to determine whether they met the port's
eligibility criteria for participating in Line Release--a high-volume
of shipments each year and a history of compliance with trade laws
and Customs commercial importing regulations.  The second part of
each port's process involved several components, including (1)
verification of the data submitted by the applicants (i.e.,
verification of company name, address, identification number, etc.);
(2) review of the application by an import specialist to ensure that,
among other things, the commodity (merchandise) was properly
classified; and (3) a background check on the applicants to ensure
they had no past history of drug smuggling. 

Each port had developed a Line Release checklist that was used to
evaluate the applications and track them through this process, as
well as a checklist that recorded the results of the background
checks conducted on applicants.  Although the ports' Line Release
checklists varied, they included some of the same elements, such as
approval by an import specialist and the Line Release coordinator. 
In addition, the checklists used to record and track background
checks also included many of the same elements, such as name and
address verifications, Internal Revenue Service numbers, and
smuggling history. 

In July 1996, Customs implemented the Land Border Carrier Initiative
Program (Carrier Initiative Program).  The program requires
participating carriers to be prescreened by Customs--through
background checks and site visits--and approved as low risk for drug
smuggling.  At the time this program was implemented, Customs
established a new requirement that all Line Release participants
(brokers, importers, and manufacturers) on the Southwest border use
carriers (trucks and drivers) approved under the Carrier Initiative
Program. 

In fiscal year 1996, cargo entries\5 along the Southwest border
totaled 1,408,790\6 of which 277,382 or about 20 percent, were Line
Release entries.  In fiscal year 1997, total entries increased by
nearly 15 percent to 1,617,445, while Line Release entries dropped by
almost 29 percent to 197,344, or about 12 percent of total entries. 
Customs officials attributed the drop in Line Release entries to the
implementation of the Carrier Initiative Program in July 1996.  Of
the three ports we reviewed, Otay Mesa had the largest number of Line
Release entries during fiscal years 1996 and 1997 (see table 1) and,
in fiscal year 1997, the greatest number of participants.  Officials
at the Laredo and Nogales cargo ports told us that Line Release
entries dropped significantly at their ports at the time the Carrier
Initiative Program went into effect.  Laredo and Nogales officials
said companies did not want to participate in the program either
because they already had contracts with nonprogram carriers or
because they did not want to tie themselves to Carrier
Initiative--approved carriers, many of whom were located near the
border and not the Mexican interior, where many of the commodities
were produced. 



                                Table 1
                
                    Decline in Line Release Entries
                 Following Start of Land Border Carrier
                           Initiative Program

                              FY 1996\a                FY 1997
                        ----------------------  ----------------------
                              Line  Percent of        Line  Percent of
                           Release       total     Release       total
Location                   entries     entries     entries     entries
----------------------  ----------  ----------  ----------  ----------
Southwest border\b         277,382       19.7%     197,344       12.2%
Otay Mesa, CA               91,730        39.9      90,172        35.6
Laredo, TX                  43,665        12.0      18,834         4.1
Nogales, AZ                 35,645        20.2         679         0.4
----------------------------------------------------------------------
\a The Land Border Carrier Initiative Program started in July 1996. 

\b Includes all Southwest border Line Release ports:  Calexico, CA;
Otay Mesa, CA; Tecate, CA; Douglas, AZ; Nogales, AZ; San Luis, AZ;
Brownsville, TX; Eagle Pass, TX; Laredo, TX; Hidalgo, TX; Pharr, TX;
Progresso, TX; and El Paso, TX. 

Source:  U.S.  Customs Service. 


--------------------
\2 Line Release shipments are subject to several types of enforcement
actions, such as random compliance and enforcement examinations. 

\3 See 19 C.F.R.   142.41 - 142.52 (1997). 

\4 Customs Directive 099 5610-003 (Jan.  14, 1993). 

\5 Merchandise arriving at a U.S.  port must be "entered" with
Customs unless specifically exempted.  "Entry" refers to the required
documentation filed with Customs to secure the release of imported
cargo from Customs' custody.  A shipment is a quantity of cargo that
is transported together. 

\6 Includes only entries from cargo ports that also process Line
Release entries (see table 1). 


      WEAK INTERNAL CONTROLS OVER
      THE LINE RELEASE PROGRAM AT
      THREE PORTS
---------------------------------------------------------- Letter :3.2

Although each of the three ports we reviewed had developed a process
for screening and approving applicants, we found internal control
weaknesses in the procedures actually followed.  These weaknesses
included (1) the lack of specific criteria for determining applicant
eligibility at two of the three ports, (2) incomplete documentation
of the screening and review of applicants at two of the three ports,
and (3) lack of documentation of supervisory review and approval of
decisions.  We also noted that the ports were not able to locate some
of the application files and background checklists that served as
support for approving applications, and that two ports had not
recertified Line Release companies. 


      LACK OF SPECIFIC CRITERIA
      FOR DETERMINING APPLICANT
      ELIGIBILITY AT TWO OF THE
      THREE PORTS
---------------------------------------------------------- Letter :3.3

Otay Mesa had specific criteria for determining program eligibility
and had established a standard review process for assessing Line
Release applicants.  To be considered for the Line Release Program,
applicants were expected to have a minimum of 50 shipments during the
12 months prior to filing an application and to have at least 5
negative examinations.\7 However, until recently the other two
ports--Nogales and Laredo--did not have specific criteria by which
reviewers were to judge an applicant's eligibility.  Lack of specific
eligibility criteria could allow individual reviewers at a port to
reach different conclusions about an applicant's eligibility. 

The former and current Nogales Line Release coordinators told us
that, until recently, Nogales did not have specific eligibility
criteria in place for screening Line Release applicants.  Instead,
each application was to be reviewed on a case-by-case basis.  The
current Line Release coordinator said that in fiscal year 1997, to
screen applicants, the port adopted the volume and compliance
criteria specified in Customs' Draft Line Release Quality
Standards--50 shipments within the prior 12 months and at least 5
Customs intensive examinations with no discrepant findings.  However,
the coordinator could not provide port guidance that addressed this
change, nor was the port's Line Release checklist revised to reflect
the new eligibility criteria. 

The Laredo Line Release coordinator told us that until recently,
Laredo had no specific eligibility criteria for volume and
discrepancy rates, relying instead on the Line Release coordinator's
subjective evaluation of applicants.  The coordinator said that
applications are judged on a case-by-case basis and that
theoretically all companies are eligible for the Line Release
Program, except those that have a history of drug violations.  To be
approved, Laredo requires that applicants can only have had
relatively minor compliance "discrepancies" or violations on their
examination records, with no record of drug violations.  The Line
Release coordinator told us that in fiscal year 1997 Laredo also
began using the volume standard cited in Customs' 1997 Draft Line
Release Quality Standards.  However, the coordinator could not
provide documentation to substantiate this change, nor did the port's
Line Release checklist reflect the new criteria. 


--------------------
\7 Otay Mesa defined a "negative" examination, or inspection, of a
shipment as one in which only "minor" infractions, such as marking
violations, of Customs trade laws and regulations--less than a 6
percent discrepancy rate--were found, and no illegal drugs were
discovered. 


         INCOMPLETE DOCUMENTATION
         OF THE SCREENING AND
         REVIEW OF APPLICANTS AT
         TWO OF THE THREE PORTS
-------------------------------------------------------- Letter :3.3.1

The Comptroller General's Standards for Internal Controls in the
Federal Government (June 1983)\8 requires that "documentation of
transactions or other significant events should be complete and
accurate and should facilitate tracing the transaction or event and
related information from before it occurs, while it is in process, to
after it is completed" and that transactions and other significant
events be promptly recorded and properly classified. 

Officials at all three of the ports we visited said they routinely
reviewed applicants' trade history--specifically, volume and
compliance history--as part of their Line Release review process. 
However, Otay Mesa did not include volume and compliance history on
the Line Release checklist, nor did reviewing officials document in
the files\9 we reviewed that this information had been verified.  In
addition, 20 of the 46 Line Release checklists\10 we reviewed at Otay
Mesa had not been fully completed.  For example, in 12 cases, review
officials had failed to check off all applicable review elements. 
For 8 of 46 Line Release checklists, reviewers had failed to either
sign and/or date the checklist.  Also, one of the application files
did not have a Line Release checklist.  None of the files we reviewed
contained supporting documentation--the Line Release coordinator told
us that the port did not require supporting documentation, such as
computer printouts of applicants' trade histories.  The Comptroller
General's Standards for Internal Controls in the Federal Government
specifies that "Internal controls systems and all transactions and
other significant events are to be clearly documented, and the
documentation is to be readily available for examination."

Both Laredo and Nogales had applicants' trade history as an element
to be checked off on either their Line Release or background
checklist.  At Laredo, 64 of the 65 background checklists we reviewed
documented applicants' trade history--volume of shipments and
compliance with Customs regulations.  In addition, 69 of the 72 Line
Release checklists we reviewed had been completed.  At Nogales, the
port could locate only one of the seven Line Release checklists
associated with the application files we reviewed.  Although the
applicants' trade history was documented on the checklist as
required, the entire checklist had not been completed.  Further, the
Nogales Line Release coordinator told us that there was no port
requirement to retain supporting documentation for record checks
conducted on Line Release applicants; however, one of the application
files we reviewed included supporting documentation.  Laredo had
provided supporting documentation for 65 of the 66 files we reviewed. 


--------------------
\8 Although these standards remain conceptually sound and are used
throughout the federal government, they are being updated and
enhanced to recognize recent internal control evaluation guidance
developed by the private sector with assistance from us and others as
well as to give greater recognition to the increasing use of
information technology. 

\9 At Otay Mesa, because the universe of participants was large, we
randomly selected 42 applications, approved between 1988 and 1997,
for review.  This sample was not large enough to be considered
representative of the universe of Line Release participants at Otay
Mesa, and the results of our review should not be projected beyond
the sample.  At Laredo and Nogales, because the universe of
participants was small, we reviewed the applications for all active
participants on Line Release during fiscal year 1997. 

\10 Some Otay Mesa application files included more than one Line
Release checklist. 


         LACK OF DOCUMENTATION OF
         SUPERVISORY REVIEW FOR
         ASPECTS OF THE REVIEW AND
         APPROVAL PROCESS
-------------------------------------------------------- Letter :3.3.2

According to the Comptroller General's Standards for Internal
Controls in the Federal Government,

  -- qualified and continuous supervision is to be provided to ensure
     that internal control objectives are achieved.  Assignment,
     review, and approval of a staff's work should result in the
     proper processing of transactions and events including (1)
     following approved procedures and requirements; (2) detecting
     and eliminating errors, misunderstandings, and improper
     practices; and (3) discouraging wrongful acts from occurring or
     from recurring. 

We found that aspects of the ports' Line Release review and approval
processes lacked documentation of supervisory review.  At Otay Mesa,
the Line Release coordinator told us he is responsible for reviewing
the Line Release checklists to ensure they have been completed,
signed, and dated.  The coordinator also said he is responsible for
documenting the progress of the application through the approval
process but is not required to review other officials' research. 
None of the 46 checklists we reviewed documented a supervisory
review, either by the coordinator or his supervisor.  Further, the
operations analyst told us there is no supervisory review required
for the background checks he performs on importers and manufacturers. 

The Laredo Line Release coordinator also told us that he is
responsible for ensuring that the port's Line Release checklists are
properly completed.  The coordinator said he reviews the research
performed on the applications, including the background checks and
trade history recorded on the background checklists, but there was no
documentation of supervisory review on either the 72 Line Release
checklists or the 65 background checklists provided by the port. 

At Nogales, applications are researched by the Line Release
coordinator and others, including import specialists.  Although the
Line Release checklist provides for the chief inspector to document
whether the application was approved or disapproved, the one
checklist located by the port did not indicate whether the chief
inspector had reviewed the checklist.  According to the coordinator,
the checklist used to document background checks performed on
applicants does not have to have supervisory review. 


      OTHER CONCERNS ABOUT THE
      LINE RELEASE APPROVAL
      PROCESS
---------------------------------------------------------- Letter :3.4

Our work at the three ports raised other issues, which could
compromise the integrity of the Line Release Program.  First, Nogales
officials were unable to locate two of the seven application files
for the companies currently using Line Release; in addition, they
could only locate one of the seven Line Release checklists identified
with the application files.  The current and former Line Release
coordinators told us the port had not received any Line Release
applications since July 1996, when the Carrier Initiative Program
went into effect.  At Otay Mesa, officials were unable to provide 15
of the background checklists for the 46 Line Release checklists we
reviewed; at all three ports, background checks served as the basis
for approving applicants.  The operations analyst responsible--as of
May 1998--for completing the background checklists at Otay Mesa told
us that although he is not required to retain copies of the
checklists or to provide documentation in support of his
findings--e.g., database check printouts--he does both. 

Second, although neither the Code of Federal Regulations nor Customs'
implementing guidelines require ports to recertify companies already
approved for the Line Release Program, Otay Mesa had recertified
participants based on their volume criteria.  The port does not
recheck (recertify) participants for compliance or perform follow-up
background checks.  Without recertification, there is no assurance
that the participants continue to meet the volume and compliance
criteria or that they remain low risk for drug smuggling.  We
verified that Otay Mesa had performed the volume recertifications for
the 42 application files we reviewed.  These 42 files included 93
commodities; 52 were recertified as meeting Otay Mesa's volume
criteria.  The remaining 41 were either inactive or had been on Line
Release for less than 12 months.  Officials at Laredo and Nogales
told us that they are planning to recertify Line Release
participants, as required in the Draft Line Release Quality
Standards, as soon as the standards are finalized. 


   CUSTOMS OFFICIALS AT THREE
   PORTS HAVE LITTLE CONFIDENCE IN
   THE THREE TIER TARGETING
   PROGRAM
------------------------------------------------------------ Letter :4

Customs developed the Three Tier Targeting Program to help identify
low- and high-risk shipments so that inspectors along the Southwest
border could focus their attention on shipments determined to be
high-risk for narcotics smuggling.  Low-risk shipments were to
receive expedited treatment for release, while high-risk shipments
were to be subject to a higher rate of narcotics examinations. 
Customs headquarters defined how cargo shipments would be divided
into three tier categories and allowed the ports to develop their own
policies and procedures for assigning risk. 

Officials at the ports we visited said they did not think the Three
Tier Targeting Program was a viable program because it did not appear
to have Customs headquarters' support.  They also said they had
little confidence in the system as a method for assessing risk
because (1) there was little information available in any database
for researching foreign manufacturers and (2) they doubted the
reliability of the designations:  two ports cited examples of
narcotics seizures from shipments designated as "low risk" and the
lack of a significant number of seizures from shipments designated as
"high risk." In addition, they said that the research necessary to
assign and recertify tier designations has been very time consuming
given the questionable reliability of the tier designations. 


      DESCRIPTION OF THE THREE
      TIER TARGETING PROGRAM
---------------------------------------------------------- Letter :4.1

In 1992, Customs implemented the Three Tier concept--a method of
targeting shipments for narcotics examinations--at Southwest border
ports.  According to Customs' draft Three Tier Targeting Directive,
this concept was devised to assist ports in classifying shipments
according to a narcotics risk assessment so that they could better
identify or "target" shipments that were "high risk" for smuggled
narcotics.  The intent of the program was for ports to better focus
inspectional resources.  According to a 1994 report\11 by Customs'
Office of Regulatory Audit, ports were to start using the program in
April 1992. 

Under the Three Tier concept, ports were to conduct research on
importers and foreign manufacturers who shipped through their ports. 
The draft directive called for port analysts to check Customs
databases and other available sources for information on importers'
and manufacturers' business histories and criminal activities. 
Commercial cargo shipments were to be divided into three categories,
or tiers, according to perceived risk factors: 

Tier I:  bearing little risk for narcotics smuggling, based on
analytical assessment. 

Tier II:  an unknown degree of risk for narcotics smuggling.  (All
shipments that are not clearly Tier I or Tier III were to fall into
Tier II.)

Tier III:  a significant risk for narcotics smuggling.  (Shipments
designated as Tier III were to be identified as high risk in Customs'
Automated Commercial System so that inspectors would know they were
to receive narcotics examinations.)



                                Table 2
                
                     Number of Tier I and Tier III
                      Designations at Three Ports

                                              Tier I          Tier III
Port                                    Designations      Designations
----------------------------------  ----------------  ----------------
Otay Mesa, CA (as of 08/97)\                   1,576                16
Laredo, TX (as of 11/97)                       2,035                29
Nogales, AZ (as of 03/96)                        246                 4
----------------------------------------------------------------------
Note 1:  Tier II designations were not included because the universe
is unknown.
Note 2:  Most recent data available at the time of our visit. 

Source:  U.S.  Customs Service. 


--------------------
\11 U.S.  Customs Service, Southwest Region:  Management Review of
the Three Tier Targeting Program, Feb.  1994. 


      PORT OFFICIALS HAVE LITTLE
      CONFIDENCE IN THE THREE TIER
      TARGETING PROGRAM
---------------------------------------------------------- Letter :4.2

Officials at the three ports we visited expressed reservations about
the viability of the Three Tier Targeting Program.  The officials
remarked that the program did not appear to have the full support of
Customs headquarters because formal program directives were issued in
draft but were not finalized.  Officials at Customs headquarters
could not explain why the Three Tier directive was not finalized. 
Customs' current Narcotics Interdiction Guide calls for continued use
of the program. 

Officials at the three ports told us they had little confidence in
the program as a method for assessing risk for two reasons.  First,
program officials said sufficient information is not available to
assess the risk of foreign companies.  For example, a Nogales
official told us that it was impossible to get enough information on
Mexican manufacturers on which to base a reliable narcotics risk
assessment.  He said that no matter how much research was conducted
through Customs' automated databases and other sources, there were no
data available on Mexican companies, particularly data identifying
those that had been involved in narcotics smuggling. 

Second, port officials told us that inspectors had become suspicious
about the reliability of Three Tier designations.  In Laredo, for
example, a program official told us the port had made two marijuana
seizures from shipments classified as Tier I, or low risk. 
Conversely, in Nogales, the analyst responsible for the program told
us there had been no narcotics seizures found in Tier III, high-risk
shipments.  Laredo officials also told us that inspectors were more
suspicious of shipments classified as low risk because they had
doubts about the reliability of the tier designations.  These doubts
could lead them to order more examinations of low-risk shipments, in
direct conflict with the original intent of the program--to process
low-risk shipments quickly so that inspectors could focus their
attention on high-risk shipments. 

Port officials also told us that the research necessary to assign and
recertify tier designations has been very time consuming given the
questionable reliability of the tier designations.  In addition to
conducting the initial research necessary to assign tier
designations, ports are to annually recertify Tier I designations by
updating the research.  An official at Otay Mesa told us that because
of time constraints, port analysts were unable to both recertify
companies for Tier I and certify companies for the Line Release
Program.  He said that in fiscal year 1997, port analysts would have
needed to do 50 recertifications per month to keep the database
current; but they had only been able to recertify--update the
research for--39 Tier I companies for the entire year from a total of
1,576 Tier I designations in their database.  According to the port
official, other operations, such as providing research support to the
port's investigative team, take priority over Tier I
recertifications.  At Laredo, a port official told us that for the
past two years, the port has continued to maintain the Tier I
database but has not added any new companies to the Tier I database. 

Officials at the three ports said that the Three Tier Targeting
Program should be discontinued and that, although the program had
worked well in facilitating cargo, it had not been effective in
distinguishing between high- and low-risk shipments.  In February
1994, Customs had also reported in its Management Review of the Three
Tier Targeting Program\12 that ".  .  .  the Three Tier Targeting
Program is a good cargo facilitation tool, however, because of the
lack of reliable intelligence, it has not been effective in targeting
narcotics in cargo shipments .  .  .  ." Port officials told us their
inspectors now rely on other cargo entry programs--such as Line
Release--to identify shipments that are low risk for drug smuggling. 

Customs' 1994 Management Review also stated that ".  .  .  no
narcotic seizures have resulted from Three Tier Targeting .  .  .  ."
Customs headquarters officials told us that they did not know if any
seizures had been made from Tier III, high-risk shipments.  Further,
they said they did not know whether any of the 61 narcotics seizures
in commercial cargo in fiscal year 1997 were made from Tier III
shipments.  The officials also told us that there is no headquarters
oversight of the Three Tier Targeting Program, and consequently no
evaluations of the program or measures of success. 


--------------------
\12 U.S.  Customs Service, Southwest Region:  Management Review of
the Three Tier Targeting Program, Feb.  1994. 


   PREFILE PROCESS AND AUTOMATED
   TARGETING SYSTEM PROVIDE MORE
   CURRENT INFORMATION TO ASSIST
   IN IDENTIFYING HIGH-RISK
   SHIPMENTS
------------------------------------------------------------ Letter :5

"Prefile" is a cargo entry process used at the Port of Laredo to
expedite low-risk shipments.  The Prefile Process, which began in
1989, requires participating brokers to file cargo entry paperwork at
least 4 hours prior to a shipment's arrival at the port.  This
advance filing is to enable port officials to review the paperwork
and perform computerized background checks on the manufacturer,
importer, and broker to assess the smuggling risk of each shipment
before it arrives at the port.  The Prefile Process is complemented
by the Automated Targeting System, which evaluates and scores
arriving shipments through the use of approximately 400 "rules"
designed to identify or profile high-risk shipments.  The higher the
score, the more the shipment warrants attention.  This process is
being evaluated to establish its effectiveness. 


      THE PREFILE PROCESS ALLOWS
      INSPECTORS TO REVIEW CURRENT
      INFORMATION ON SHIPMENTS FOR
      POTENTIAL DRUG SMUGGLING
---------------------------------------------------------- Letter :5.1

According to Laredo officials, the Prefile Process was designed to
expedite processing cargo through the port.  Customs officials said
it facilitates processing by identifying, before the cargo reaches
the port, low-risk shipments that can be released at the primary
inspection gate and shipments that should be held at the dock for
intensive examinations.  Compared with other low-risk cargo entry
programs (e.g., Line Release and the Three Tier Targeting Program),
which rely on initial research of applicants before they are approved
or designated as "low risk," the Prefile Process involves reviewing
the most current--"real-time"--information available on companies and
their potential for drug smuggling before the shipments reach the
port.  Although the databases may not include information on foreign
manufacturers, the data accessed is the most current information
available. 

When a broker uses the Prefile Process, the port is to receive the
hard-copy entry paperwork--the entry summary, for example--at least 4
hours before the shipment arrives at the port.  Under Customs'
standard entry-filing process, drivers park their trucks at the dock
and give a hard copy of the entry paperwork to Customs for
processing.  While the drivers wait, Customs compares the hard copy
with entry information that was filed electronically in advance by
the broker.  Any comparison of the hard copy and the electronic
filing for consistency must be conducted while the trucks are parked
at the dock. 

Under the Prefile Process, Customs inspectors are to perform the same
reviews of the electronic and hard-copy entry documents that they
would do under the standard entry- filing process, including
additional research;\13 but receiving the hard-copy entry paperwork
in advance allows the port to perform these reviews, and any
necessary additional research, before the shipment arrives at the
port.  If the research does not provide a reason to inspect the
shipment, it is to be cleared for release.  The inspector in the
primary inspection booth can then allow the cleared shipment to
proceed directly to the exit gate when it arrives at the port.  (For
other reasons--such as a driver acting suspiciously or a random,
computer-generated order for an inspection--a Customs inspector may
order the shipment held at the dock for an intensive examination.)
One official estimated that approximately 70 percent of cargo
shipments at Laredo are Prefile shipments, although statistics were
not maintained to confirm this figure. 

A disadvantage of the Prefile Process is that unlike the Line Release
process, Prefile focuses on the importer, broker, and manufacturer
and does not require the use of prescreened carriers.  Companies
participating in the Line Release Program are required to use
preapproved carriers and drivers cleared under the Carrier Initiative
Program.  According to a September 1997 report from the Office of
National Drug Control Policy,\14

76 percent of the seizures made in the Southwest border commercial
cargo environment during 1997 were found in the conveyance (truck and
trailer), not in the actual cargo. 


--------------------
\13 Additional research is to be performed if the reviewing inspector
identifies suspicious or unusual information in the electronic and
hard-copy entry paperwork.  This research might include more
extensive background checks in Customs' automated databases for
information or intelligence on the importer, broker, and
manufacturer. 

\14 Report to Congress, Volume 1, United States and Mexico
Counterdrug Cooperation, Enhanced Multilateral Drug Control
Cooperation, and Enhanced Truck Inspections, Executive Office of the
President, Office of National Drug Control Policy, Sept.  1997. 


      AUTOMATED TARGETING SYSTEM
      DESIGNED TO ASSIST IN
      IDENTIFYING SHIPMENTS
      WARRANTING EXTRA
      INSPECTIONAL ATTENTION
---------------------------------------------------------- Letter :5.2

In May 1997 Laredo began pilot testing, in conjunction with the
Prefile Process, a computerized system called the Automated Targeting
System.  The Automated Targeting System assists the port in
identifying shipments that could pose a high risk for drug smuggling. 
According to Customs, the system is designed to help the port
prioritize shipments according to threat, in order to allow the port
to more effectively use resources and to ensure that shipments that
pose the highest risk for smuggling are researched first. 

The Automated Targeting System standardizes entry and entry-summary
data received from the broker and creates integrated records called
"shipments." The shipments are to be evaluated and scored by the
Automated Targeting System through the use of approximately 400
weighted "rules" designed to identify or profile high-risk shipments. 
According to the system's program officer, the rules are based on
targeting and evaluation methods successfully used by experienced
Customs inspectors.  The higher the score, the more the shipment
warrants attention. 

Customs inspectors may use the score to determine whether the
shipment should be detained for inspection after it reaches the port. 
For example, a shipment going to a "first-time importer" might be
selected for an intensive inspection.  One of the rules used for
scoring a potentially high-risk shipment is a first-time importer
because little information is available about first-time importers on
which to assess the risk of drug smuggling. 

The Automated Targeting System also allows Customs inspectors to
query several databases simultaneously to conduct background checks
on importers, brokers, and manufacturers associated with a shipment. 
Because data from several systems are displayed on a computer screen
at one time, inspectors are able to compare information for potential
irregularities and inconsistencies. 


      CUSTOMS IS CURRENTLY
      EVALUATING THE EFFECTIVENESS
      OF THE AUTOMATED TARGETING
      SYSTEM
---------------------------------------------------------- Letter :5.3

Customs officials told us that Laredo is the first land-border port
of entry to test the Automated Targeting System.  Depending on the
outcome of Laredo's pilot test, Customs may expand the system to all
major seaports, airports, and land-border ports of entry.  Customs is
currently evaluating the pilot test at Laredo.  According to the
system's program officer, Customs does not plan to expand the system
to other land-border, cargo ports of entry until an evaluation has
been completed.  According to the program officer, the system will be
assessed for use at other Southwest border ports on the basis of
three factors:  (1) drug threat, (2) volume of shipments and method
of processing (i.e., Line Release, etc.), and (3) technological
capability.  Laredo port officials told us they are tracking drug
seizures attributed to the Automated Targeting System; as of May
1998, three marijuana seizures had been made, totaling over 5,000
pounds. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

The Customs Service is faced with the challenge of facilitating the
flow of legitimate cargo into the United States while, at the same
time, detecting and intercepting illegal drug smuggling.  Customs has
developed several programs to try to identify shipments that are
lower risk than others and give more inspectional attention to the
higher-risk shipments.  Theoretically, these programs would
facilitate the processing of lower risk cargo and enable Customs to
use its inspectional resources more efficiently and effectively. 

The key to the success of these programs is Customs' ability to
identify the risk that any given shipment poses.  Our review of three
programs at three Southwest border ports raises several concerns
about the implementation of two of these programs.  The weak internal
controls over the Line Release Program at three ports may not assure
Customs that program participants, at these three ports, are fully
researched and properly designated as low risk. 

Further, port officials' concerns about the Three Tier Targeting
Program raise questions about the continued value or utility of the
program at the three ports we visited.  Officials at all three ports
said that the program should be discontinued, and that they relied on
other programs for distinguishing high- and low-risk shipments. 
These reasons cause us to conclude that the Three Tier Targeting
Program may not be an effective tool for assessing narcotics risk. 

We recognize that under current operating conditions, Customs will
not be able to subject all cargo entering the United States to
intensive inspections to detect drug smuggling.  We also recognize
that inadequately controlled processes for identifying low-risk
shipments can give Customs inspectors a false sense of confidence
that those shipments are low risk for drug smuggling.  While the
Prefile Process, used in conjunction with the Automated Targeting
System, seems to have the potential to offer the advantage of basing
inspection decisions on more current information than the Line
Release and the Three Tier Targeting programs, it does not cover the
carriers, and has not been thoroughly evaluated. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

We recommend that the Commissioner of Customs

  -- strengthen internal control procedures for the Line Release
     application and review process to ensure fully researched and
     documented risk-assessment decisions on applicants;

  -- suspend the Three Tier Targeting Program until it can be
     determined if more complete and comprehensive data are available
     on which to base "low risk for narcotics smuggling" risk
     assessments; and

  -- evaluate the effectiveness and efficiency of the Automated
     Targeting System, as designed and implemented at Laredo, and use
     the evaluation results to determine whether other land-border
     cargo ports should implement the system or whether additional
     testing is needed. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :8

Treasury provided written comments on a draft of this report, and its
comments are reprinted in appendix III.  Overall, Treasury and
Customs management generally agreed with our conclusions, and Customs
is taking action, or is planning to take action, on all of our
recommendations. 

Regarding our first recommendation, Treasury stated in its written
comments that Customs' Office of Field Operations plans to publish
the Line Release Quality Standards in the form of a Headquarters
Directive by the end of fiscal year 1998.  According to Treasury,
this directive will create consistent national criteria and guidance
with regard to the application procedures.  Included will be a
requirement for ports to retain the original approved applications
and supporting documentation on file for as long as the applicants
are active participants in the program. 

Regarding our second recommendation, Treasury agreed that the Three
Tier Program should be suspended until more reliable information is
developed for classifying low-risk importations.  Treasury stated in
its written comments that Customs believes its other targeting
methods, including the Line Release Program, the Automated Targeting
System, the Prefile Program, and the Land Border Carrier Initiative
Program, are better able to fulfill Customs' narcotic interdiction
goals and responsibilities. 

Regarding our third recommendation, Treasury said Customs is
currently evaluating the Automated Targeting System as implemented at
the port of Laredo.  It also plans to assess data regarding cargo
volume and cargo processes used--e.g., Line Release--on other
Southwest border ports of entry to determine future deployment of the
system. 

Customs management, in their written comments, acknowledged that the
Prefile Process, used in conjunction with the Automated Targeting
System, does not require the use of preapproved carriers and drivers
cleared under the Carrier Initiative Program and that this could be
seen as a disadvantage.  They also stated that the Prefile approach
narrows the scope of Customs' interdiction efforts to focus on the
driver and conveyance because the cargo has been determined to be low
risk.  Customs pointed out that Prefile shipments are also subject to
other enforcement actions, including (1) random checks performed on
all companies using the Prefile Process, (2) X-ray and detection
dogs, and (3) the experience and knowledge of Customs inspectors. 
Nevertheless, we still feel that the fact that the Prefile Process
does not require shipments to use carriers preapproved under the
Carrier Initiative Program is a significant disadvantage.  Line
Release shipments are also subject to the same enforcement actions
mentioned above.  Yet, in July 1996, Customs strengthened the Line
Release Program by requiring all participants on the Southwest border
to use carriers approved under the Carrier Initiatives Program. 


---------------------------------------------------------- Letter :8.1

We are sending copies of this report to the Secretary of the
Treasury, the Acting Commissioner of Customs, and to the Chairmen and
Ranking Minority Members of the congressional committees that have
responsibilities related to these issues.  Copies also will be made
available to others upon request.  The major contributors to this
report are listed in appendix IV.  If you or your staff have any
questions about the information in this report, please contact me on
(202) 512-8777 or Darryl Dutton, Assistant Director, on (213)
830-1000. 

Sincerely yours,

Norman J.  Rabkin
Director, Administration
 of Justice Issues


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

Our objectives for this report were to (1) describe Customs'
low-risk, cargo entry programs in use at three ports on the Southwest
border and (2) discuss the results of our evaluation of the internal
controls over the Line Release Program and processes used to assess
the risks of narcotics smuggling in other low-risk, cargo entry
programs.  As agreed with your office, we focused our work on three
of the busiest commercial cargo ports of entry along the Southwest
border--Otay Mesa, CA; Laredo, TX; and Nogales, AZ. 

To identify Customs' low-risk, cargo entry programs on the Southwest
border, we interviewed Customs headquarters officials in the offices
of Anti-Smuggling and Trade Compliance.  We also reviewed agency
program documents, including Customs' Southern Border Cargo Action
Plan, Narcotics Interdiction Guide, Line Release Directive and draft
standards, draft of the Three Tier Targeting Directive, and other
program documents.  We also reviewed program documents at the three
cargo ports of entry, including local guidance and directives for the
programs.  At each of the three ports and their Customs Management
Centers, we interviewed key officials, including the center director,
port director, the Line Release coordinator, and senior operations
and analysis officials responsible for developing and overseeing the
low-risk, cargo entry programs. 

At each port, we observed both low-risk and standard cargo entry
processes--including inspection techniques and enforcement
activities--used by the ports to facilitate commercial shipments and
to detect illegal drugs contained in these shipments.  We also
observed the use of nonintrusive technology, such as the pallet
X-rays used at all three ports and the truck X-ray system used at
Otay Mesa. 

To examine the processes Customs uses for screening cargo shipments
designated as low risk for narcotics smuggling, we began by reviewing
each port's processes and procedures and internal controls for
reviewing and approving applicants for the Line Release Program.  We
also attempted to determine whether ports were following their local
criteria and procedures in evaluating Line Release applications.  Of
the three ports we visited, Otay Mesa had the largest number of Line
Release entries during fiscal year 1997 and the greatest number of
participants.  Because Otay Mesa's universe of participants was
large, we randomly selected a sample of 42 application files,\15
approved between 1988 and 1997, for review to determine whether Otay
Mesa was following its local criteria and procedures in approving
Line Release applicants in accordance with applicable internal
control standards.  This sample was not large enough to be
representative of the universe of Line Release participants at Otay
Mesa, and the results of our review should not be projected beyond
the sample.  At Laredo and Nogales, because the universe of
participants was small, we reviewed the applications for all active
participants on Line Release during fiscal year 1997. 

To examine Customs' processes for designating cargo shipments as low
risk for narcotics smuggling under the Three Tier Targeting Program
and to determine the extent to which selected ports had implemented
the program, we interviewed key officials at Customs headquarters and
reviewed program documentation.  At all three ports, we interviewed
officials responsible for overseeing the program, including the
analysts who performed the background reviews leading to low-risk
designations.  We also reviewed checklists that the ports had
developed to facilitate their background reviews, and obtained the
most recent data available on the number of Tier I (low-risk) and
Tier III (high-risk) designations in place at each port.  We did not
review port files to determine whether ports were in compliance with
local policies and procedures for assigning the tier designations. 

At Customs headquarters and at the Port of Laredo, we reviewed
applicable program guidance and interviewed key officials concerning
the Prefile Process and the Automated Targeting System.  We also
received a demonstration of the Automated Targeting System, including
the computer research, from Customs inspectors at Laredo. 

We performed our work between November 1997 and May 1998 in
accordance with generally accepted government auditing standards.  We
discussed the contents of this report with relevant Customs
officials, and we incorporated their comments where appropriate. 


--------------------
\15 For the purposes of this review, Line Release "application files"
are defined as the completed forms companies submit to a port when
they apply for the Line Release Program and the documentation ports
produce during their review and approval of the applicants. 


DESCRIPTION OF PORTS VISITED
========================================================== Appendix II


   OTAY MESA, CALIFORNIA
-------------------------------------------------------- Appendix II:1

Otay Mesa, CA, is the third busiest commercial cargo facility on the
Southwest border.  In fiscal year 1997, Otay Mesa handled over
585,000 vehicles, which was an average of 1,604 vehicles per day.\16
The port processes a variety of imports, including produce,
television sets, and electronic components.  Otay Mesa has over 100
dock spaces available for inspections and, as of December 1997, had
140 inspectors, canine enforcement officers, and supervisors.\17 The
port utilizes standard technology, such as pallet X-ray and tanker
scales, as well as a truck X-ray system to inspect commercial
vehicles and cargo for narcotics.  In fiscal year 1997, the port
seized about 24,000 pounds of marijuana, but no cocaine.  Otay Mesa
is located about 15 miles south of San Diego, CA. 


--------------------
\16 The average number of vehicles per day reflects the traffic
average over a 1-year period, which includes both weekdays, when the
traffic volume is much higher, and weekends, when the traffic volume
is much lower. 

\17 Twelve inspectors and three supervisors from Otay Mesa were
assigned to the San Diego airport/seaport. 


   LAREDO, TEXAS
-------------------------------------------------------- Appendix II:2

Laredo, TX, consists of two separate cargo facilities, the downtown
Laredo facility and the Colombia Bridge facility.  Together, they
form the busiest commercial cargo port along the Southwest border. 
Customs considers, for administrative purposes, the two facilities as
one port and does not track data separately for each facility (e.g.,
volume of entries, inspections, etc.).  Although we examined cargo
entry operations at both facilities, for purposes of this review and
data collection, we considered the Laredo and Colombia facilities as
one port.  Therefore, the Laredo data included in this report
incorporate both Laredo and Colombia operations. 

During fiscal year 1997, Laredo handled about 994,600 vehicles, which
was an average of 2,722 vehicles per day.  Both facilities handled
auto parts, steel, and chemical products; Colombia also processed
hazardous materials.  The Laredo facility has 13 dock spaces to
examine trucks and cargo, while the Colombia facility has 100 dock
spaces available for inspections.  As of December 1997, Laredo and
Colombia had a combined staff of 139 inspectors, canine enforcement
officers, and supervisors.  Both Laredo and Colombia had pallet X-ray
systems and tanker scales; and, at the time of our review, Colombia
was scheduled to receive a truck X-ray system in September 1998.  In
fiscal year 1997, the two-facility port seized 3,252 pounds of
marijuana and 450 pounds of cocaine.  The Laredo facility is located
154 miles south of San Antonio, TX, and the Colombia facility is
located 22 miles west of Laredo. 


   NOGALES, ARIZONA
-------------------------------------------------------- Appendix II:3

Nogales, AZ, is the fifth busiest commercial cargo port on the
Southwest border.  Nogales handled about 223,000 vehicles during
fiscal year 1997, which was an average of 611 vehicles per day. 
During the winter season, the port's busiest period, Nogales mainly
handles produce; during the summer months, it primarily processes
industrial commodities such as auto parts and medical supplies. 
Nogales has 92 dock spaces dedicated to Customs inspections and, as
of December 1997, had a staff of 36 inspectors, canine enforcement
officers, and supervisors.  Nogales has both a pallet X-ray and a
scale for weighing tanker trucks; and, at the time of our review, it
expected to receive a truck X-ray system in August 1998.  In fiscal
year 1997, Nogales seized 3,304 pounds of marijuana and 960 pounds of
cocaine.  The port is located 67 miles south of Tucson, AZ. 




(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
TREASURY
========================================================== Appendix II



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C. 

Darryl W.  Dutton, Assistant Director
Barry J.  Seltser, Assistant Director, Design, Methodology,
 and Technical Assistance
Sidney H.  Schwartz, Senior Mathematical Statistician,
 Design, Methodology, and Technical Assistance

OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C. 

Ann H.  Finley, Senior Attorney

LOS ANGELES FIELD OFFICE

Kathleen H.  Ebert, Project Manager
Barbara A.  Guffy, Senior Evaluator


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